Draft Minutes Member Representatives Committee (MRC) August 15, :00 5:00 p.m. ET

Transcription

1 Draft Minutes Member Representatives Committee (MRC) 1:00 5:00 p.m. ET Hilton Quebec 1100, Rene-Levesque Blvd East Quebec, QC Canada G1R 4P3 Chair Scott Helyer called to order the North American Electric Reliability Corporation (NERC) Member Representatives Committee (MRC) meeting on at 1:00 p.m., local time. The meeting announcement, agenda, and list of attendees are attached as Exhibits A, B, and C, respectively. NERC Antitrust Compliance Guidelines and Public Meeting Notice Chair Helyer called attention to the NERC Antitrust Compliance Guidelines and the public meeting notice, indicating that any questions regarding these guidelines or notice should be addressed to NERC s General Counsel, Charles Berardesco. Introductions and Chair s Remarks Chair Helyer declared a quorum present with the following recognized proxies: Barry Lawson for Eric Baker Cooperative Bill Gallagher for Terry Huval Transmission Dependent Utility Larry Nordell for Charles Acquard Small End-Use Customer Scott Helyer for William Taylor III Merchant Generator Lam Chung for Lorne Midford Federal/Provincial Stacy Dochoda for Gordon Gillette Regional Entity - FRCC (non-voting) Chair Helyer acknowledged and welcomed Vice Chair Carol Chinn, the NERC Board of Trustees, Commissioners Cheryl LaFleur and John Norris, Federal Energy Regulatory Commission (FERC), and Pat Hoffman, assistant secretary for electricity delivery and energy reliability, U.S. Department of Energy (DOE). Chair Helyer also recognized the policy input provided by the MRC and stakeholders at the request of John Q. Anderson, chair of the NERC Board of Trustees. Minutes The MRC approved the draft minutes of its July 10, 2012 conference call and May 8, 2012 meeting (Exhibits D and E).

2 Nominations and Election of MRC Officers and Sector Representatives Chair Helyer announced the annual nomination and election of the MRC chair, vice chair and member representatives from each sector. The tentative schedule for the 2013 elections includes: MRC Officer Nominations and Elections Friday, August 31 nomination period opens Monday, October 1 nomination period closes Tuesday, November 6 election of officers for following year by current MRC members MRC Member Nominations and Elections Monday, September 10 nomination period opens Tuesday, November 13 nomination period closes Monday, December 3 election begins Friday, December 14 election ends Update from the Board of Trustees Nominating Committee Jan Schori, chair of the Board of Trustees Nominating Committee (BOTNC), reported that the BOTNC continues the recruitment of candidates for the Board. John Q. Anderson and Tom Berry will be term limited in February 2013 and ineligible for reelection to the Board. David Goulding is an incumbent trustee and expected to be re-nominated to serve another term. Vicky Bailey will not stand for reelection in The NERC Corporate Governance and Human Resources Committee (CGHRC) will review and consider the total number of trustees needed to serve on the Board, beginning February The tentative schedule for the 2013 elections includes: BOTNC Nomination Period Tuesday, September 4 nomination period opens Monday, October 1 nomination period closes The BOTNC also includes five members of the MRC: Scott Helyer MRC Chair Carol Chinn MRC Vice Chair Sylvain Clermont Federal/Provincial Sector Terry Boston ISO/RTO Sector John A. Anderson Large End-Use Electricity Customer Sector Chair Helyer and Vice Chair Chinn invited MRC members to share questions or comments regarding the BOTNC, within one week, including any concerns with the re-nomination of Mr. Goulding. 2

3 Remarks from Gerry Cauley, NERC President and CEO President Cauley welcomed participants to Quebec City and shared his appreciation for the MRC s response to the Board s request for policy input. He also recognized that the input highlighted several key issues and strategic challenges facing the ERO: Maturation of the NERC business planning and budget process (BP&B) The ERO must continue to strive to improve its effectiveness, efficiency, and transparency through its business planning and budget process and through its delivery of results. Performance of key activities The ERO must also understand why significant events occur on the bulk power system. Activities built around risk and event analysis, situational awareness, lessons learned, etc. assist the ERO in linking and connecting data and information to better understand events, determine causes, and formulate solutions. Impact of compliance As the ERO prepares for the March 2013 filing of the Phase 2 Find, Fix, Track and Report (FFT) initiative, a comprehensive vision of an end-state for compliance enforcement should be developed. Attention has to be given to the existing culture of compliance and the ERO must also incent a shift that includes a culture of reliability. Effective internal controls, good monitoring procedures, and sampling of risk priorities are all pieces of a new compliance monitoring model that the ERO needs to consider and improve upon with input from the Regions, industry and FERC. Implementation of the Reliability Issues Steering Committee (RISC) The RISC is designed to perform evidence-based prioritizing of real reliability issues to determine where to best allocate resources to achieve desired solutions. This new committee will work outside of the traditional mindset of incremental processes and timelines as it assists the ERO and industry in formulating solutions and resources towards improved reliability. Process improvements at NERC - There needs to be a formal process developed that determines how the ERO will prioritize and decide what resources and tools to allocate within the legal framework of Section 215. NERC Business Planning and Budget Process Michael Walker, senior vice president and chief financial and administrative officer, NERC, reviewed the 2013 business planning and budget (BP&B) cycle and shared improvements for the 2014 cycle that include multi-year objectives and budget projections, earlier collaboration with the Regions and industry, and production of a common strategic plan. The following questions and comments were provided by the MRC regarding this topic: The 2013 business planning and budget process worked well and added transparency and predictability. NERC is commended for their cost control in the 2013 budget. NERC truly held to its 3-5 year commitment to level off resources. There was recognized consistency among the regional budgets and demonstration of greater coordination with NERC. The working relationship between NERC and the Regions gets stronger each year. 3

4 The policy input from the MRC highlighted the need to review NERC s core activities. There is the potential for a lot of debate and dialogue regarding what constitutes NERC s core activities. The MRC is asked to consider framing the debate to better define NERC core activities and priorities during a future meeting. Many are encouraged by this high level discussion among the Board and NERC staff to think differently, especially regarding the culture of reliability excellence. The Standards Process Input Group (SPIG) was a good beginning effort, but it did not go as far as it needed to go. There is still the need for a comprehensive plan with one complete vision for how the ERO gets industry pointed towards a culture of reliability excellence. MRC input remains beneficial and critical to NERC and the ERO s business plan and budget. Chair Helyer proposed that the MRC focus more on defining the scope of the ERO and the culture of reliability excellence as well as provide assistance and input to NERC regarding the compliance initiative. Vice Chair Chinn and several other MRC members agreed to assist NERC staff with the future planning of the BP&B and with the preparations for the March 2013 FFT filing to FERC. Mr. Cauley clarified that there are two initiatives that will be best pursued through the development of two separate MRC subgroups: 1. Reaching an end-state of compliance assurance (culminating in the March 2013 FFT filing) 2. Providing input to the ERO BP&B process and documentation The following MRC members and participants agreed to support the two new subgroup efforts: Compliance Enforcement Initiative, March 2013 filing John Seelke, Tom Bowe, Jeff Gust, and Jack Cashin BP&B, ERO scope - Bill Gallagher, John Anderson, Tom Burgess, and Mike Penstone Standards Process Input Group (SPIG) Recommendations Chair Helyer reviewed the initial five SPIG recommendations endorsed by the Board on May 8, In response to the SPIG s Recommendation #2, on a motion by Bill Gallagher with a second by Terry Boston, the MRC endorsed the submission of the RISC charter to the Board for approval and the following initial slate of MRC and at-large member nominations for the RISC: 1. Scott Helyer, Tenaska, Inc. Merchant Electricity Generator sector 2. Bob Schaffeld, Southern Company Services, Inc. Investor-Owned Utility sector 3. Jason Marshall, ACES Power Marketing Electricity Marketer sector 4. John Twitty, Transmission Access Policy Study Group Transmission Dependent Utility sector 5. Brian Silverstein, Bonneville Power Administration Federal/Provincial sector 6. Christine Schwab, Dominion Investor-Owned Utility sector 7. Peter Flynn, National Grid Investor-Owned Utility sector 4

5 8. Mike Smith, Georgia Transmission Corporation Cooperative Utility sector 1 9. A vacancy for a Canadian Provincial representative, to be filled at a later date Recommendation 2 The following questions and comments were provided by the MRC regarding Recommendation #2: There will not be a complete understanding of how the RISC will operate so the charter needs to remain broad through the committee s initial formation. Membership of the RISC is intended to be broad and diverse, but the process by which to select the best candidates is still unclear. The SPIG s nominating committee is encouraged to seek out the best candidates, through proactive dialogue, from each of the desired sectors and to include a Canadian representative. The one year review of the charter should also include thoughtful consideration for how issues and risks enter the committee s review and consideration. An annual review may determine if additional activities should be submitted to the RISC in an effort to take the burden off of the SC. The RISC charter may also need a statement regarding the committee s capability to review existing standards to determine the appropriate follow-on action, to include retirement of some standards. The Standards Committee (SC) process must continue and is not intended to stop and wait while the RISC is initiated. There must be work completed in parallel by both the SC and RISC, at least initially. The intent of the RISC seems to be providing guidance to what enters the standards development process; however, it is still unclear whether all SARs will enter into the RISC. The processing of SARs makes a difference to the effectiveness of the RISC. Since standards are one of the outcomes of the RISC s analysis, the issue regarding review of SARs is expected to be a two-way effort, determined on an as-needed basis. The RISC is expected to refer SARs to the standards committee and the standards committee is expected to send SARs to the RISC when it is believes that a broader solution is more beneficial than the development of a standard. Chair Helyer confirmed that the RISC should be thought of, in a more general sense, as steering broader reliability issues and not just confined to reviewing SARs that go into the standards process. Notwithstanding that, there will be times when the RISC receives a SAR and determines that the best course of action or route for solution is through standards development. Chair Helyer also recognized that a lot can be learned from the current nomination process as the RISC matures, plans for future elections, and improves upon its own charter. 1 Mike Smith was proposed as an initial member of the RISC slate as part of an amended motion by Bill Gallagher. 5

6 Mr. Cauley confirmed that the RISC is primarily intended to advise the board and set the reliability agenda for the ERO from a qualified and broad industry perspective. Recommendations 1, 3, 4 and 5 Regarding Recommendations 1, 3, 4 and 5, Herb Schrayshuen, vice president of standards and training, NERC, and Allen Mosher, chair of the Standards Committee, provided a brief update regarding changes to the Standard Processes Manual (SPM) and composition of the standard drafting teams (SDT) and the timeline of activities to strengthen relationships with governmental and provincial regulators. The following questions and comments were provided by the MRC regarding these additional SPIG recommendations: The approximate timeline for the implementation of these activities and process improvements is unclear. It is also unclear how the SC will utilize the wavier provision. When considering a schedule for engaging industry and governmental and provincial authorities in the process improvements, a 24-month look ahead is encouraged to better coincide with the planning and budget process. Events proposed to take place in 2012 are occurring after the approval of the 2013 budget. Project management of the process continues to be important and should include an understanding of the complexity of a standard being developed as well as a gauge for how soon it can be expected to be done or completed. The SC s ability to waive any provision of the SPM, for a good cause, seems to be an overly broad waiver provision with little demonstrated need. Mr. Mosher acknowledged that the SC will be cautious in the flexibility and use of a waiver provision. The use of a wavier will be publically disclosed to the Board. Mr. Cauley confirmed that intent of Recommendation #3 is to assist in formalizing ERO priorities in concert with industry and regulators. There are two annual events that are anticipated to promote this collaboration. One conference would occur in the fall to gather ideas/input and regulatory perspective to assist with prioritizing activities. The second event in the spring would promote a capstone report on activities and accomplishments that have occurred to-date. Status and Policy Input for Standards Projects The following updates were provided for several ongoing standards projects. Bulk Electric System (BES) Definition, Phase 2 Pete Heidrich, manager of reliability standards for Florida Reliability Coordinating Council, provided updates from the SDT assisting with the ERO s response to FERC s notice of proposed rulemaking (NOPR) issued in June A recent draft guidance document was developed to assist industry in identifying bulk electric system (BES) and non-bes elements, pending the final order that approves the BES definition. A technical justification project, under development with the Planning Committee and other subcommittees, is expected later this year or early next year to address the bright-line voltage criteria, generation and reactive resource thresholds, and power flow associated with local networks. 6

7 The following comment was provided by the MRC regarding this topic: There is a need for a bright-line between BES and local distribution; however, this may not be the responsibility or job of this SDT. Mr. Schrayshuen announced that the NOPR responses from NERC will be shared with the Trades and Industry in the upcoming days. Definition of Adequate Level of Reliability (ALR) Mr. Mosher reported the recent posting of the revised definition of ALR for industry comment. The revised definition contains clarifying language for assessment objectives such as the identification of transmission and resource adequacy. Status of Communications Standards Mr. Schrayshuen provided an update on the status of the communications standards. During the February 2012 quarterly meetings, there were reservations raised regarding the completion of the communications standards and the filing of the COM-002 interpretation limiting required use of threepart communications to emergency situations. As a result, the interpretation was asked to be held until a more comprehensive package was available for the MRC and Board to consider. The elements of the comprehensive package include: an RSAW for COM-002, the standard development for COM-003, and a reliability guideline from the Operating Committee (OC). Mr. Cauley acknowledged the potential burden of documenting all instances of compliance with threepart communication. The comprehensive proposal is promoting a shift in the compliance burden philosophy by demonstrating that an effective communications program is underway and being checked for instances of noncompliance and where deficiencies are being identified and corrected. NERC and the Regions then have a role in checking the sufficiency and effectiveness of the program, the training of personnel, the sampling technique and that any findings or discoveries of noncompliance are being addressed. This new approach promotes learning opportunities and examples of incented performance and suggests a better way to test controls that are already in place to determine if they are or are not working properly. This approach also needs to be initiated for the upcoming CIP version 5 standards, which involves expanding cyber security on a prioritized basis among all bulk power system (BPS) assets. The potential burden of zero tolerance among all of these entities is too great when the focus is truly on implementing effective access controls that NERC can then check against for compliance purposes. The following comments were provided by the MRC regarding this topic: It is important that the same compliance principles be consistent across all versions of the CIP standards. NERC is encouraged to be aware of these inconsistencies throughout the development of version 5. Addressing zero defects is only half the equation in the CIP version 5 and the COM-003 standards; the other half of the equation is understanding how these standards will be audited. 7

8 If we want to be successful with balloting, the industry needs to clearly understand how they are going to be audited against the new approach/language. Both standards have a high chance for success if the industry has a clearer understanding of the auditing approach that accompanies each. The industry is not solely concentrated on the zero defect issue surrounding three-part communication, but is largely concentrated on the impossibility for an operator to implement three-part communications during all circumstances. The standard should probably have not been balloted given this impossibility. Mr. Cauley recognized that there will be exponentially more CIP violations under the current compliance model if the new approach is not implemented, but during this implementation there will be an effort to reach as much consistency across all standards as possible. Mr. Schrayshuen clarified, at the request of Janice Case, the balloting of COM-003 did not fail due to the implementation of the internal controls approach. Additional Discussion of the August 8 MRC Informational Session Items Chair Helyer asked for any additional discussion on the agenda items presented during the August 8 MRC Informational Webinar session. The following comments were provided by the MRC regarding the various topics discussed on August 8: Compliance Enforcement Initiative When will auditors or investigators make field determinations on FFT treatment? It is still unclear why minor administrative items, as part of the FFT process, take up to six months to track. What activity is occurring during each month or stage of FFT during this period of time? Ken Lotterhos, associate general counsel and director of enforcement, confirmed that field auditors and investigators can presently make recommendations to the CEA enforcement staff. In parallel, NERC and the Regions are developing a whitepaper to address the future of CEI as well as field determinations and pilot efforts for early Mr. Lotterhos also noted the ongoing collaborative effort among NERC, the Regional Entities and registered entities to improve upon the current processing time for FFTs. Lack of prequalification and completion of mitigation plans by entities has contributed to slower processing times in the past Emerging Issues Survey for Long-Term Reliability Assessment The survey poll indicates that there should be more focus on gas-electric interdependency with the increased build out expected over the next few years. 8

9 Cyber security may not be considered an emerging issue since there is ongoing focus in this area, but it may need to remain on the list if specific cyber risk-based tools need to be developed or become available at some future point. Environmental regulation is questioned on the list since it is more concentrated on costs than on risk to reliability. The three risks/issues of primary concern are driven by environmental-based concerns to some degree, but climate change does not seem to appear on the list. Mr. John Moura, associate director of reliability assessment, NERC, confirmed that topics, such as climate control, can be recommended annually for consideration and further review or special assessment. Mr. Cauley recognized that these emerging reliability issues have merit and challenges. The RISC will be asked to weigh risks that may not be seen as frequent. Despite that a framework is already in place for prioritizing low frequency, high impact issues through raw data, event analysis and opinion surveys, better methods may be needed for developing and quantifying a full risk portfolio. Report on Rules of Procedure Process Improvements Rebecca Michael, associate general counsel, NERC announced that a NERC staff report will be shared with the Board, on August 16, that includes improvements and enhancements to the processes used to revise the Rules of Procedure (ROP). The following four key enhancements were developed in response to comments provided during the last ROP revisions: more transparency, earlier engagement with industry and Regions, additional information shared during the actual changes to the ROP, and the ability to maintain flexibility and take additional time when warranted. Follow-up Activities from the 2011 Southwest Outage Dave Nevius, senior vice president, NERC, and Melanie Frye, vice president of operations and planning, for Western Electricity Coordinating Council (WECC), provided a status and progress update, from WECC and the other Regional Entities, in response to the findings and recommendations of the FERC/NERC Inquiry. WECC recently initiated a survey of the operating practices in the Western Interconnection that focused on identifying successes, gaps and challenges in the following areas: nextday studies, seasonal planning, near and long-term planning, situational awareness, consideration of BPS equipment, protection systems, and angular separation. A final report, expected later this month, will address WECC s progress in response to NERC s July 26, 2012 request and timeline for completing remaining remediation efforts. November 6, 2012 Meeting and Future Meetings The following are future MRC meeting dates and locations: November 6 7, 2012 New Orleans, LA February 6 7, 2013 San Diego, CA May 8 9, 2013 Philadelphia, PA 9

10 August 14 15, 2013 Montreal, Canada November 6 7, 2013 Atlanta, GA February 5 6, 2014 Phoenix, AZ Update on Regulatory Matters Chair Helyer invited MRC members with questions or concerns regarding additional regulatory matters to meet with Charlie Berardesco, senior vice president and general counsel, NERC, at the conclusion of the meeting. Adjournment There being no further business, the meeting terminated at 5:00p.m. local time. Submitted by, Holly Mann Secretary 10