
[Federal Register Volume 79, Number 15 (Thursday, January 23, 2014)]
[Rules and Regulations]
[Pages 3723-3738]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01218]



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  Federal Register / Vol. 79, No. 15 / Thursday, January 23, 2014 / 
Rules and Regulations  

[[Page 3723]]



DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket No. RM13-11-000; Order No. 794]


Frequency Response and Frequency Bias Setting Reliability 
Standard

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: Pursuant to section 215(d) of the Federal Power Act, the 
Federal Energy Regulatory Commission (Commission) approves Reliability 
Standard BAL-003-1 (Frequency Response and Frequency Bias Setting), 
submitted by the North American Electric Reliability Corporation 
(NERC), the Commission-certified Electric Reliability Organization. 
Reliability Standard BAL-003-1 defines the amount of frequency response 
needed from balancing authorities to maintain Interconnection frequency 
within predefined bounds and includes requirements for the measurement 
and provision of frequency response. In addition, the Commission 
directs NERC to submit certain reports to address concerns discussed in 
the final rule.

DATES: Effective Date: This rule will become effective March 24, 2014.

FOR FURTHER INFORMATION CONTACT: Daniel Woldemariam (Technical 
Information), Office of Electric Reliability, Division of Reliability 
Standards, Federal Energy Regulatory Commission, 888 First Street NE., 
Washington, DC 20426, Telephone: (202) 502-8080, 
Daniel.Woldermariam@ferc.gov.

Mark Bennett (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE., Washington, 
DC 20426, Telephone: (202) 502-8524, Mark.Bennett@ferc.gov.

SUPPLEMENTARY INFORMATION: 

Order No. 794

Final Rule

Issued January 16, 2014
    1. Pursuant to section 215(d) of the Federal Power Act (FPA),\1\ 
the Commission approves Reliability Standard BAL-003-1 (Frequency 
Response and Frequency Bias Setting), submitted by the North American 
Electric Reliability Corporation (NERC), the Commission-certified 
Electric Reliability Organization (ERO). Reliability Standard BAL-003-1 
defines the amount of frequency response needed from balancing 
authorities to maintain Interconnection frequency within defined bounds 
and includes requirements for the measurement and provision of 
frequency response.\2\ We find that Reliability Standard BAL-003-1 
addresses an existing gap in reliability and the Commission's 
directives set forth in Order No. 693.\3\ Reliability Standard BAL-003-
1 establishes a minimum Frequency Response Obligation \4\ for each 
balancing authority; provides a uniform calculation of frequency 
response; establishes Frequency Bias Settings that set values closer to 
actual balancing authority frequency response; and encourages 
coordinated automatic generation control (AGC) operation.\5\ These 
matters are not addressed in any currently-effective Reliability 
Standard. Therefore, pursuant to section 215(d) of the FPA, we approve 
Reliability Standard BAL-003-1.\6\
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    \1\ 16 U.S.C. 824o(d).
    \2\ NERC defines ``frequency response'' in the NERC Glossary of 
Terms Used in Reliability Standards (NERC Glossary) as follows:
    Equipment: The ability of a system or elements of the system to 
react or respond to a change in system frequency. System: The sum of 
the change in demand, plus the change in generation, divided by the 
change in frequency, expressed in megawatts per 0.1 Hertz (MW/0.1 
Hz).
    \3\ See Mandatory Reliability Standards for the Bulk-Power 
System, Order No. 693, FERC Stats. & Regs. ] 31,242 at P 375, order 
on reh'g, Order No. 693-A, 120 FERC ] 61,053 (2007).
    \4\ NERC defines Frequency Response Obligation as ``[t]he 
balancing authority's share of the required Frequency Response 
needed for the reliable operation of an Interconnection. This will 
be calculated as MW/0.1Hz.''
    \5\ NERC revises the definition of Frequency Bias Setting as 
``[a] number, either fixed or variable, usually expressed in MW/0.1 
Hz, included in a balancing authority's Area Control Error equation 
to account for the balancing authority's inverse Frequency Response 
contribution to the Interconnection, and discourage response 
withdrawal through secondary control systems.''
    \6\ In a related action, the Commission is approving regional 
Reliability Standard BAL-001-TRE-01 containing provisions for 
assuring frequency response in the ERCOT Interconnection. See Docket 
No. RD13-12-000, North American Electric Reliability Corporation, 
146 FERC ] 61,025.
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    2. The Commission also approves four new or revised definitions to 
the NERC Glossary and NERC's implementation plan and, with two 
exceptions, the violation risk factors and violation severity levels, 
and NERC's request for retirement of currently-effective Reliability 
Standard BAL-003-0.1b.
    3. While the Commission believes that the record supports approving 
Reliability Standard BAL-003-1, we have concerns about certain aspects 
of the Reliability Standard that warrant further consideration. 
Therefore, the Commission directs NERC to submit two reports, and to 
continue its ongoing annual analysis of certain aspects of BAL-003-1 
\7\ to address concerns regarding specific provisions of the 
Reliability Standard and to determine the effectiveness of Reliability 
Standard BAL-003-1 in providing an adequate amount of frequency 
response. First, no later than 15 months after implementation of the 
Reliability Standard, NERC shall submit a report that addresses the 
results and recommendations of a light-load case study of the Eastern 
Interconnection, using actual turbine governor response data. Second, 
no later than 27 months after implementation of the Reliability 
Standard, NERC shall submit a report(s) addressing: (1) An evaluation 
of the use of the linear regression methodology to calculate frequency 
response; and (2) the availability of resources for applicable entities 
to meet the Frequency Response Obligation. Depending on the results and 
recommendations of these reports, which should provide insight on the 
effectiveness of the Reliability Standard in assuring that the 
necessary amount of Frequency Response is available in response to 
system events, further

[[Page 3724]]

refinements to the standard may be warranted. Moreover, if data 
indicate that sufficient resources are not available for applicable 
entities to meet their Frequency Response Obligation, NERC should 
provide that information, together with appropriate recommendations for 
mitigation, as this information becomes available.
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    \7\ On December 30, 2013, NERC submitted an informational 
filing, titled ``Annual Analysis of Frequency Response.'' NERC 
states that the informational filing updates the statistical 
analyses and calculations contained in the 2012 Frequency Response 
Initiative Report, attached to NERC's Petition as Exhibit F 
(Frequency Response Initiative Report).
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    4. The Commission finds NERC's December 30, 2013 ``Annual Analysis 
of Frequency Response'' helpful and notes NERC's statement that it 
intends to continue this work. Specifically, in its 2013 annual 
analysis, NERC states that the informational filing analyzes the impact 
of Remedial Action Schemes that trip more than 2,400 MW on the 
calculation of the Interconnection Frequency Response Obligation (IFRO) 
for the Western Interconnection, adjustment factors for calculating 
IFROs and trends in primary frequency response sustainability or 
withdrawal throughout frequency events. The Commission expects NERC to 
continue to evaluate these aspects of frequency response and include 
them in future annual analyses.

I. Background

A. Section 215 of the FPA

    5. Section 215(c) of the FPA requires a Commission-certified 
Electric Reliability Organization (ERO) to develop mandatory and 
enforceable Reliability Standards that are subject to Commission review 
and approval. Once approved, the Reliability Standards may be enforced 
by NERC, subject to Commission oversight, or by the Commission 
independently.\8\
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    \8\ 16 U.S.C. 824o(e).
---------------------------------------------------------------------------

B. Frequency Response and Frequency Bias Setting

    6. Sufficient frequency response is necessary to stabilize 
frequency within an Interconnection immediately following the sudden 
loss of generation or load. NERC explains that ``[s]ystem frequency 
reflects the instantaneous balance between generation and load. 
Reliable operation of a power system depends on maintaining frequency 
within predetermined boundaries above and below a scheduled value, 
which is 60 Hertz (Hz) in North America.'' \9\ Most frequency response 
is provided by the automatic and autonomous actions of turbine-
governors, with some response being provided by changes in demand due 
to changes in frequency. Failure to maintain frequency can disrupt the 
operation of equipment and initiate disconnection of power plant 
equipment to prevent equipment from being damaged, which could lead to 
wide-spread blackouts.
---------------------------------------------------------------------------

    \9\ NERC Petition at 3.
---------------------------------------------------------------------------

    7. Frequency response is provided in two stages, referred to as 
primary frequency response and secondary frequency response.
    8. Primary frequency response and control involves the autonomous, 
automatic, and rapid action of a generator, or other resource, to 
change its output (within seconds) to rapidly dampen large changes in 
frequency. The ability of a power system to withstand a sudden loss of 
generation or load depends on the presence and adequacy of resources 
capable of providing rapid incremental power changes to counterbalance 
the disturbance and arrest a frequency deviation.
    9. Secondary frequency response, also known as automatic generation 
control (AGC), is produced from either manual or automated dispatch 
from a centralized control system.\10\ It is intended to balance 
generation, interchange and demand by managing the response of 
available resources within minutes as opposed to primary frequency 
response, which manages response within seconds. Frequency bias is an 
input used in the calculation of a balancing authority's area control 
error (ACE) to account for the power changes associated with primary 
frequency response. However, frequency bias is not the same as 
frequency response. Frequency Bias Setting is a secondary control 
setting of the AGC system, not a primary control parameter, and changes 
in the Frequency Bias Setting of a balancing authority do not change 
the primary frequency response. The Frequency Bias Setting is used in 
AGC to prevent premature withdrawal of generator primary frequency 
response following a disturbance as long as frequency is off its 
nominal value.\11\
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    \10\ NERC Petition at 11. Additional background information 
about the engineering concepts that pertain to frequency response is 
discussed in the Frequency Response Background Document, NERC 
Petition, Exh. D.
    \11\ NERC Petition at 11.
---------------------------------------------------------------------------

C. NERC Reliability Standard BAL-003-0

    10. On March 16, 2007, in Order No. 693, the Commission approved 83 
of 107 Reliability Standards pursuant to FPA section 215(d), including 
currently-effective Reliability Standard BAL-003-0. In addition, 
pursuant to section 215(d)(5) of the FPA, the Commission directed NERC, 
among other things, to develop modifications to BAL-003-0 to address 
certain issues identified by the Commission. Specifically, the 
Commission directed NERC to:

    develop a modification to BAL-003-0 through the Reliability 
Standards development process that: (1) includes Levels of Non-
Compliance; (2) determines the appropriate periodicity of frequency 
response surveys necessary to ensure that Requirement R2 and other 
requirements of the Reliability Standard are being met, and to 
modify Measure M1 based on that determination and (3) defines the 
necessary amount of Frequency Response needed for Reliable Operation 
for each balancing authority with methods of obtaining and measuring 
that the frequency response is achieved.\12\
---------------------------------------------------------------------------

    \12\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 375.
---------------------------------------------------------------------------

II. NERC Petition and Reliability Standard BAL-003-1

A. NERC Petition

    11. On March 29, 2013, NERC submitted its petition seeking the 
Commission's approval of Reliability Standard BAL-003-1, four new or 
modified definitions for inclusion in the NERC Glossary, violation risk 
factors and violation severity levels, an implementation plan for the 
proposed standard, and retirement of currently-effective BAL-003-
0.1b.\13\
---------------------------------------------------------------------------

    \13\ Reliability Standard BAL-003-1 is not attached to this 
Final Rule. The complete text of Reliability Standard BAL-003-1 is 
available on the Commission's eLibrary document retrieval system in 
Docket No. RM13-11-000 and is posted on the ERO's Web site, 
available at: http://www.nerc.com.
---------------------------------------------------------------------------

    12. The petition states that in 2010 NERC began a frequency 
response initiative to perform an in-depth analysis of Interconnection-
wide frequency response ``to achieve a better understanding of the 
factors influencing frequency response across North America.'' \14\ 
According to NERC, one of the basic objectives of the frequency 
response initiative included increasing coordinated communication and 
outreach on the issue, including webinars, and NERC alerts.\15\ NERC 
states that it developed several reports that provide the conclusions 
and recommendations resulting from the frequency response initiative, 
which NERC includes as exhibits to its petition.\16\ Further, NERC 
states that a detailed explanation of the development, testing, and 
implementation of Reliability Standard BAL-003-1 is provided in the 
Frequency Response Standard Background Document, included as Exhibit D 
to the petition.
---------------------------------------------------------------------------

    \14\ NERC Petition at 11-12.
    \15\ Id. at 12.
    \16\ See Frequency Response Initiative Report, Exh. G (Status of 
Recommendations), and Exh. H (Supplemental Report).
---------------------------------------------------------------------------

    13. NERC requests approval of the implementation plan for proposed 
BAL-003-1, under which: (1) Requirement R2, Requirement R3 and 
Requirement

[[Page 3725]]

R4 would become effective the first day of the first calendar quarter 
that is twelve months following the effective date of this Final Rule; 
and (2) Requirement R1 would become effective the first day of the 
first calendar quarter that is twenty-four months following the 
effective date of this Final Rule. NERC proposes the retirement of 
existing Reliability Standard BAL-003-0.1b at midnight of the day 
immediately prior to the effective date of Requirements R2, Requirement 
R3 and Requirement R4 of the Reliability Standard. NERC requests 
approval of three new definitions and the revised definition of 
Frequency Bias Setting effective the first day of the first calendar 
quarter that is twelve months following the effective date of a Final 
Rule in this docket.\17\
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    \17\ NERC proposes to retire the existing definition of 
Frequency Bias Setting at midnight of the day immediately prior to 
the effective date of Requirement R2, Requirement R3, and 
Requirement R4 of the Reliability Standard.
---------------------------------------------------------------------------

B. Reliability Standard BAL-003-1 and NERC Explanation of Provisions

    14. NERC states that the purpose of the Reliability Standard is to 
ensure an adequate amount of Frequency Response and also ensure that 
``a Balancing Authority's Frequency Bias Setting is accurately 
calculated to match its actual Frequency Response.'' The Reliability 
Standard also is intended ``to provide consistent methods for measuring 
Frequency Response and determining the Frequency Bias Setting.'' \18\ 
The Reliability Standard consists of four requirements, and is 
applicable to balancing authorities and Frequency Response Sharing 
Groups.\19\
---------------------------------------------------------------------------

    \18\ NERC Petition at 15. See also Reliability Standard BAL-003-
1, Purpose Statement:
    To require sufficient Frequency Response from the balancing 
authority (BA) to maintain Interconnection Frequency within 
predefined bounds by arresting frequency deviations and supporting 
frequency until the frequency is restored to its scheduled value. To 
provide consistent methods for measuring Frequency Response and 
determining the Frequency Bias Setting.
    \19\ NERC defines Frequency Response Sharing Group as ``[a] 
group whose members consist of two or more Balancing Authorities 
that collectively maintain, allocate, and supply operating resources 
required to jointly meet the sum of the Frequency Response 
Obligations of its members.'' NERC Petition at 13. The Reliability 
Standard allows balancing authorities to cooperatively form 
Frequency Response Sharing Groups as a means to jointly meet the 
obligations of the standard. Id.
---------------------------------------------------------------------------

    15. Requirement R1 requires that each balancing authority or 
Frequency Response Sharing Group achieve an annual Frequency Response 
Measure \20\ that is ``equal to or more negative than its Frequency 
Response Obligation'' needed to ensure sufficient Frequency Response. 
Specifically, Requirement R1 states:
---------------------------------------------------------------------------

    \20\ NERC defines Frequency Response Measure as ``[t]he median 
of all the frequency response observations reported annually by 
Balancing Authorities or Frequency Response Sharing Groups for 
frequency events specified by the ERO. This will be calculated as 
MW/0.1Hz.''

    Each Frequency Response Sharing Group (FRSG) or Balancing 
Authority that is not a member of a FRSG shall achieve an annual 
Frequency Response Measure (FRM) (as calculated and reported in 
accordance with Attachment A) that is equal to or more negative than 
its Frequency Response Obligation (FRO) to ensure that sufficient 
Frequency Response is provided by each FRSG or BA that is not a 
member of a FRSG to maintain Interconnection Frequency Response 
equal to or more negative than the Interconnection Frequency 
---------------------------------------------------------------------------
Response Obligation.

    NERC explains that Requirement R1 has the primary objective of 
``determin[ing] whether a Balancing Authority has sufficient Frequency 
Response for reliable operations.'' \21\ According to NERC, Requirement 
R1 achieves this objective ``via FRS [Frequency Response Survey] Form 1 
and the process in Attachment A that provides the method for 
determining the Interconnections' necessary amount of Frequency 
Response and allocating it to the balancing authorities.'' \22\ NERC 
asserts that Requirement R1 and Attachment A satisfy the Commission's 
directive in Order No. 693 to ``determine the appropriate periodicity 
of frequency response surveys necessary to ensure that Requirement R2 
and other requirements of the Reliability Standard are met. . . .'' 
\23\
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    \21\ NERC Petition at 15.
    \22\ Id. NERC explains that ``Attachment A (appended to the 
proposed standard) is a supporting document for Reliability Standard 
BAL-003-1 that discusses the process the ERO will follow to validate 
the Balancing Authority's FRS Form 1 data and publish the official 
Frequency Bias Settings. FRS Form 1 provides the guidance as to how 
to account for and measure Frequency Response. FRS Form 1, and the 
underlying data retained by the balancing authority, will be used 
for measuring whether sufficient Frequency Response was provided.'' 
NERC Petition at 4.
    \23\ Id. at 16 (citing Order No. 693, FERC Stats. & Regs. ] 
31,242 at P 375).
---------------------------------------------------------------------------

    16. Requirement R2 states that:

    Each Balancing Authority that is a member of a multiple 
Balancing Authority Interconnection and is not receiving Overlap 
Regulation Service \24\ and uses a fixed Frequency Bias Setting 
shall implement the Frequency Bias Setting determined in accordance 
with Attachment A, as validated by the ERO, into its Area Control 
Error (ACE) calculation during the implementation period specified 
by the ERO and shall use this Frequency Bias Setting until directed 
to change by the ERO.
---------------------------------------------------------------------------

    \24\ NERC explains that overlap regulation service is a method 
of providing regulation service in which a balancing authority 
incorporates another balancing authority's actual interchange, 
frequency responses, and schedule into the providing balancing 
authority's AGC/ACE equation. NERC Petition at 21.

    NERC explains that setting the frequency bias to better approximate 
the balancing authority's natural response characteristic will improve 
the quality of ACE control and general AGC system control response. 
NERC states that the ERO, in coordination with the regions of each 
Interconnection, will annually review Frequency Bias Setting data 
submitted by the balancing authorities.
    17. Requirement R3 states that:

    Each Balancing Authority that is a member of a multiple 
Balancing Authority Interconnection and is not receiving Overlap 
Regulation Service and is utilizing a variable Frequency Bias 
Setting shall maintain a Frequency Bias Setting that is: (1.1) Less 
than zero at all times, and (1.2) Equal to or more negative than its 
Frequency Response Obligation when Frequency varies from 60 [Hertz] 
Hz by more than +/- 0.036 Hz.

    NERC explains that, in an Interconnection with multiple balancing 
authorities, the Frequency Bias Setting should be coordinated among all 
balancing authorities in the Interconnection. According to NERC, when 
there is a minimum Frequency Bias Setting requirement, it should apply 
for all balancing authorities. However, balancing authorities using a 
variable Frequency Bias Setting may have non-linearity in their actual 
response for a number of reasons including the deadband settings of 
their generator governors. The measurement to ensure that these 
balancing authorities are conforming to the Interconnection minimum is 
adjusted to remove the deadband range from the calculated average 
Frequency Bias Setting actually used.\25\
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    \25\ NERC Petition at 20. NERC further states that ``For 
[balancing authorities] using variable bias, FRS Form 1 has a data 
entry location for the previous year's average monthly Bias. The 
[balancing authority] and the ERO can compare this value to the 
previous year's Frequency Bias Setting minimum to ensure Requirement 
R3 has been met.'' Id.
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    18. Requirement R4 states that:

    Each Balancing Authority that is performing Overlap Regulation 
Service shall modify its Frequency Bias Setting in its ACE 
calculation, in order to represent the Frequency Bias Setting for 
the combined Balancing Authority area, to be equivalent to either:
     the sum of the Frequency Bias Settings as shown on FRS 
Form 1 and FRS Form 2 for the participating Balancing Authorities as 
validated by the ERO, or
     the Frequency Bias Setting shown on FRS Form 1 and FRS 
Form 2 for the entirety of the participating Balancing Authorities' 
areas.


[[Page 3726]]


    NERC states that Requirement R4 is similar to Requirement R6 in the 
currently-effective BAL-003-0.1b.

III. Notice of Proposed Rulemaking

    19. On July 18, 2013, the Commission issued a Notice of Proposed 
Rulemaking (NOPR) proposing to approve Reliability Standard BAL-003-1 
as just, reasonable, not unduly discriminatory or preferential, and in 
the public interest.\26\ The Commission also proposed to approve three 
new definitions and the revised definition of Frequency Bias Setting, 
all but one of the associated violation risk factors, most violation 
severity levels, the implementation plan, effective date, and the 
retirement of the ``Version 0'' Standard BAL-003-0.1b. The NOPR stated 
that the Reliability Standard establishes a minimum Frequency Response 
Obligation and addresses other related matters that are not addressed 
in any currently-effective Reliability Standard.
---------------------------------------------------------------------------

    \26\ Frequency Response and Frequency Bias Setting Reliability 
Standard, Notice of Proposed Rulemaking, 78 FR 45479 (July 29, 
2013), 144 FERC ] 61,057 (2013) (NOPR).
---------------------------------------------------------------------------

    20. While the Commission proposed to approve Reliability Standard 
BAL-003-1, the Commission raised concerns regarding certain provisions 
of the proposed standard, some of which NERC itself identified in the 
reports included in its petition. In the NOPR, the Commission sought 
comments on the following issues: (1) In Requirement R1, the use of the 
median statistical method in the calculation of Frequency Response 
Measure, i.e., selecting the middle value in a set of data that is 
arranged in an ascending or descending order; (2) the potential for 
early withdrawal of primary frequency response before secondary 
frequency response is activated; (3) the need to study frequency 
response during light-load conditions; (4) whether the resource 
contingency criteria in the Western Interconnection is properly 
identified; and (5) the need to adequately ensure that each balancing 
authority has available the resources it needs to meet its frequency 
response obligation.\27\
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    \27\ On July 18, 2013 the Commission issued a Notice of Request 
for Comments (Docket No. AD13-8) concerning the market implications 
of frequency response and frequency bias setting requirements. See 
Market Implications of Frequency Response and Frequency Bias Setting 
Requirements, 144 FERC ] 61,058 (2013).
---------------------------------------------------------------------------

    21. In response to the NOPR, the Commission received comments from: 
NERC, Midcontinent Independent System Operator (MISO), Electricity 
Consumers Resource Council (ELCON), ISO/RTO Council (IRC), Arizona 
Public Service Company (APS), Bonneville Power Administration (BPA), 
and Trade Associations.\28\ On October 15, 2013, NERC submitted reply 
comments. We address below the issues raised in the NOPR and comments.
---------------------------------------------------------------------------

    \28\ The Trade Associations group consists of Edison Electric 
Institute (EEI), National Rural Electric Cooperative Association 
(NRECA), American Public Power Association (APPA) and Electric Power 
Supply Association (EPSA).
---------------------------------------------------------------------------

IV. Discussion

    22. Pursuant to FPA section 215(d), we approve Reliability Standard 
BAL-003-1 as just, reasonable, not unduly discriminatory or 
preferential, and in the public interest. The Reliability Standard 
establishes a minimum Frequency Response Obligation for each balancing 
authority; provides a uniform calculation of frequency response; 
establishes Frequency Bias Settings that are closer to actual balancing 
authority frequency response; and encourages coordinated automatic 
generation control operation. The Reliability Standard addresses an 
existing gap in reliability, as these matters are either not covered, 
or not adequately addressed, in any currently-effective Reliability 
Standard. Further, Reliability Standard BAL-003-1 adequately addresses 
certain directives from Order No. 693. We also approve the new and 
modified definitions and, with two exceptions, the proposed violation 
severity levels and violation risk factors, and retirement of the 
currently-effective standard and NERC's implementation plan.
    23. We discuss below the following issues raised in the NOPR and 
addressed in the comments: (A) The use of the median statistical method 
in determining the Frequency Response Measure; (B) the determination of 
Interconnection Frequency Response Obligation; (C) methods of obtaining 
frequency response; (D) withdrawal of primary frequency response before 
secondary frequency response is activated; (E) development of a new 
light-load case study; (F) assignment of violation risk factors and 
violation severity levels; and (G) associated and supporting documents.

A. Use of the ``Median'' in Determining the Frequency Response Measure 
NERC Petition

    24. As discussed above, Requirement R1 of Reliability Standard BAL-
003-1 provides that each balancing authority or Frequency Response 
Sharing Group achieve an annual Frequency Response Measure that is 
equal to or more negative than its Frequency Response Obligation needed 
to ensure sufficient frequency response. NERC proposed to define the 
Frequency Response Measure as ``the median of all the Frequency 
Response observations reported annually by balancing authorities or 
Frequency Response Sharing Groups for the frequency events specified by 
the ERO.'' \29\ NERC defines the ``median'' as ``the numerical value 
separating the higher half of a one-dimensional sample, a one-
dimensional population, or a one-dimensional probability distribution 
from the lower half. The median of a finite list of numbers is found by 
arranging all the observations from lowest value to highest value and 
picking the middle one.'' \30\
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    \29\ NERC Petition at 13.
    \30\ Frequency Response Initiative Report at 72. NERC developed 
a procedure for selecting frequency response observations. See NERC 
Petition, Exh. C (Procedure for ERO Support of Frequency Response 
and Frequency Bias Setting Standard). The Procedure is referenced, 
but not included, in Attachment A of Reliability Standard BAL-003-1.
---------------------------------------------------------------------------

    25. NERC stated in its petition that the standard drafting team 
evaluated different approaches for averaging individual event 
observations to compute a technically sound estimate of Frequency 
Response Measure, including median and linear regression analysis.\31\ 
Explaining why the drafting team chose to use the median, NERC stated:
---------------------------------------------------------------------------

    \31\ NERC Petition at 17-18. The Frequency Response Initiative 
Report defines the linear regression method as the linear average of 
a multi-dimensional sample, or a multi-dimensional population. See 
id., Exh. F at 73.

    In general, statisticians use the median as the best measure of 
a central tendency when a population has outliers. Based on the 
analyses performed thus far, the standard drafting team believes 
that the median's superior resiliency to this type of data quality 
problem makes it the best aggregation technique at the time. 
However, the standard drafting team sees merit and promise in future 
research with sample filtering combined with a technique such as 
linear regression. When compared with the mean, linear regression 
shows superior performance with respect to the elimination of noise 
because the measured data is weighted by the size of the frequency 
changes associated with the event. The standard drafting team 
acknowledges that linear regression should be re-evaluated for use 
in the BAL-003 Reliability Standard once more experience is gained 
with data collected.\32\
---------------------------------------------------------------------------

    \32\ Id. at 17-18 (footnote omitted). See also id., Exh. F at 
72-78. NERC explained that the ``noise'' refers to factors that can 
influence data and produce outliers. Id. at 18, n.34.
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NOPR
    26. In the NOPR, the Commission stated that NERC provided adequate 
rationale for using the median to determine the required Frequency 
Response Measure.\33\ The NOPR also

[[Page 3727]]

noted NERC's explanation that application of the median is supported by 
the analyses performed to date.\34\ Therefore, the Commission proposed 
to approve BAL-003-1 on that basis.
---------------------------------------------------------------------------

    \33\ NOPR, 144 FERC ] 61,057 at P 26.
    \34\ Id. P 25 (citing NERC Petition at 17-18).
---------------------------------------------------------------------------

    27. However, in the NOPR, the Commission expressed concern 
``whether use of the median adequately represents actual data that 
could, on occasions, be significantly higher or lower than the 
median.'' \35\ Further, the Commission noted the standard drafting 
team's support for re-evaluating the use of linear regression when more 
experience is gained with Reliability Standard BAL-003-1. Accordingly, 
the Commission proposed to direct NERC to develop a modification to 
Reliability Standard BAL-003-1 to replace use of the median with a 
``more appropriate methodology,'' suggesting that ``based on the record 
in this docket, it appears that the linear regression method is 
superior to the median when determining the Frequency Response 
Measure.'' \36\
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    \35\ Id. P 27.
    \36\ Id.
---------------------------------------------------------------------------

Comments

    28. NERC, IRC and Trade Associations disagree with the NOPR 
proposal, and support use of the median statistical measure. NERC 
states that the Commission's proposed directive to develop a 
modification to the methodology for determining the Frequency Response 
Measure is premature. NERC asserts that the standard drafting team 
evaluated different approaches for averaging individual event 
observations to compute a technically sound estimate of Frequency 
Response Measure, including the median and linear regression analysis. 
NERC also notes that, in the NOPR, the Commission indicated that NERC 
provided adequate rationale for using the median to determine the 
required Frequency Response Measure, and that use of the median is 
supported by the analyses performed to date.\37\
---------------------------------------------------------------------------

    \37\ NERC Comments at 5.
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    29. Trade Associations and IRC also disagree with the Commission's 
proposal to direct NERC to develop a modification to the proposed 
standard and assert that the standard drafting team selected the most 
appropriate methodology. Trade Associations assert that the standard 
drafting team's reasoning was ``well thought out and balanced 
considering the advantages and disadvantages of both approaches (i.e., 
`median' and `linear regression').'' \38\ Trade Associations understand 
that the standard drafting team evaluated both methods and found that 
the median approach consistently produced a more conservative Frequency 
Response Measure value, and was significantly less likely to result in 
calculation errors. Thus, Trade Associations support the median 
methodology because ``it is far better to err on the side of having 
slightly more available reserves than not having enough.'' \39\ 
Finally, Trade Associations and IRC comment that that the median 
methodology is less complicated and will minimize the compliance risks 
and resource burdens of applicable entities. IRC notes that the 
frequency response measurement process is easily susceptible to 
distortion due to a very large noise to signal ratio, and that use of 
the median discards such ``outliers,'' while results from linear 
regression may be skewed by such ``noise.''
---------------------------------------------------------------------------

    \38\ Trade Associations Comments at 5; see also IRC Comments at 
4.
    \39\ Trade Associations Comments at 5.
---------------------------------------------------------------------------

    30. BPA raises a concern that use of the median method for 
determining the Frequency Response Measure ``gives equal weight to 
large and small disturbances.'' \40\ In particular, BPA expresses 
concern with NERC's proposal to use 20 to 30 events per year for 
calculating the Frequency Response Measure because targeting a fixed 
number of events per year may lead to using relatively small (less than 
400 MW) events in frequency response calculations. BPA asserts that 
extrapolating from these small events to large events could lead to 
misleading indications of the Interconnection and balancing authority's 
performance during large events and ``undermine the intent'' of the 
Reliability Standard.\41\ BPA recommends the following specific 
revisions to the frequency response measurement proposal: (1) Use 
resource loss events equal to or greater than 1,000 MW or events with 
frequency deviations below 59.9 Hz for calculating frequency response, 
rather than a fixed number of events per year; and (2) use the smallest 
of actual maximum design frequency or the maximum design delta from 
NERC Table 1 Interconnection Frequency Response Obligation.
---------------------------------------------------------------------------

    \40\ BPA Comments at 2.
    \41\ Id.
---------------------------------------------------------------------------

    31. In reply comments, NERC responds to BPA's proposed revisions, 
stating that the values in Table 1 are not static and are revised on an 
annual basis pursuant to a written process for identifying candidate 
frequency events and an annual review of the calculations. Further, 
NERC explains that the methodology set forth in Table 1 of Attachment A 
to Reliability Standard BAL-003-1 is based on frequency and not the 
size of events, as suggested by BPA.
Commission Determination
    32. The Commission does not adopt the NOPR proposal that NERC 
develop a modification to replace the use of the median with a more 
appropriate methodology and, instead, approves the use of the median 
methodology to determine the required Frequency Response Measure as set 
forth in Reliability Standard BAL-003-1. As indicated by NERC, the 
standard drafting team considered various approaches for averaging 
individual event observations to compute a technically sound estimate 
of Frequency Response Measure and determined that ``the median's 
superior resiliency to this type of data quality problem [i.e., a data 
set with outliers] makes it the best aggregation technique at the 
time.'' \42\ We also see merit at this time in IRC's explanation that 
the frequency response measurement process is susceptible to distortion 
due to a large noise to signal ratio, and that use of the median 
discards such ``outliers.'' Accordingly, we are persuaded that, based 
on this record, there is sufficient justification for NERC's use of the 
median method for determining the required Frequency Response Measure 
in the initial implementation of Reliability Standard BAL-003-1.
---------------------------------------------------------------------------

    \42\ NERC Petition at 17-18.
---------------------------------------------------------------------------

    33. Further, with respect to BPA's concerns regarding NERC's 
process for determining the appropriate Frequency Response Measure, we 
agree with NERC's explanation that NERC has developed an acceptable 
methodology for identifying candidate frequency events and an annual 
review of the calculations.\43\ The methodology developed by NERC is 
based on frequency and not the size of events. Therefore, if any 
revisions are necessary, as BPA suggests, they can be implemented via 
this established review process.\44\
---------------------------------------------------------------------------

    \43\ NERC Reply Comments at 3-4.
    \44\ Id.
---------------------------------------------------------------------------

    34. In addition, while the use of the median provides an adequate 
initial means to achieve the objectives of Reliability Standard BAL-
003-1, we continue to believe that over the long term the Reliability 
Standard can be improved by adopting the linear method.\45\ However, we 
are persuaded

[[Page 3728]]

by the comments of NERC and others that adopting the linear regression 
method will insert an additional level of complexity to the process, 
and a directive to that effect would be premature. Accordingly, as 
stated above, we do not adopt our NOPR proposal to direct that NERC 
immediately develop a modification to Reliability Standard BAL-003-1 to 
calculate the Frequency Response Measure using linear regression. 
Rather, the Commission acknowledges NERC's commitment to studying the 
use of linear regression \46\ and the analysis contained in the 
Frequency Response Initiative Report,\47\ and directs NERC to continue 
its evaluation of the use of the linear regression methodology based 
upon experience and data collected following the implementation of BAL-
003-1 and to submit a report to the Commission within three months 
after two years of operating experience once Requirement R1 of BAL-003-
1 becomes effective (i.e., 27 months from the effective date of 
Requirement R1). The report should assess the accuracy of the linear 
regression methodology compared to the median methodology for purposes 
of determining Frequency Response Measure. Based on this report and 
actual experience, the Commission may revisit this issue.
---------------------------------------------------------------------------

    \45\ See NOPR, 144 FERC ] 61,057 at P 27. One of the 
recommendations contained in NERC's Frequency Response Initiative 
Report states that ``[l]inear regression is the method that should 
be used for calculating Balancing Authority Frequency Response 
Measure (FRM) for compliance with Standard BAL-003-1-Frequency 
Response.''
    \46\ NERC Comments at 6 and NERC Petition at 18, fn. 35.
    \47\ See NERC Petition at 17-18; see also id., Exh. F at 72-78.
---------------------------------------------------------------------------

B. Determination of Interconnection Frequency Response Obligation NERC 
Petition

    35. Reliability Standard BAL-003-1 establishes an Interconnection 
Frequency Response Obligation designed to require sufficient frequency 
response for each Interconnection to arrest frequency decline even for 
severe, but possible, contingencies. The methodology for determining 
each Interconnection's obligation for obtaining the necessary amount of 
frequency response is set forth in Attachment A of the Reliability 
Standard. The Interconnection Frequency Response Obligation is based on 
the ``resource contingency criteria,'' which is the largest ``Category 
C'' event for the Interconnection,\48\ except for the Eastern 
Interconnection, which uses the largest event and maximum actual change 
in frequency in the last ten years.\49\ The maximum change in frequency 
is calculated by adjusting the starting frequency for each 
Interconnection by the ``prevailing UFLS first step,'' i.e., under-
frequency load shedding for the Interconnection as adjusted by specific 
information on the frequency deviations for the observed events which 
make up the data-set used to calculate the Frequency Response 
Measure.\50\ For multiple balancing authority Interconnections, the 
Frequency Response Obligation is allocated to balancing authorities 
based on the formula set forth in Attachment A. FRS Form 1 and the 
underlying data retained by the balancing authorities are used for 
measuring whether frequency response was provided.
---------------------------------------------------------------------------

    \48\ See Reliability Standard BAL-003-1, Attachment A at 1. 
Category C events are defined in Reliability Standard TPL-003-0 
(System Performance Following Loss of Two or More Bulk Electric 
System Elements), Table 1.
    \49\ For the Eastern Interconnection, the largest event in the 
last ten years is the loss of 4,500 MW of generation, which occurred 
on August 4, 2007. See Reliability Standard BAL-003-1, Attachment A 
at 1; Frequency Response Initiative Report at 34-37, 54.
    \50\ Id. Under-frequency load shedding is intended to be a 
safety net to prevent against system collapse from severe 
contingencies. The resource contingency criterion is selected to 
avoid violating the under-frequency load shedding settings. See NERC 
Petition, Exh. D at 36 (``in general, the goal is to avoid 
triggering the first step of under[hyphen]frequency load shedding 
(UFLS) in the given Interconnection for reasonable contingencies 
expected'').
---------------------------------------------------------------------------

NOPR
    36. In the NOPR, with respect to the determination of the 
Interconnection Frequency Response Obligation, the Commission discussed 
two matters: (1) Eastern Interconnection--prevailing first step of 
under-frequency load shedding and (2) Western Interconnection--
identifying the largest N-2 contingency.
1. Eastern Interconnection--Prevailing UFLS First Step
    37. For the Eastern Interconnection, Attachment A to the 
Reliability Standard identifies 59.5 Hz as the ``first step'' of under-
frequency load shedding in the calculation of the default 
Interconnection Frequency Response Obligation. Attachment A notes that 
this set point is ``a compromise value set midway between the stable 
frequency minimum established in Reliability Standard PRC-006-1 (59.3 
Hz) and the local protection under frequency load shedding setting of 
59.7 Hz used in Florida and Manitoba.'' \51\ The NERC Frequency 
Response Initiative Report notes that the Florida Reliability 
Coordinating Council (FRCC) concluded that the Interconnection 
Frequency Response Obligation starting frequency of the prevalent 59.5 
Hz for the Eastern Interconnection is acceptable because it imposes no 
greater risk of triggering under-frequency load shedding operation for 
contingencies internal to FRCC than for contingencies external to 
FRCC.\52\
---------------------------------------------------------------------------

    \51\ Reliability Standard BAL-003-1, Attachment A at 2.
    \52\ See Frequency Response Initiative Report at 4, n.3.
---------------------------------------------------------------------------

    38. Noting that the actual first-step of under-frequency load 
shedding for the Eastern Interconnection is 59.7 Hz, the NOPR sought 
comment on the technical source or support for NERC's statement that 
the first-step value of 59.5 Hz in the calculation of the 
Interconnection Frequency Response Obligation imposes no greater risk 
of under-frequency load shedding operation in FRCC for an external 
resource loss than for an internal FRCC event. Also, the NOPR sought 
clarification of whether the intent of the proposal is that FRCC will 
start shedding load automatically before an event meets the value of 
59.5 Hz used in the Reliability Standard to determine the 
Interconnection Frequency Response Obligation.
Comments
    39. NERC, Trade Associations, and MISO submitted comments in 
support of using the prevailing under-frequency load shedding first 
step for the Eastern Interconnection of 59.5 Hz. Trade Associations 
state that they understand that FRCC has evaluated the impact of the 
proposed standard and has determined that the probability of a load 
shedding event caused by a generation loss within the Eastern 
Interconnection is comparable with an event internal to the FRCC 
region.\53\
---------------------------------------------------------------------------

    \53\ Trade Association Comments at 6.
---------------------------------------------------------------------------

    40. NERC comments that FRCC's 59.7 Hz under-frequency load shedding 
setting is designed to arrest dynamic transients for system events 
occurring on the Florida peninsula to avoid separation from the rest of 
the Eastern Interconnection. NERC states that further analysis by NERC 
showed that the under-frequency load shedding settings on the Florida 
peninsula are not susceptible to activation even by very large resource 
losses within the main body of the Eastern Interconnection. NERC 
explains that ``[u]sing the `generic' dynamics case available, a 
follow-on analysis was performed by NERC staff to determine the general 
order of magnitude of a frequency event that could be sustained by the 
Eastern Interconnection without violating the 59.7 Hz first step under-
frequency load shedding in FRCC. A simulation was run that tripped 
about 8,500 MW of generation in the southeast United

[[Page 3729]]

States (north of Florida).'' \54\ NERC further states that the 
simulation showed that the lowest frequency resulting from that event 
would be about 59.76 Hz in southern Florida.
---------------------------------------------------------------------------

    \54\ NERC Comments at 13.
---------------------------------------------------------------------------

    41. NERC further states that the initial nadir of 59.78 Hz in 
southern Florida from the simulation is lower than the nadir in 
northern Florida due to the wave properties of the disturbance.\55\ 
Finally, NERC asserts that because the simulation was conducted with 
nearly twice the 4,500 MW resource loss used to determine the 
Interconnection Frequency Response Obligation for the Eastern 
Interconnection, it is prudent to conclude that the smaller resource 
loss could not generate a transient or momentary system disturbance 
that would trip the FRCC 59.7 Hz under-frequency load shedding. For 
these reasons, NERC concludes that the proposed first-step value of 
59.5 Hz is adequately supported by technical considerations.\56\
---------------------------------------------------------------------------

    \55\ The ``nadir'' is the lowest point at which frequency 
excursion is arrested. Frequency Response Initiative Report at 13.
    \56\ NERC Comments at 14.
---------------------------------------------------------------------------

    42. MISO also supports the proposed first-step value of 59.5 Hz for 
the Eastern Interconnection and asserts that NERC has provided 
sufficient support for using the 59.5 Hz value. According to MISO, the 
FRCC 59.7 Hz frequency value reflects local concerns specific to 
Florida, based on the observation that an event in Florida causes a 
wider frequency swing locally than what propagates out to the rest of 
the Eastern Interconnection. MISO asserts that there has been no 
recorded case of frequency in the Eastern Interconnection declining to 
59.7 Hz.\57\ MISO further submits that, given the localized nature of 
the concerns supporting the first-step value in Florida, and the 
extreme nature of the event that would be required to drive 
Interconnection-wide impact, NERC has sufficient justification for 
establishing 59.5 Hz as the first-step value for the Eastern 
Interconnection.
---------------------------------------------------------------------------

    \57\ MISO Comments at 5.
---------------------------------------------------------------------------

Commission Determination
    43. The Commission accepts NERC's and MISO's explanation of the 
technical support for using 59.5 Hz as the ``first step'' of under-
frequency load shedding in the calculation of the default 
Interconnection Frequency Response Obligation. The Commission also 
agrees with Trade Associations' assertion that FRCC has evaluated the 
impact of the proposed standard and has determined that the probability 
of a load shedding event caused by a generation loss within the Eastern 
Interconnection is comparable with an event within the FRCC region. 
Accordingly, the Commission is satisfied with the NOPR responses and 
takes no further action on this matter.

2. Western Interconnection--Largest N-2 Event NERC Petition

    44. The Interconnection Frequency Response Obligation is based on 
the largest Category C event, or N-2 (loss of two or more bulk electric 
system elements) for the Interconnection. The default Interconnection 
Frequency Response Obligation for the Western Interconnection is based 
on the loss of two Palo Verde generating station units, which results 
in a resource contingency criterion of 2,740 MW.\58\ NERC indicated in 
its petition that the default Interconnection Frequency Response 
Obligation calculation scenarios and the calculation of the Frequency 
Response Measure for the Western Interconnection do not take into 
account the intentional tripping of generation that will occur during 
the operation of specific remedial action schemes. According to the 
Frequency Response Initiative Report, operation of the Pacific 
Northwest Remedial Action Scheme trips up to 3,200 MW of generation in 
the Pacific Northwest due to the loss of the Pacific DC Intertie.\59\ 
The Frequency Response Initiative Report recommends that NERC and the 
Western Interconnection analyze the Frequency Response Obligation 
allocation implications of the activation of the Pacific Northwest 
Remedial Action Scheme that trips 3,200 MW of generation for a single 
contingency.\60\
---------------------------------------------------------------------------

    \58\ See Frequency Response Initiative Report at 53.
    \59\ The Pacific Northwest Remedial Action Scheme, among other 
things, blocks frequency response from a number of generators and 
Balancing authorities to avoid overloading the Pacific AC ties. See 
Frequency Response Initiative Report at 62.
    \60\ See id. NERC noted that the maximum value of the Pacific 
Northwest Remedial Action Scheme has been updated to be 2,850 MW. 
See NERC Petition, Exh. G (Status of Recommendations of the 
Frequency Response Initiative Report).
---------------------------------------------------------------------------

NOPR
    45. In the NOPR, the Commission expressed concern regarding whether 
the N-2 contingency identified as an input to the Attachment A 
methodology for calculating the Interconnection Frequency Response 
Obligation accurately identifies the largest N-2 event in the Western 
Interconnection. The NOPR referenced the Frequency Response Initiative 
Report, which indicates that the Pacific Northwest Remedial Action 
Scheme could result in a larger contingency that, if included as an 
input to the Attachment A calculation, would produce more accurate 
results.\61\ Accordingly, the Commission proposed in the NOPR to direct 
NERC to submit a report that analyzes, with supporting documentation, 
the implications of the Pacific Northwest Remedial Action Scheme or any 
other Remedial Action Scheme which involves intentional tripping of 
greater than 2,400 MW of generation, and whether such a contingency 
would provide a more accurate basis for the determination of the 
Western Interconnection default Interconnection Frequency Response 
Obligation.
---------------------------------------------------------------------------

    \61\ See NOPR, 144 FERC ] 61,057 at P 32.
---------------------------------------------------------------------------

Comments
    46. Trade Associations comment that they recognize the Commission's 
issue and have no concerns with a directive mandating the ERO to study 
the implications of the Pacific Northwest Remedial Action Scheme and 
other similar arrangements that intentionally involve the tripping of 
greater than 2,400 MW of generation.
    47. BPA comments that ``[Remedial Action Scheme] events should not 
determine the Resource Contingency Criteria in the Western 
Interconnection'' because, inter alia, simulation of Remedial Action 
Scheme events and two Palo Verde events show similar system frequency 
performance and ``RAS events off-load the system stress . . . while an 
unplanned 2 Palo Verde unit outage would increase the system stress.'' 
\62\
---------------------------------------------------------------------------

    \62\ See BPA Comments at 7 (providing additional rationale for 
not considering Remedial Action Scheme events).
---------------------------------------------------------------------------

Commission Determination
    48. In light of NERC's December 30, 2013 annual analysis 
informational filing, we will not adopt our NOPR proposal. In its 2013 
annual analysis NERC explains that ``[Remedial Action Schemes] in the 
Western Interconnection that trip generation resources in excess of 
2,400 MW for transmission system contingencies should not be used for 
the resource contingency protection criteria for the Western 
Interconnection. Because of the location of the resources tripped and 
the fact that [Remedial Action Schemes] would not be armed to trip 
those levels of generation under peak conditions, the loss of two Palo 
Verde units is a larger hazard to the interconnection.'' \63\ 
Accordingly, the Commission will not direct NERC to submit a report 
concerning the implications of the Pacific Northwest Remedial Action 
Scheme or any other Remedial Action

[[Page 3730]]

Scheme which involves intentional tripping of greater than 2,400 MW of 
generation, and whether such a contingency would provide a more 
accurate basis for determining the Western Interconnection default 
Interconnection Frequency Response Obligation. We expect, however, that 
NERC will continue to study any modified or new Remedial Action Schemes 
that may have an impact greater than the tripping of 2,400 MW in its 
annual frequency response analysis, including an assessment of the 
adequacy of the resource contingency protection criteria for the 
Western Interconnection.
---------------------------------------------------------------------------

    \63\ NERC's 2013 Annual Analysis at 2.
---------------------------------------------------------------------------

    49. While BPA advocates that Remedial Action Schemes should not be 
considered in determining the Interconnection Frequency Response 
Obligation, BPA did not provide support in the record for its claim 
that activation of Remedial Action Schemes will reduce system stress 
while the loss of two Palo Verde units will increase it. Contrary to 
BPA's argument, we believe that it is appropriate to study this matter, 
as NERC has done, and take possible future action depending on study 
results because if the obligation is set too low, the Western 
Interconnection may not have sufficient frequency response to arrest 
frequency decline.

C. Method of Obtaining Frequency Response

    50. In Order No. 693, the Commission directed NERC to develop a 
modification to BAL-003-0 that includes methods for obtaining frequency 
response.\64\ While the Reliability Standard establishes an 
Interconnection Frequency Response Obligation and allocates this 
obligation to the balancing authorities within the Interconnection, the 
Reliability Standard imposes no obligation on resources that are 
capable of providing frequency response.
---------------------------------------------------------------------------

    \64\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 375. The 
Commission directed NERC to develop a modification to BAL-003-0 that 
``defines the necessary amount of Frequency Response needed for 
Reliable Operation for each balancing authority with methods of 
obtaining and measuring that the frequency response is achieved.'' 
Id. (emphasis added).
---------------------------------------------------------------------------

NOPR
    51. In the NOPR, the Commission stated that Reliability Standard 
BAL-003-1 imposes an obligation, subject to compliance and enforcement, 
on each balancing authority to obtain frequency response. The 
Commission recognized, however, that balancing authorities must obtain 
frequency response from other entities with available resources, and 
Reliability Standard BAL-003-1 imposes no obligation on those entities 
to provide frequency response.
    52. In the NOPR, the Commission proposed to direct NERC to submit a 
report 15 months after implementation of BAL-003-1 that provides an 
analysis of the availability of resources for each balancing authority 
to meet its Frequency Response Obligation during the first year of 
implementation.\65\ The Commission also proposed that the report 
provide data indicating whether actual frequency response was 
sufficient to meet each balancing authority's Frequency Response 
Obligation. Further, the NOPR proposed that, if NERC's findings 
indicate that the Frequency Response Obligation was not met, NERC 
should provide appropriate recommendations to ensure that frequency 
response can be maintained at all times within each balancing 
authority's footprint.
---------------------------------------------------------------------------

    \65\ NOPR, 144 FERC ] 61,057 at P 34.
---------------------------------------------------------------------------

Comments
    53. NERC, Trade Associations, IRC, APS, and ELCON generally support 
the Commission's proposal that NERC submit a report regarding the 
availability of resources for frequency response. Trade Associations 
comment that they ``recognize the potential benefit of such a study,'' 
but suggest that 20 to 24 months is a more reasonable time frame for a 
directive. Trade Associations also ask the Commission to exercise care 
when directing NERC to conduct studies to ensure that scarce resources 
are not expended unnecessarily.
    54. NERC commits to submitting an analysis of resource availability 
as proposed in the NOPR. However, NERC provides a detailed timeline for 
implementation and indicates that it will not receive the necessary 
information from responsible entities until March 24 of the year 
following the implementation of Requirement R1 of BAL-003-1, beyond the 
15 month time frame proposed in the NOPR. Thus, NERC proposes to submit 
the report ``within six months of the validation by the ERO of the 
Frequency Bias Setting values and computation of the sum of all 
Frequency Bias Setting values for each Interconnection and 
determination of the L 10 values for the CPS 2 criterion for each 
Balancing Authority or, if applicable, confirmation of the Frequency 
Bias Setting to be used for the calculation of the Balancing Authority 
ACE limit.'' \66\ NERC also seeks clarification that the study should 
analyze the availability of resources for both balancing authorities 
and Frequency Response Sharing Groups, since the latter was not 
specifically mentioned in the NOPR proposal. NERC states that, upon 
completion of the analysis, ``should the findings indicate that the 
Frequency Response Obligation was not met, NERC will provide 
appropriate recommendations.'' \67\
---------------------------------------------------------------------------

    \66\ NERC Comments at 16 (footnote omitted).
    \67\ Id. at 17.
---------------------------------------------------------------------------

    55. Several commenters, including IRC, APS and BPA, raise concerns 
regarding the compliance responsibilities of balancing authorities to 
meet a Frequency Response Obligation. IRC asserts that BAL-003-1 
creates an inequitable alignment of compliance responsibility and 
generator performance capability. IRC states that while the obligation 
to meet the frequency response requirements lies with the balancing 
authority, the ability to provide the resources necessary to meet those 
obligations lies primarily with generators. Therefore, while IRC 
supports the analysis proposed in the NOPR, IRC also requests that the 
Commission direct prospective revisions to the Reliability Standard to 
assign responsibilities based on performance capability. IRC contends 
that this approach is appropriate because balancing authorities have no 
control over generators' performance in supporting the Frequency 
Response Obligation assigned to balancing authorities.
    56. BPA agrees with the Commission that Reliability Standard BAL-
003-1 does not address the ability of each balancing authority to 
ensure adequacy of resources to meet its frequency response 
obligations. According to BPA, there is a proposal in WECC to develop a 
regional Reliability Standard complementary to NERC BAL-003-1 to 
address this gap. BPA comments that, until such a standard is 
developed, each balancing authority must determine how to meet its own 
frequency response obligation. BPA states that this frequency response, 
measured by balancing authority interchange, includes not only the 
response of balancing authority generation but also incremental 
transmission losses and natural load response to voltage and 
frequency.\68\ Finally, BPA asserts that balancing authorities that 
have to acquire resources will also need to develop monitoring 
capabilities to ensure that the contracted resources provide frequency 
response and that such monitoring will further increase the cost of 
compliance with Reliability Standard BAL-003-1.
---------------------------------------------------------------------------

    \68\ BPA Comments at 20.

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

[[Page 3731]]

    57. APS believes it is appropriate for NERC to study and report on 
the availability of resources. However, APS asserts it is neither just 
nor reasonable for a balancing authority to be held to this requirement 
when frequency response services are simply not available. APS states 
that until such time that NERC has completed the studies, the results 
are reviewed, and appropriate solutions are developed to assure that 
affected entities have the resources available to comply under all 
conditions, either the implementation of the requirements should be 
delayed, or in the alternative, those balancing authorities who cannot 
obtain the required frequency response should be exempt from the 
proposed requirements.
    58. APS also proposes that the Commission take a phased-in approach 
to compliance obligations to allow adequate time for necessary 
activities such as testing generation units for ramp-up capability, 
tuning generation and retesting, as well as time to allow a frequency 
response market to develop. APS comments that the types of resources a 
balancing authority has in its portfolio may significantly impact its 
ability to comply with BAL-003-1 because some resources, such as 
hydroelectric generation, are more effective in responding to frequency 
declines. APS asserts that it does not have sufficient fast-ramping 
resources to provide the required frequency response should the Western 
Interconnection experience an event that results in significant 
frequency response deviation. To address its concern, APS suggests a 
revision to the definition of a Balancing Authority's ``annual 
generation'' to exclude non-responsive units and apply a higher 
weighting factor for responsive units. According to APS, this revision 
would align the allocation of Frequency Response Obligation with a 
generator's physical ability to provide it.
    59. In its reply comments, NERC responds to APS, stating that the 
standard drafting team determined technical evidence indicates that 
sufficient frequency response resources would be available for 
balancing authorities to comply with the requirements of Reliability 
Standard BAL-003-1.\69\ Therefore, NERC contends that there is no need 
to adjust the implementation plan for Reliability Standard BAL-003-1 on 
the basis of availability.\70\ Further, NERC disagrees with APS's 
suggestion to revise the definition of balancing authority ``annual 
generation,'' contending that such a change would create a ``perverse 
incentive'' for entities to install generating units that are not 
capable of providing Frequency Response. Further, NERC explains in 
response to APS that the Reliability Standard is appropriately 
technology- neutral, does not require every generator to respond and 
provide Frequency Response, and allows for flexibility since Frequency 
Response is measured on a balancing authority and an Interconnection-
wide basis and permits the formation of Frequency Response Sharing 
Groups.
---------------------------------------------------------------------------

    \69\ NERC Reply Comments at 4 (citing NERC Report: State of 
Reliability 2013 Report (May 2013), Key Finding 3, Page 12).
    \70\ NERC Reply Comments at 4.
---------------------------------------------------------------------------

Commission Determination
    60. The Commission adopts the NOPR proposal and directs NERC to 
submit a report that provides an analysis of the availability of 
resources for each balancing authority and Frequency Response Sharing 
Group to meet its Frequency Response Obligation during the first year 
of implementation. However, NERC indicates in its comments that it 
needs more than the proposed 15 months to prepare the report based on 
the time frame for NERC to receive relevant data from applicable 
entities.\71\ Accordingly, we direct NERC to submit this report within 
27 months of implementation of Requirement R1. The Commission believes 
that the need for the report is well justified based on the record in 
the proceeding, including the support of most commenters. While we 
conclude that BAL-003-1 is reasonable and should be approved, it 
includes a new methodology for determining the Frequency Response 
Obligation and the results when applied are not yet known. Further, as 
discussed above, the ability of balancing authorities and Frequency 
Response Sharing Groups to meet the obligation is untested. Thus, we 
believe the required report is an appropriate means to inform us as to 
whether additional steps are needed on the Frequency Response 
Obligation and what those might be. The required report should provide 
data indicating whether actual frequency response was sufficient to 
meet each balancing authority's Frequency Response Obligation. Further, 
consistent with NERC's representation in its comments, the Commission 
directs that, upon completion of the required analysis, should the 
findings indicate that the Frequency Response Obligation was not met, 
NERC shall provide appropriate recommendations to ensure that frequency 
response can be maintained at all times within each balancing 
authority's footprint.\72\
---------------------------------------------------------------------------

    \71\ See NERC Comments at 16.
    \72\ See NERC Comments at 17.
---------------------------------------------------------------------------

    61. In response to the concerns expressed by the IRC, BPA and APS 
that balancing authorities may not have control over adequate resources 
necessary to support the Frequency Response Obligations assigned to the 
balancing authorities, we will not forego compliance or delay 
implementation. Certainly, a balancing authority's ability or inability 
to draw on the necessary resources to meet the compliance obligations 
of BAL-003-1 might be a potential mitigating factor in a compliance 
action, depending on the efforts made to obtain resource commitments. 
Moreover, NERC and its stakeholders had, and still have, the option to 
propose a Reliability Standard imposing obligations directly on 
resources, if they find it appropriate. (Similarly, we may consider a 
directive for such a Standard or other options such as market or tariff 
mechanisms, if appropriate.) However, we are not persuaded that a 
blanket waiver or delay in compliance is warranted.
    62. While we share concerns regarding the ability of balancing 
authorities and Frequency Response Sharing Groups to meet the Frequency 
Response Obligation pursuant to BAL-003-1, we do not believe that such 
changes are warranted based on the current record in the proceeding. 
Rather, a recent NERC study indicates that sufficient frequency 
response resources would be available for balancing authorities to 
comply with the requirements of Reliability Standard BAL-003-1.\73\ 
Further, as noted by NERC, Reliability Standard BAL-003-1 provides 
flexibility, for example by allowing entities to form Frequency 
Response Sharing Groups to meet the Frequency Response Obligation. 
Likewise, we are not persuaded by APS that a change to the definition 
of balancing authority annual generation is warranted at this time, and 
we are concerned that APS's suggestion would change the resource-
neutral approach of the standard.
---------------------------------------------------------------------------

    \73\ See NERC Reply Comments at 4 (citing NERC Report: State of 
Reliability 2013 Report (May 2013), Key Finding 3, Page 12). See 
also APS Comments at 8 (``[a]s NERC Reported in its recent State of 
Reliability 2013 Report, from 2009 to 2012 interconnection frequency 
response performance, and expected frequency response . . . has been 
higher than the recommended interconnection frequency response 
obligation'').
---------------------------------------------------------------------------

    63. We do not discount the concerns of APS and others regarding 
resource availability. However, we believe that the prudent course is 
to have NERC complete the directed report. The

[[Page 3732]]

Commission will review NERC's report, any related recommendations from 
NERC, and the record developed in Docket No. AD13-8 regarding the 
market implications of frequency response requirements,\74\ to 
determine whether additional action is warranted. However, if prior to 
the deadline for the report NERC learns that a lack of resource 
availability could prevent achieving the purpose of Reliability 
Standard BAL-003-1, (e.g., balancing authorities are experiencing 
problems procuring sufficient resources to satisfy their frequency 
response obligations), NERC should immediately report that to the 
Commission together with appropriate recommendations for 
mitigation.\75\
---------------------------------------------------------------------------

    \74\ See Market Implications of Frequency Response and Frequency 
Bias Setting Requirements, 144 FERC ] 61,058 (2013).
    \75\ For example, in such circumstances, NERC could look to 
regional Reliability Standard BAL-001-TRE-01, approved concurrently 
with this Final Rule, which contains provisions for assuring 
frequency response in the ERCOT Interconnection.
---------------------------------------------------------------------------

D. Premature Withdrawal of Primary Frequency Response NERC Petition

    64. In its petition, NERC indicated that, while the standards 
drafting team addressed the early withdrawal of primary frequency 
response, there are no requirements that address this issue and it 
remains a concern.\76\ Specifically, during the initial recovery from 
the loss of a generator, a gap can occur if a significant amount of 
primary frequency response is withdrawn before the secondary response 
is fully activated. As previously noted, the Interconnection Frequency 
Response Obligation for each Interconnection is a function of the 
resource contingency criteria and the maximum change in frequency.\77\
---------------------------------------------------------------------------

    \76\ See NERC Petition, Exh. D (Frequency Response Standard 
Background Document) at 19 (``the intentional withdrawal of response 
before frequency has been restored to schedule can cause a decline 
in frequency beyond that which would be otherwise expected. This 
intentional withdrawal of response is highly detrimental to 
reliability. Therefore, it can be concluded in general that 
sustained response has a higher reliability value than 
un[hyphen]sustained response.'').
    \77\ The maximum change in frequency is an amount of frequency 
deviation based on the loss of the identified resource contingency 
that will not trigger under-frequency load shedding.
---------------------------------------------------------------------------

    65. NERC's Frequency Response Initiative Report states that 
``[w]ithdrawal of primary frequency response is an undesirable 
characteristic associated most often with digital turbine-generator 
control systems using set point output targets for generator output. 
These are typically outer-loop control systems that defeat the primary 
frequency response of the governors after a short time to return the 
unit to operating at a requested MW output.'' \78\ The Frequency 
Response Initiative Report recommends measuring and tracking frequency 
response sustainability trends.\79\ The Frequency Response Initiative 
Report also recommends that ``NERC should include guidance on methods 
to reduce or eliminate the effects of primary frequency response 
withdrawal by outer-loop unit or plant control systems.'' \80\
---------------------------------------------------------------------------

    \78\ NERC Petition, Exh. F (Frequency Response Initiative 
Report) at 31.
    \79\ Id. at 35. The Frequency Response Initiative Report also 
recognizes unit characteristics and operating philosophies as 
typical causes.
    \80\ Id. at 41-42.
---------------------------------------------------------------------------

NOPR
    66. In the NOPR, the Commission explained that ``following the 
sudden loss of generation, the automatic and immediate increase in 
power output by resources providing primary frequency control seeks to 
quickly arrest and stabilize the frequency of the interconnection, 
usually within 30 seconds or less. After this rapid primary frequency 
response, AGC provides secondary frequency response to return frequency 
to the scheduled value in time frames of several minutes after the loss 
of generation.'' \81\ However, the withdrawal of a significant amount 
of primary frequency response before the secondary frequency response 
is activated can cause a further drop in frequency response. This drop 
in frequency is illustrated by the following diagram: \82\
---------------------------------------------------------------------------

    \81\ NOPR, 144 FERC ] 61,057 at P 35.
    \82\ Id. P 35 (citing Frequency Response Initiative Report at 
35, fig. 21).
[GRAPHIC] [TIFF OMITTED] TR23JA14.062


[[Page 3733]]


    67. In the NOPR, the Commission expressed concern that Reliability 
Standard BAL-003-1 does not adequately address the reliability issue 
created by the withdrawal of primary frequency response prior to 
activation of secondary frequency response. The withdrawal of primary 
frequency response before the activation of resources providing 
secondary frequency response may lead to under-frequency load shedding 
and possible cascading outages. Accordingly, the Commission proposed to 
direct NERC to develop a modification to BAL-003-1 to address the 
concern of premature withdrawal of primary frequency response prior to 
the activation of secondary frequency response.
Comments
    68. NERC disagrees with the need for the proposed directive. First, 
NERC asserts that Form 1 of the Reliability Standard addresses 
premature withdrawal of frequency response and suggests that experience 
with the actual implementation of the Reliability Standard will better 
indicate whether premature withdrawal is an issue that requires 
revisions to the Reliability Standard and, if necessary, definitions of 
the scope and parameters of the potential issue. Second, NERC notes 
that the premature withdrawal issue could be impacted by the 
Commission's ongoing effort to determine whether action is necessary to 
coordinate the requirements of the Reliability Standard with tariffs 
and market rules.\83\ Third, NERC asserts the issue of premature 
withdrawal can be addressed with other mechanisms rather than a 
revision to the Reliability Standard. Finally, NERC states that it 
``commits to monitoring the issue of premature withdrawal on a going-
forward basis and will submit an informational filing two years after 
Requirement R1 of Reliability Standard BAL-003-1 becomes effective.'' 
\84\
---------------------------------------------------------------------------

    \83\ See Market Implications of Frequency Response and Frequency 
Bias Setting Requirements, 144 FERC ] 61,058 (2013).
    \84\ NERC Comments at 7.
---------------------------------------------------------------------------

    69. NERC maintains that the standard drafting team accounted for 
the issue of premature withdrawal of frequency response in the 
calculation of the B-value averaging period within the Frequency 
Response Measure. NERC states that ``[t]he team recognized that there 
would be more AGC response in the 20 to 52 second period, but the team 
also recognized that the 20 to 52 second period would provide a better 
measure of squelched response from outer loop control action. The 20 to 
52 second period was selected because it would indicate squelched 
response from outer-loop control and provide incentive to reduce 
response withdrawal.'' \85\ NERC further explains that if there is 
withdrawal of primary frequency response during the 20 to 52 second 
interval, the metric will have a lower value, which will then lower an 
entity's median score thereby impacting compliance with Requirement R1 
of Reliability Standard BAL-003-1.
---------------------------------------------------------------------------

    \85\ NERC Comments at 9 (citing NERC Petition, Exh. D at 13).
---------------------------------------------------------------------------

    70. NERC also maintains that, while Reliability Standard BAL-003-1 
applies to balancing authorities and Frequency Response Sharing Groups, 
the premature withdrawal issue applies to generators. Therefore, NERC 
asserts, the withdrawal issue could be addressed with alternative 
mechanisms, including other Reliability Standards or guidelines. NERC 
further asserts that there are emerging technologies that can and will 
affect withdrawal, including energy storage devices. NERC notes that 
the premature withdrawal issue could be affected by whatever tariff or 
market solutions the Commission may adopt in related Docket AD13-8. For 
these reasons, NERC believes the Commission's proposed directive 
requiring a specific solution, i.e., a modification to BAL-003-1 
Reliability Standard, is premature. NERC states that, consistent with 
the recommendations in the Frequency Response Initiative Report, it 
will evaluate whether a modification to Reliability Standard BAL-003-1 
is necessary to address premature withdrawal and will submit an 
informational filing to the Commission two years after Requirement R1 
of Reliability Standard BAL-003-1 becomes effective.\86\
---------------------------------------------------------------------------

    \86\ Id. at 10.
---------------------------------------------------------------------------

    71. Trade Associations disagree with the Commission's concern over 
premature withdrawal of frequency response. Trade Associations state 
that Reliability Standard BAL-003-1, along with other Reliability 
Standards awaiting implementation, such as BAL-001-2, sufficiently 
addresses this concern. Trade Associations assert that the Eastern 
Interconnection has significant inertia which buffers the initial drop 
in frequency in major events making premature primary frequency 
response withdrawal more apparent. Trade Associations state that the 
exemplary post-contingent recovery of all Interconnections' frequency 
as demonstrated over time supports their view that premature withdrawal 
is not a significant factor at this time. Finally, Trade Associations 
state that the desired outcome of automatic generation control for a 
balancing authority should result in a dispatch of resources to meet 
the secondary control requirements of NERC BAL-001. Based upon the 
overall balance of resources and demand, Trade Associations assert that 
automatic generation control may at times, guide individual regulating 
resources within a balancing authority, where a positive ACE exists, to 
withdraw energy (i.e., to reduce ACE) to meet the secondary control 
requirements of CPS2 under Reliability Standard BAL-001-1. Trade 
Associations assert that the response of such a unit would be to 
withdraw support, thereby resulting in an outcome contrary to the 
desire to sustain frequency response.\87\
---------------------------------------------------------------------------

    \87\ Trade Associations Comments at 8-9.
---------------------------------------------------------------------------

    72. IRC states that the Commission's concern about premature 
withdrawal of frequency response is unwarranted. IRC maintains that the 
Commission should adopt a more comprehensive perspective, taking into 
account frequency response and withdrawal patterns over an extended 
period of time and across Interconnections to understand the potential 
impact of premature withdrawal. IRC states that data collected and 
analyzed during the standard drafting team's field trial indicated how 
quickly and steadily frequency is, on average, brought back to a stable 
level over a five minute response window in all three Interconnections. 
IRC explains that the standard drafting team considered data regarding 
the mean frequency recovery rate (mHz/Sec) for all frequency-related 
events in each of the major Interconnections from 2010 to 2013. IRC 
states that early withdrawal of primary frequency response has not been 
a significant problem because ``most responses are incomplete at the 
time that frequency has been initially arrested and the additional 
response has generally been sufficient to make up for more than these 
unpreventable reductions in response.'' \88\
---------------------------------------------------------------------------

    \88\ IRC Comments at 10.
---------------------------------------------------------------------------

    73. ELCON states that secondary frequency response (Regulation) is 
primarily delivered through automatic generation control, which is 
governed by Reliability Standard BAL-005-0.2b. That Reliability 
Standard contains requirements applicable to balancing authorities 
which therefore, ELCON states, have ``the responsibility to ensure its 
operability.'' \89\ ELCON further states that Reliability Standard TOP-
003-1 calls for generator operators to coordinate planned outages with 
transmission operators, who are

[[Page 3734]]

required to share that information with balancing authorities. 
Therefore, ELCON asserts that ``[t]his means that the [balancing 
authority] is aware of all AGC capacity that will be unavailable due to 
planned maintenance well ahead of time--and can plan mitigating actions 
accordingly.'' \90\ ELCON also asserts that Reliability Standard PRC-
024-1 has requirements intended to ensure that generator operators can 
ride through specifically defined frequency deviations, ``which can 
best assure their availability when needed for secondary frequency 
response support.'' \91\ ELCON suggests that generator concerns with 
possible violations of Reliability Standard PRC-024-1, such as dropping 
off-line during a frequency transient within the standard's ``no-trip 
zones,'' could provide incentives against premature withdrawal.
---------------------------------------------------------------------------

    \89\ ELCON Comments at 8.
    \90\ Id.
    \91\ Id.
---------------------------------------------------------------------------

    74. BPA states that it shares the Commission's concerns on early 
withdrawal of frequency response and provides a recorded frequency 
response withdrawal by a combined cycle plant.\92\ BPA states that the 
withdrawal was caused by load controllers implemented at many power 
plants and suggests that load controllers include a frequency bias 
term, similar to automatic generation control, to allow plants to 
sustain their frequency response. BPA asserts that the sustainability 
of frequency response is essential not only for Interconnection system 
frequency support, but also for voltage stability when the response 
withdrawal causes excessive loading on stability-limited transmission 
paths.\93\
---------------------------------------------------------------------------

    \92\ BPA Comments at 14-15.
    \93\ Id. at 15.
---------------------------------------------------------------------------

Commission Determination
    75. The Commission is persuaded not to adopt the NOPR proposal to 
require NERC to develop a modification to Reliability Standard BAL-003-
1 to address premature withdrawal of frequency response. The Commission 
believes that the nature and extent of the problems that could result 
from the premature withdrawal of primary frequency response, and how 
best to address it if necessary, will be better understood after NERC 
and balancing authorities have more experience with Reliability 
Standard BAL-003-1. Accordingly, in light of NERC's December 30, 2013 
annual analysis informational filing, the Commission expects NERC to 
continue to evaluate the impact of the withdrawal of primary frequency 
response before secondary frequency response is activated in its annual 
analyses.
    76. The Commission recognizes BPA's concerns about the early 
withdrawal of frequency response, particularly the possibility that 
load controllers may prematurely over-ride primary frequency response. 
However, we agree with NERC that the need to take action, including 
requiring load controllers to include a frequency bias term similar to 
AGC to sustain frequency response or otherwise modifying Reliability 
Standard BAL-003-1, should be decided after we have actual experience 
with the Reliability Standard.

E. Light Load Case Study

NOPR
    77. In the NOPR, the Commission highlighted NERC's conclusion in 
its Frequency Response Initiative Report that ``[s]ustainability of 
primary frequency response becomes more important during light-load 
conditions when there are generally fewer frequency-responsive 
generators online.'' \94\ Light load conditions require special 
consideration because inertia, i.e., the resistance to a change in the 
motion of an object, plays a crucial role in how fast frequency 
declines following the sudden loss of generation.\95\ In the NOPR, the 
Commission further explained that ``[W]hen the inertia on the system is 
low (i.e. fewer generators on line), the loss of generation creates a 
steeper frequency excursion and thus the need for faster frequency 
response.'' \96\
---------------------------------------------------------------------------

    \94\ NOPR, 144 FERC ] 61,057 at P 39 (quoting Frequency Response 
Initiative Report at 32).
    \95\ Id. Inertia is provided from the stored energy in the 
rotating mass of the turbine-generators and synchronous motors on 
the Interconnection. See NERC Petition, Exh. D at 16-17.
    \96\ Id. (quoting Frequency Response Initiative Report at 40). 
The reduction in inertia also drives a need for higher speed 
response to frequency excursions.
---------------------------------------------------------------------------

    78. In the NOPR, the Commission focused on the resource contingency 
criterion in Reliability Standard BAL-003-1 for calculating the 
Interconnection Frequency Response Obligation for the Eastern 
Interconnection, and the potential concerns with the use of an event 
that took place during heavy system load conditions. The use of a 
generic governor stability case in the stability simulation testing for 
the Eastern Interconnection resource contingency criteria used in the 
determination of the Interconnection Frequency Response Obligation 
represented conditions far different than light-load conditions. This 
raises questions regarding whether, and by what amount, light load 
conditions would lower system inertia and load response. The Frequency 
Response Initiative Report recommended the development of a new light-
load case study, and the re-simulation of the resource contingency 
criterion for the Eastern Interconnection Frequency Response 
Obligation.\97\ According to NERC, the Eastern Interconnection 
Reliability Assessment Group is preparing an updated generic governor 
2013 summer light-load case (from the 2012 case series), and NERC will 
be evaluating the Eastern Interconnection Frequency Response Obligation 
during the expected light-load conditions.\98\
---------------------------------------------------------------------------

    \97\ NERC Petition, Exh. F, Frequency Response Initiative Report 
at 99.
    \98\ NERC Petition, Exh. G. A study conducted by the National 
Renewable Energy Laboratory explored the relationship between system 
disturbance and grid frequency perturbation. See National Renewable 
Energy Laboratory, Eastern Frequency Response Study (May 2013). A 
key finding is that the dynamic model of the Eastern Interconnection 
can be adjusted to more closely capture the observed behavior. In 
particular, the assumed amount of generation with governor controls 
activated was increased to model the contingency used in calculating 
the Eastern Interconnection Frequency Response Obligation. In 
addition, a light load power flow case was selected with the 
expectation that it would represent one of the more challenging 
conditions for the Eastern Interconnection with respect to frequency 
response. See http://www.nrel.gov/docs/fy13osti/58077.pdf.
---------------------------------------------------------------------------

    79. The Commission agreed with NERC that the study of light-load 
scenarios is useful in determining an appropriate Interconnection 
Frequency Response Obligation, especially for the Eastern 
Interconnection.\99\ Accordingly, the Commission proposed to direct 
NERC to submit the results of the light-load case, together with NERC's 
recommendations on whether further actions are warranted.
---------------------------------------------------------------------------

    \99\ According to NERC, ``[m]odeling of frequency response 
characteristics has been a known problem since at least 2008, when 
forensic modeling of the Eastern Interconnection required a `de-
tuning' of the existing [Multiregional Modeling Working Group] 
dynamics governor to 20% of modeled (80% error) to approach the 
measured frequency response values from the [August 4, 2007] 
event.'' See NERC Petition, Exh. F, Frequency Response Initiative 
Report at 35.
---------------------------------------------------------------------------

Comments
    80. BPA, Trade Associations, and IRC submitted comments agreeing 
with the Commission that the study of light-load scenarios is useful in 
determining an appropriate Interconnection Frequency Response 
Obligation, especially for the Eastern Interconnection.
    81. IRC states that it does not oppose the development of a new 
light-load case study, but believes that better modeling data needs to 
be collected before an accurate study can be conducted. IRC states that 
``[i]n

[[Page 3735]]

particular, inaccurate modeling of governor deadbands and adjustments 
to model governor performance based on observed performance for 
frequency excursions will lead to inaccurate assumptions of performance 
for extreme events during light-load.'' \100\ IRC encourages the 
Commission to direct that NERC partner with industry to compile the 
appropriate information needed to ensure an accurate case study, and to 
review that study through an industry stakeholder process. Finally, the 
IRC states that while it agrees that a new light-load case study would 
be useful, the study should also look at tools to estimate frequency 
response in real time.
---------------------------------------------------------------------------

    \100\ IRC Comments at 11.
---------------------------------------------------------------------------

    82. BPA states that while frequency response is expected to be 
lower during off-peak light load conditions, there have not been a 
sufficient number of events under light load conditions to confirm the 
severity of the problem. BPA states that currently all WECC regions are 
exceeding their frequency response obligations.
    83. The Trade Associations support the Commission's proposal to 
direct NERC to submit their light-load case study and recommendations.
Commission Determination
    84. The Commission adopts the proposal in the NOPR and directs NERC 
to submit the results of the Eastern Interconnection Reliability 
Assessment Group's light-load case, using actual turbine governor 
response data. Additionally, the Commission directs NERC to submit a 
recommendation on whether further actions are warranted no later than 
15 months after implementation of the Final Rule. Further, the report 
should discuss any appropriate changes to the Interconnection Frequency 
Response Obligation warranted by the study.

F. Assignment of Violation Risk Factors and Violation Severity Levels

1. Violation Risk Factor for Requirement R1

NOPR
    85. In the NOPR, the Commission proposed to approve each violation 
risk factor assignment NERC proposed for a requirement of the proposed 
Reliability Standard, with one exception. The Commission indicated that 
NERC did not adequately justify assignment of a medium violation risk 
factor to Requirement R1, which establishes the Frequency Response 
Measure that a balancing authority must achieve to arrest a decline in 
system frequency. While NERC asserted that a violation of this 
requirement will not cause bulk electric system instability, separation 
or cascading failures because ``a balancing authority's previous year's 
Frequency Bias setting is included within its ACE equation and would 
provide support for the contingency,'' the Commission indicated that 
this explanation does not apply to Requirement R1. The Commission noted 
that the ACE equation provides input to secondary frequency control, 
which differs from the primary control needed to arrest a frequency 
decline, as established by Requirement R1. The Commission proposed to 
direct NERC to assign a high violation risk factor to Requirement R1 
because (1) NERC described frequency response as a critical component 
to the reliable operation of the Bulk-Power System, indicating that 
Requirement R1 does not impose merely an administrative burden, and (2) 
the medium violation risk factor that the Commission approved for each 
BAL-003-0.1b requirement does not apply to Requirement R1 because it 
has no equivalent in that standard.\101\ The Commission sought comments 
on this proposal.
---------------------------------------------------------------------------

    \101\ NOPR, 144 FERC ] 61,057 at P 42.
---------------------------------------------------------------------------

Comments
    86. Trade Associations state that while Requirement R1 may merit a 
high violation risk factor, responsible entities must achieve an annual 
Frequency Response Measure as calculated in accordance with Attachment 
A to Reliability Standard BAL-003-1. The Trade Associations therefore 
observe that it would be inappropriate to apply the violation risk 
factor for Requirement R1 to a single event rather than to an annual 
Frequency Response Measure.\102\
---------------------------------------------------------------------------

    \102\ Trade Associations Comment at 10-11.
---------------------------------------------------------------------------

    87. Commenting that the standard drafting team took a rational 
approach to its violation risk factor assignments, and that each such 
assignment appears appropriate and well-reasoned to approximate the 
impact of a violation on reliability, IRC requests that the Commission 
accept the medium violation risk factor for Requirement R1 as developed 
by the standard drafting team and agreed to by industry.\103\
---------------------------------------------------------------------------

    \103\ IRC Comments at 12.
---------------------------------------------------------------------------

    88. APS disagrees with the Commission's proposal to assign a high 
violation risk factor to Requirement R1. APS agrees with NERC that a 
violation of this requirement will not cause Bulk Electric System 
instability, separation or cascading failures. APS maintains that 
frequency response in the Western Interconnection is and has been 
stable. APS states that there are almost forty balancing authorities in 
the Western Interconnection, and even if individual balancing 
authorities should fall short of their obligation, there is no 
measurable risk to the Interconnection.\104\
---------------------------------------------------------------------------

    \104\ APS Comments at 9.
---------------------------------------------------------------------------

    89. APS also states that the worst case scenario from a violation 
of Requirement R1 is some loss of load due to under-frequency load 
shedding. APS contends that over the last fifteen years in the Western 
Interconnection, frequency has not declined below 59.7 Hertz for a 
generation loss of 3,000 megawatts or less. APS states that the first 
under-frequency load shedding in the Western Interconnection occurs at 
59.5 Hertz, and hence, there has not been a significant impact to the 
bulk electric system for loss of generation. APS submits that a medium 
violation risk factor is appropriate.\105\
---------------------------------------------------------------------------

    \105\ APS Comments at 9.
---------------------------------------------------------------------------

Commission Determination
    90. We direct NERC to change the violation risk factor for 
Requirement R1 to ``high,'' as proposed in the NOPR. No commenter 
disagreed with the Commission's observation that Requirement R1 
addresses primary frequency control that is necessary to arrest 
frequency decline within seconds after it begins. Without sufficient 
primary frequency control, a frequency decline may not be arrested in 
sufficient time to prevent instability, uncontrolled separation or 
cascading failures. While APS maintains that frequency in the Western 
Interconnection is and has been stable, that stability depends on 
compliance with Requirement R1 by balancing authorities that have 
sufficient resources to meet Requirement R1. The fact that one entity's 
violation of Requirement R1 may be offset by the efforts of others is 
not a basis for ignoring or downplaying the substantial risk posed by 
inadequate frequency response. Accordingly, we conclude that a ``high'' 
violation risk factor for Requirement R1 is appropriate. We agree with 
Trade Associations that Requirement R1 mandates achievement of an 
annual Frequency Response Measure, and that compliance with that 
requirement cannot be determined by a single event.

2. Violation Severity Levels for Requirement R1

NOPR
    91. In the NOPR, the Commission proposed changes to NERC's proposed 
violation severity level assignments for Requirement R1. NERC proposed 
two violation severity levels depending

[[Page 3736]]

upon whether a balancing authority or a Frequency Response Sharing 
Group has an annual Frequency Response Measure ``less negative than its 
Frequency Response Obligation by more than 1 percent but by at most 30 
percent or 15 MW/0.1Hz, whichever one is the greater deviation from its 
[Frequency Response Obligation].'' This violation would have a 
``lower'' severity level if ``[t]he summation of the Balancing 
authorities' [Frequency Response Measure] within an Interconnection was 
equal to or more negative than the Interconnection's [Interconnection 
Frequency Response Obligation],'' and a ``high'' severity level if this 
summation ``did not meet its [Interconnection Frequency Response 
Obligation].'' Based on these two possibilities for this summation, 
NERC proposed either a ``medium'' severity level and a ``severe'' 
severity level for a balancing authority or Frequency Response Sharing 
Group with an Frequency Response Measure that is ``less negative than 
its [Frequency Response Obligation] by more than 30% or by more than 15 
MW/0.1 Hz, whichever is the greater deviation from its [Frequency 
Response Obligation].'' \106\
---------------------------------------------------------------------------

    \106\ NOPR, 144 FERC ] 61,057 at P 43.
---------------------------------------------------------------------------

    92. The Commission proposed that NERC modify its severity level 
assignments for Requirement R1 to remove references to performance by 
other entities or otherwise so as to address a concern that NERC 
assigned these severity levels partly on performance of Requirement R1 
by all other responsible entities in the Interconnection in which a 
violator is located. The Commission concluded that it would be unfair 
to base a penalty on a responsible entity in part upon the collective 
compliance or lack of compliance by independent entities, because: (1) 
NERC's sanction guidelines focus violation severity levels on a 
violator's deviation from required performance, not the risk the 
violation is expected to pose to reliability or performance by other 
entities; and (2) a balancing authority or Frequency Response Sharing 
Group subject to Requirement R1 does not control any other responsible 
entity's compliance with this requirement.\107\ The Commission sought 
comments on its proposal.
---------------------------------------------------------------------------

    \107\ Id. P 44.
---------------------------------------------------------------------------

Comments
    93. APS agrees with the Commission's proposal that NERC change 
Requirement R1 violation severity level assignments that are in part 
based on the performance of other entities in the Interconnection. 
However, APS contends that there is no justification for a ``severe'' 
violation severity level applicable to this requirement. APS comments 
that the violation severity level should be ``low'' for a responsible 
entity missing its annual Frequency Response Obligation by small 
amounts (less than 20 percent) and ``medium'' for missing by a larger 
amount (greater than 20 percent).\108\
---------------------------------------------------------------------------

    \108\ APS Comments at 9-10.
---------------------------------------------------------------------------

    94. IRC states that the standard drafting team took an appropriate, 
rational approach to its violation severity level proposal, taking into 
account that frequency response is an interconnection-wide service, not 
balancing authority specific. IRC contends that a single balancing 
authority should not be penalized for a 10 percent decrease in 
response, where frequency response is otherwise sufficient amongst its 
surrounding balancing authorities and the reliability of the 
Interconnection as a whole is not in jeopardy. IRC asserts that, in 
contrast, a 10 percent decrease in frequency response within the 
Interconnection as a whole clearly would signal a reliability issue. 
IRC contends that, by suggesting that the VSLs for Requirement R1 be 
modified to remove references to performance by other entities, the 
Commission essentially suggested that a small deficiency within a 
single balancing authority is equivalent to deficient frequency 
response within an Interconnection, and should be equivalently 
penalized as such.\109\
---------------------------------------------------------------------------

    \109\ IRC Comments at 12-13.
---------------------------------------------------------------------------

Commission Determination
    95. As proposed in the NOPR, we direct NERC to remove from its 
violation severity level assignments for Requirement R1 any references 
to performance of that requirement by other entities. No commenter has 
questioned the Commission's analysis in the NOPR that NERC's Sanction 
Guidelines define violation severity levels as a violator's deviation 
from required performance, not as the risk the violation is expected to 
pose to reliability or performance by other entities, and that a 
particular responsible entity's compliance with Requirement R1 is not 
controlled by performance of the requirement by other responsible 
entities in an Interconnection. Nor has any commenter suggested any 
rationale sufficient to support a departure from the Sanction 
Guidelines in this regard. While we agree with IRC that frequency 
response is an Interconnection-wide service, a failure by each 
responsible entity in an Interconnection to comply with Requirement R1 
will result in a failure to meet the Interconnection-wide annual 
Frequency Response Measure, to the detriment of reliability across the 
Interconnection. We believe that violation severity levels for this 
requirement should be set so as to discourage particular responsible 
entities from ``leaning on'' other entities to provide sufficient 
frequency response collectively to meet the relevant Interconnection 
Frequency Response Obligation.
    96. We leave it to NERC to consider how its violation severity 
level assignments for Requirement R1 should be changed in response to 
our concerns, including consideration of APS's suggestions. However, we 
note that APS did not provide in its comments any rationale for its 
suggested severity level assignments.

G. Supporting/Associated Documents

    97. In the NOPR, the Commission explained that Reliability Standard 
BAL-003-1 has several supporting or associated documents. For example, 
Attachment A, appended to the Reliability Standard, is explicitly 
referenced in Requirements R1 and R2.\110\ Further, NERC's Procedure 
for ERO Support of Frequency Response and Frequency Bias Setting 
Standard (Procedure), is included as an ``associated document'' in the 
Reliability Standard, and is referenced in Attachment A.\111\ Likewise, 
Requirement 4 of proposed BAL-003-1 references FRS Forms 1 and 2, 
stating that ``each balancing authority that provides Overlap 
Regulation Service shall modify its Frequency Bias Setting in its ACE 
calculation . . . to be equivalent to `the sum of Frequency Bias 
Settings as shown on FRS Form 1 and Form 2 . . . as validated by the 
ERO.' '' \112\
---------------------------------------------------------------------------

    \110\ See NOPR, 144 FERC ] 61,057 at P 45.
    \111\ Id. The Procedure is provided as Exh. C to the NERC 
petition. NERC stated that it included the Procedure in the petition 
for informational purposes. NERC Petition at 4.
    \112\ NOPR, 144 FERC ] 61,057 at P 45. Reliability Standard BAL-
003-1 identifies FRS Form 1 and FRS Form 2 as ``associated 
documents.''
---------------------------------------------------------------------------

    98. In the NOPR, the Commission stated that ``[t]hese associated 
and supporting documents are explicitly referenced in the Requirements 
of the Reliability Standard. Thus, failure of a Balancing Authority to 
comply with such associated and supporting documents could result in 
non-compliance with the underlying Requirement.'' \113\
---------------------------------------------------------------------------

    \113\ Id. P 46 (footnote omitted).

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

[[Page 3737]]

Commission Determination
    99. No entity submitted comments on this matter. Accordingly, the 
Commission affirms its NOPR statement that the failure of a balancing 
authority to comply with the associated and supporting documents that 
are referenced in the Requirements of BAL-003-1 could result in non-
compliance with the underlying Requirement.\114\
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    \114\ Attachment A and the Procedures also require NERC to take 
certain actions pertaining to the calculation of frequency response 
measure and allocation among balancing authorities. The ERO is not 
an applicable entity pursuant to Reliability Standard BAL-003-1. The 
ERO, however, has an independent obligation to ``ensure compliance 
with a reliability standard or any Commission order affecting the 
ERO or a regional entity'' and the Commission can take ``such action 
as is necessary or appropriate'' to ensure that the ERO fulfills 
this responsibility under Attachment A and the Procedures. See id. P 
46, n.73 (citing 16 U.S.C. 824o(e)(5)).
---------------------------------------------------------------------------

    100. NERC, in its Reply Comments, states that ``the values in Table 
1 of Attachment A are not static. As explained in Attachment A to the 
proposed Reliability Standard and the Procedure for ERO Support of 
Frequency Response and Frequency Bias Setting Standard, the values in 
Table 1 are determined and revised on an annual basis.'' \115\ While 
the Procedure sets forth a mechanical and objective formula for 
calculating the IFRO value in Table 1 of Attachment A, we believe that 
any changes to the inputs or IFRO value in Table 1 should occur in a 
transparent manner. Accordingly, should NERC make changes to Table 1 
based upon NERC's Procedure document, the Commission directs NERC to 
submit an informational notice describing the basis for the changes at 
least 30 days in advance of the effective date of any such 
changes.\116\


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    \115\ NERC Reply Comments at 3-4.
    \116\ Cf. Version One Regional Reliability Standard for 
Transmission Operations, Order No. 752, 135 FERC ] 61,062, at P 43 
(2011) (requiring WECC to notify the Commission of changes to the 
WECC Transfer Path Table). See also NERC Petition, Exh. C at 1 
(changes to the Procedure for ERO Support of Frequency Response must 
be posted for comment by NERC, approved by the NERC Board of 
Trustees, and filed with the Commission ``for informational 
purposes'').
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V. Information Collection Statement

    101. The following collection of information contained in this 
Final Rule is subject to review by the Office of Management and Budget 
(OMB) under section 3507(d) of the Paperwork Reduction Act of 1995 
(PRA).\117\ OMB's regulations require approval of certain information 
collection requirements imposed by agency rules.\118\ Upon approval of 
a collection(s) of information, OMB will assign an OMB control number 
and an expiration date. Respondents subject to the filing requirements 
of a rule will not be penalized for failing to respond to these 
collections of information unless the collections of information 
display a valid OMB control number. The Commission solicited comments 
on the need for this information, whether the information will have 
practical utility, the accuracy of the provided burden estimate, ways 
to enhance the quality, utility, and clarity of the information to be 
collected, and any suggested methods for minimizing the respondent's 
burden, including the use of automated information techniques. The 
Commission received comments on specific requirements in the 
Reliability Standard, which we address in this Final Rule. However, the 
Commission did not receive any comments on our reporting burden 
estimates.
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    \117\ 44 U.S.C. 3507(d).
    \118\ 5 CFR 1320.11.
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    102. Public Reporting Burden: The burden and cost estimates below 
are based on the collection of certain information to establish the 
Interconnection Frequency Response Obligation and the Frequency Bias 
Setting for each balancing authority. Each balancing authority reports 
its previous year Frequency Response Measure and Frequency Bias Setting 
to NERC, and revised Frequency Bias Settings are based on data from 
events the balancing authorities report on the proposed FRS Form 1. The 
information provided on the FRS Form 1 is based on events which qualify 
for analyses,\119\ and NERC states that it will identify between 20 to 
35 events in each Interconnection for calculating the Frequency 
Response Measure and Frequency Bias Setting.\120\ Allotting eight hours 
for balancing authorities to compile the information on candidate 
events,\121\ multiplied by 28 events per balancing authority per year 
yields 224 hours per year per balancing authority as the regulatory 
burden for compliance.\122\ Our estimates are based on the NERC 
Compliance Registry as of May 31, 2013, which indicates that there are 
about 132 registered balancing authorities.\123\ Accordingly, the 
Commission estimates the annual regulatory burden for compliance with 
the Reliability Standard to be $13,560 per balancing authority,\124\ 
with an estimated total annual cost for all balancing authorities to be 
$1,789,920.\125\
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    \119\ NERC stated that it will provide quarterly posting of 
candidate events to assist the balancing authorities with 
compliance, and lessen the burden of the annual submission of FRS 
Form 1 data. NERC Petition, Exh. C at 3-4.
    \120\ Id. at 1. The Frequency Response Initiative Report states 
that between 20 and 25 events are necessary for statistical 
analysis. Frequency Response Initiative Report at 72.
    \121\ The information is automatically generated from computer 
data bases. However, time is allotted to compile, verify, and review 
the information.
    \122\ Assuming an average of between 20 and 35 events per year.
    \123\ NERC Compliance Registry List, May 31, 2013, available at: 
http://www.nerc.com.
    \124\ The estimated hourly loaded cost (salary plus benefits) 
for an engineer is assumed to be $60/hour, based on salaries as 
reported by the Bureau of Labor Statistics (BLS) (http://bls.gov/oes/current/naics2_22.htm). Loaded costs are BLS rates divided by 
0.703 and rounded to the nearest dollar. (http://www.bls.gov/news.release/ecec.nr0.htm.)
    \125\ The estimated total annual cost includes an annual data 
retention burden of $15,840 for all balancing authorities.

----------------------------------------------------------------------------------------------------------------
                                     Number of
  BAL-003-1 (frequency response      balancing       Number of    Average burden   Total annual      Estimated
   and frequency bias setting)       authority     responses per     hours per     burden hours    total annual
                                    respondents     respondent       response                        cost ($)
                                             (1)             (2)             (3)     (1) x (2) x   Total hours x
                                                                                             (3)             $60
----------------------------------------------------------------------------------------------------------------
Annual Reporting................             132              28               8          29,568      $1,774,080
Data Retention..................             132               1               2             264          15,840
                                 -------------------------------------------------------------------------------
    Total.......................  ..............  ..............  ..............          29,832       1,789,920
----------------------------------------------------------------------------------------------------------------


[[Page 3738]]

    Title: FERC-725R, Mandatory Reliability Standards: Reliability 
Standard BAL-003-1.
    Action: Proposed Collection of Information.
    OMB Control No: To be determined.
    Respondents: Business or other for-profit, and not-for-profit 
institutions.
    Frequency of Responses: Annual.
    Necessity of the Information: The revision of NERC Reliability 
Standard BAL-003-1 is part of the implementation of the Congressional 
mandate of the Energy Policy Act of 2005 to develop mandatory and 
enforceable Reliability Standards to better ensure the reliability of 
the nation's Bulk Power System. Specifically, Reliability Standard BAL-
003-1 is intended to ensure sufficient Frequency Response from 
balancing authorities to maintain Interconnection Frequency within 
predefined bounds.
    Internal Review: The Commission has reviewed the revisions to the 
Reliability Standard and determined that its action is necessary to 
implement section 215 of the FPA. The Commission has assured itself, by 
means of its internal review, that there is specific, objective support 
for the burden estimate associated with the information requirements.
    103. Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street NE., Washington, DC 20426 [Attention: 
Ellen Brown, Office of the Executive Director, email: 
DataClearance@ferc.gov, phone: (202) 502-8663, fax: (202) 273-0873].

VI. 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.\126\ 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.\127\ The actions directed 
herein fall within this categorical exclusion in the Commission's 
regulations.
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    \126\ Regulations Implementing the National Environmental Policy 
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & 
Regs., Regulations Preambles 1986-1990 ] 30,783 (1987).
    \127\ 18 CFR 380.4(a)(2)(ii).
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VII. Regulatory Flexibility Act

    105. The Regulatory Flexibility Act of 1980 (RFA) \128\ generally 
requires a description and analysis of proposed rules that will have 
significant economic impact on a substantial number of small entities. 
The NERC registry includes about 132 individual balancing authorities. 
Comparison of the NERC Compliance Registry with data submitted to the 
Energy Information Administration on Form EIA-861 indicates that, of 
these entities, 15 may qualify as small entities.\129\
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    \128\ 5 U.S.C. 601-612.
    \129\ The RFA definition of ``small entity'' refers to the 
definition provided in the Small Business Act (SBA), 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 (2006). According to the Small Business 
Administration, an electric utility is defined as ``small'' if, 
including its affiliates, it is primarily engaged in the generation, 
transmission, and/or distribution of electric energy for sale and 
its total electric output for the preceding fiscal year did not 
exceed 4 million megawatt hours.
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    106. As noted above, the Commission estimates the annual regulatory 
burden for compliance with the Reliability Standard to be $13,560 per 
balancing authority. This estimate for all balancing authorities was 
established using 28 events per year, but smaller entities may have 
fewer events which qualify for analysis,\130\ and the costs for these 
smaller entities may be reduced. Further, while the Reliability 
Standard establishes a balancing authority's Frequency Response 
Obligation, because balancing authorities are currently providing 
frequency response, we do not anticipate additional compliance costs. 
Accordingly, we do not consider the cost of compliance with the 
Reliability Standard to be a significant economic impact for small 
entities because it should not represent a significant percentage of an 
affected small entity's operating budget. Accordingly, no regulatory 
flexibility analysis is required.
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    \130\ The Procedures establish a minimum of 20 events for 
analysis, and a process for identifying when fewer than 20 events 
are available for analysis.
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VIII. Document Availability

    107. 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 the Commission's Home Page (http://www.ferc.gov) and 
in the Commission's Public Reference Room during normal business hours 
(8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE., Room 2A, 
Washington, DC 20426.
    108. From the Commission'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.
    109. User assistance is available for eLibrary and the Commission's 
Web site during normal business hours from the Commission's Online 
Support at 202-502-6652 (toll free at 1-866-208-3676) or email at 
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
public.referenceroom@ferc.gov.

IX. Effective Date and Congressional Notification

    110. These regulations are effective March 24, 2014. 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.
[FR Doc. 2014-01218 Filed 1-22-14; 8:45 am]
BILLING CODE 6717-01-P


