Agenda Board of Trustees December 17, :00 p.m. 3:00 p.m. Eastern Conference Call

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1 Agenda Board of Trustees December 17, :00 p.m. 3:00 p.m. Eastern Conference Call Participant Line: Call to Order Introductions and Chair s Remarks NERC Antitrust Compliance Guidelines Agenda 1. Standards* a. Relay Performance During Stable Power Swings PRC Adopt b. Transmission System Planned Performance for Geomagnetic Disturbance Events TPL Adopt 2. Adjournment *Background materials included.

2 Antitrust Compliance Guidelines I. General It is NERC s policy and practice to obey the antitrust laws and to avoid all conduct that unreasonably restrains competition. This policy requires the avoidance of any conduct that violates, or that might appear to violate, the antitrust laws. Among other things, the antitrust laws forbid any agreement between or among competitors regarding prices, availability of service, product design, terms of sale, division of markets, allocation of customers or any other activity that unreasonably restrains competition. It is the responsibility of every NERC participant and employee who may in any way affect NERC s compliance with the antitrust laws to carry out this commitment. Antitrust laws are complex and subject to court interpretation that can vary over time and from one court to another. The purpose of these guidelines is to alert NERC participants and employees to potential antitrust problems and to set forth policies to be followed with respect to activities that may involve antitrust considerations. In some instances, the NERC policy contained in these guidelines is stricter than the applicable antitrust laws. Any NERC participant or employee who is uncertain about the legal ramifications of a particular course of conduct or who has doubts or concerns about whether NERC s antitrust compliance policy is implicated in any situation should consult NERC s General Counsel immediately. II. Prohibited Activities Participants in NERC activities (including those of its committees and subgroups) should refrain from the following when acting in their capacity as participants in NERC activities (e.g., at NERC meetings, conference calls and in informal discussions): Discussions involving pricing information, especially margin (profit) and internal cost information and participants expectations as to their future prices or internal costs. Discussions of a participant s marketing strategies. Discussions regarding how customers and geographical areas are to be divided among competitors. Discussions concerning the exclusion of competitors from markets. Discussions concerning boycotting or group refusals to deal with competitors, vendors or suppliers.

3 Any other matters that do not clearly fall within these guidelines should be reviewed with NERC s General Counsel before being discussed. III. Activities That Are Permitted From time to time decisions or actions of NERC (including those of its committees and subgroups) may have a negative impact on particular entities and thus in that sense adversely impact competition. Decisions and actions by NERC (including its committees and subgroups) should only be undertaken for the purpose of promoting and maintaining the reliability and adequacy of the bulk power system. If you do not have a legitimate purpose consistent with this objective for discussing a matter, please refrain from discussing the matter during NERC meetings and in other NERC-related communications. You should also ensure that NERC procedures, including those set forth in NERC s Certificate of Incorporation, Bylaws, and Rules of Procedure are followed in conducting NERC business. In addition, all discussions in NERC meetings and other NERC-related communications should be within the scope of the mandate for or assignment to the particular NERC committee or subgroup, as well as within the scope of the published agenda for the meeting. No decisions should be made nor any actions taken in NERC activities for the purpose of giving an industry participant or group of participants a competitive advantage over other participants. In particular, decisions with respect to setting, revising, or assessing compliance with NERC reliability standards should not be influenced by anti-competitive motivations. Subject to the foregoing restrictions, participants in NERC activities may discuss: Reliability matters relating to the bulk power system, including operation and planning matters such as establishing or revising reliability standards, special operating procedures, operating transfer capabilities, and plans for new facilities. Matters relating to the impact of reliability standards for the bulk power system on electricity markets, and the impact of electricity market operations on the reliability of the bulk power system. Proposed filings or other communications with state or federal regulatory authorities or other governmental entities. Matters relating to the internal governance, management and operation of NERC, such as nominations for vacant committee positions, budgeting and assessments, and employment matters; and procedural matters such as planning and scheduling meetings. NERC Antitrust Compliance Guidelines 2

4 Phase 3 of Relay Loadability: Stable Power Swings PRC Agenda Item 1.a Board of Trustees Conference Call December 17, 2014 Action Adopt the following standard documents and authorize staff to file with applicable regulatory authorities: Reliability Standard PRC Relay Performance During Stable Power Swings [PRC-026-1] Violation Risk Factors (VRFs) and Violation Severity Levels (VSLs) for PRC [VRFs and VSLs] Implementation Plan for PRC Relay Performance During Stable Power Swings [PRC Implementation Plan] Definitions None Retirements None Background This is the final phase of a three-phased standard development project that focused on addressing protective relay operations due to stable power swings. This project establishes requirements aimed at preventing protective relays from tripping unnecessarily in response to a stable power swing by: requiring the identification of Elements on which a power swing may affect Protection System operation, assessing the security of load-responsive protective relays, and performing corrective actions, when required, to ensure such relays will not trip in response to stable power swings. PRC addresses three FERC directives from FERC Order No There were no Paragraph 81 or Independent Experts Review Panel (IERP) considerations since this is a new standard.

5 Pertinent FERC Order No. 733 Directives The project addressed three directives from Order No related to the development of a standard to address stable power swings. Paragraphs 150 and We will not direct the ERO to modify PRC to address stable power swings. However, because both NERC and the Task Force have identified undesirable relay operation due to stable power swings as a reliability issue, we direct the ERO to develop a Reliability Standard that requires the use of protective relay systems that can differentiate between faults and stable power swings and, when necessary, phases out protective relay systems that cannot meet this requirement. We also direct the ERO to file a report no later than 120 days of this Final Rule addressing the issue of protective relay operation due to power swings. The report should include an action plan and timeline that explains how and when the ERO intends to address this issue through its Reliability Standards development process While we recognize that addressing stable power swings is a complex issue, we note that more than six years have passed since the August 2003 blackout and there is still no Reliability Standard that addresses relays tripping due to stable power swings. Additionally, NERC has long identified undesirable relay operation due to stable power swings as a reliability issue. Consequently, pursuant to section 215(d)(5) of the FPA, we find that undesirable relay operation due to stable power swings is a specific matter that the ERO must address to carry out the goals of section 215, and we direct the ERO to develop a Reliability Standard addressing undesirable relay operation due to stable power swings. Paragraphs 162 The PSEG Companies also assert that the Commission s approach to stable power swings should be inclusive and include islanding strategies in conjunction with out-ofstep blocking or tripping requirements. We agree with the PSEG Companies and direct the ERO to consider islanding strategies that achieve the fundamental performance for all islands in developing the new Reliability Standard addressing stable power swings. Standard Development Process The standard was posted for three industry comment and ballot periods. The Standards Committee authorized a waiver for a shortened time period of 21 days for the third comment and ballot period, which achieved industry approval with a percent approval rating. The proposed standard was posted for final ballot on December 5, 2014 that will close on December 16, Results from the final ballot will be presented to the NERC Board of Trustees at the December meeting. 1 FERC Order No. 733, issued on March 18, 2010 approved PRC Transmission Relay Loadability.

6 Minority Issues None Additional Information A link to the project history and files is included here for reference: [Project Phase 3 of Relay Loadability: Stable Power Swings] Reliability Standard Audit Worksheet (RSAW) [PRC Draft RSAW]

7 PRC Relay Performance During Stable Power Swings Board of Trustees Conference Call December 17, 2014

8 Background Third phase of the Relay Loadability projects Filing response due December 31, 2014 FERC Order No. 733 directed: the ERO to develop a Reliability Standard that requires the use of protective relay systems that can differentiate between faults and stable power swings and, when necessary, phases out protective relay systems that cannot meet this requirement. develop a reliability standard addressing undesirable relay operation due to stable power swings Three formal comment and ballot periods Final ballot December 5 16, RELIABILITY ACCOUNTABILITY

9 Technical Approach Protection System Response to Power Swings, August 2013 System Protection and Control Subcommittee & System Analysis and Modeling Subcommittee Recommended narrow set of Bulk Electric System Elements Recommended applicable entities PRC Ensures relays are expected to not trip in response to stable power swings Planning Coordinator identifies at-risk Elements based on criteria Generator Owners and Transmission Owners evaluate relays on: o Elements identified by the PC o Elements that actually trip on power swings 3 RELIABILITY ACCOUNTABILITY

10 Phase 3 of Relay Loadability: Stable Power Swings PRC Reliability Benefits Identifies Elements with greatest risk to tripping Applies evaluation criteria to applicable relays on identified Elements Requires Corrective Action Plan for relays not meeting the criteria Addresses three FERC directives Action Adopt PRC Relay Performance During Stable Power Swings 4 RELIABILITY ACCOUNTABILITY

11 5 RELIABILITY ACCOUNTABILITY

12 Geomagnetic Disturbance Mitigation (GMD) TPL Agenda Item 1.b Board of Trustees Conference Call December 17, 2014 Action Adopt the following standard documents and authorize staff to file with applicable regulatory authorities: Reliability Standard TPL Transmission System Planned Performance for Geomagnetic Disturbance Events [TPL Clean] Violation Risk Factors (VRFs) and Violation Severity Levels (VSLs) for TPL [VRFs and VSLs] Implementation Plan for TPL [TPL Implementation Plan] Definitions Geomagnetic Disturbance Vulnerability Assessment or GMD Vulnerability Assessment Retirements None Background TPL applies to Planning Coordinators, Transmission Planners, Transmission Owners, and Generator Owners with grounded power transformers connected at 200 kv or higher, and requires these entities to conduct assessments of the impacts of a 100-year benchmark Geomagnetic Disturbance (GMD) event on their systems. If the assessments identify impacts from the benchmark GMD event, entities are required to develop plans to mitigate the risk of instability, uncontrolled separation, or cascading. On May 16, 2013, the Federal Energy Regulatory Commission (FERC) issued Order No. 779, directing NERC to develop Reliability Standards addressing the potential impact of GMDs in two stages. Stage 1 standard (EOP-010-1) requiring applicable entities to implement Operating Procedures, which was approved by FERC in June Stage 2 standard (TPL-007-1) requiring applicable entities to conduct assessments of the impacts of benchmark GMD events on their systems and requiring the development and implementation of plans to mitigate the risk of instability, uncontrolled separation, or cascading, if impacts are identified. FERC established a filing deadline of January 21, 2015.

13 FERC further directed that NERC identify, through its standards development process, the benchmark GMD event (including a technical justification for the selected benchmark) that entities will use in their GMD assessments. This standard addresses the 13 FERC directives for Stage 2 in Order No As a new standard, there were no requirements recommended by the Paragraph 81 project or by the Independent Experts Review Panel for retirement to be addressed in this project. The standard is not based on a single event because of the small number of available events with high-resolution recorded data. Instead, through the standard development process, a hypothetical event, developed through statistical analysis of historical geomagnetic data, was used to develop a benchmark. The technical justification for the benchmark is provided in a white paper, posted on the project page, describing the drafting team s analysis and the procedure for using it in conducting a location-specific GMD Vulnerability Assessment. TPL is based on planning and modeling guidance developed by the NERC GMD Task Force and approved by the Planning Committee. Based on industry experience and knowledge to date, it is an appropriate solution to mitigate the potential risk to the reliability of the Bulk- Power System. The proposed implementation plan provides for phased implementation of requirements over a five-year period. This approach allows entities the necessary time to develop the required models, coordinate assessment steps, and develop viable corrective action plans, if necessary. FERC Order No. 779 Directives Excerpts from the key directives in Order No. 779 are provided below. A complete listing of all directives and resolutions is available in the Consideration of Directives document on the project page: [Consideration of Directives] Paragraph 2...In the second stage, NERC must submit, within 18 months of the effective date of this Final Rule, one or more Reliability Standards that require owners and operators of the Bulk-Power System to conduct initial and on-going assessments of the potential impact of benchmark GMD events on Bulk-Power System equipment and the Bulk-Power System as a whole. The Second Stage GMD Reliability Standards must identify benchmark GMD events that specify what severity GMD events a responsible entity must assess for potential impacts on the Bulk-Power System.... Paragraph 28...We expect that NERC and industry will consider the costs and benefits of particular mitigation measures as NERC develops the technically-justified Second Stage GMD Reliability Standards.

14 Paragraph 67...Each responsible entity under the Second Stage GMD Reliability Standards would then be required to assess its vulnerability to the benchmark GMD events consistent with the five assessment parameters identified in the NOPR and adopted in this Final Rule.... Paragraph 79 We direct NERC, within 18 months of the effective date of this Final Rule, to submit for approval one or more Reliability Standards that, assuming the assessments identify potential impacts from a benchmark GMD event, require owners and operators of the Bulk-Power System to develop and implement a plan to protect against instability, uncontrolled separation, or cascading failures of the Bulk-Power System, caused by damage to critical or vulnerable Bulk-Power System equipment, or otherwise, as a result of a benchmark GMD event.... Paragraph 91...While NERC should propose an implementation plan, we do not direct or suggest a specific implementation plan. As stated in the NOPR, in a proposed implementation plan, we expect that NERC will consider a multi-phased approach that requires owners and operators of the Bulk-Power System to prioritize implementation so that components considered vital to the reliable operation of the Bulk-Power System are protected first. We also expect, as discussed above, that the implementation plan will take into account the availability of validated tools, models, and data that are necessary for responsible entities to perform the required GMD vulnerability assessments. Standard Development Process TPL and the Benchmark GMD Event Description were posted for three industry comment and ballot periods. The Standards Committee authorized a waiver for a shortened time period of 25 days for the third comment and ballot period, which achieved industry approval with a percent approval rating. The proposed standard was posted for final ballot on December 5, 2014 that will close on December 16, Results from the final ballot will be presented to the NERC Board of Trustees at the December meeting Minority Issues A minority of stakeholders disagree with the proposed benchmark. Some stakeholders argue that it is too low to protect from an event with the magnitude of the Carrington 1 event and challenge the statistical approach taken by the drafting team. 1 The largest geomagnetic disturbance event on record was observed by British astronomer Richard Carrington in Data is not available that would allow direct determination of the geoelectric fields experienced during the Carrington event. Research suggests the occurrence rate for a Carrington event to be in a wide range of 1 in years. A description is available on page 3 of the 2012 GMD TF Interim Report: Effects of GMD on the Bulk Power System:

15 Other stakeholders argue that the benchmark is too high. These stakeholders do not support a benchmark with this extremely low probability of occurring (1-in-100 years) is not appropriate for a standard that requires mitigation. This concern was raised by some entities located at the northern latitudes where the benchmark is characteristically higher. The drafting team maintains that a 1-in-100 year benchmark is appropriate due to the potential wide-area impacts of a severe GMD event as contemplated by the FERC order. The drafting team used modern magnetometer data, which provides a means to conduct rigorous statistical analysis to determine the benchmark. This type of measured data is not available for the 1859 Carrington event and not included in the benchmark analysis. The drafting team presented all results and technical justification in the Benchmark GMD Event Description white paper. A minority of stakeholders argue that a cost-benefit analysis should be conducted before a standard can be approved. In Order No. 779, FERC stated their expectation that NERC and industry will consider the costs and benefits of particular mitigation measures as NERC develops the technically-justified Second Stage GMD Reliability Standards (P.28). The drafting team has met the FERC directive by selecting a planning approach for the reliability standard that enables responsible entities to select mitigation from a variety of considerations including cost. Some stakeholders expressed concern that the proposed standard does not impose requirements for mandatory geomagnetically-induced current (GIC) monitoring. The commenters argue that such requirements are essential for effective mitigation. The SDT considered this suggestion, but did not support including specific requirements for GIC monitoring in the proposed standard. TPL-007 requires entities to develop mitigation plans to address identified impacts from the benchmark GMD event but does not impose prescriptive mitigation strategies. The SDT's approach is consistent Order No. 779 which affirmed that "responsible entities will decide how to mitigate GMD vulnerabilities on their systems" (P.85). Additional Information A link to the project history and files is included here for reference: [Project Geomagnetic Disturbance Mitigation] Reliability Standard Audit Worksheet (RSAW) [TPL Draft RSAW]

16 TPL Stage 2 Geomagnetic Disturbance (GMD) Standard Board of Trustees Conference Call December 17, 2014

17 Background Stage 2 of GMD project Regulatory deadline January 21, 2015 FERC Order 779 directed: Development of a GMD vulnerability assessment standard Assessments based on a benchmark GMD event Stage 2 addresses all remaining FERC directives Three formal comment and ballot periods Final ballot December 5 16, RELIABILITY ACCOUNTABILITY

18 Technical Basis Tools and methods for evaluating GMD impacts are evolving Standard leverages current technical resources Assessments will address known potential impacts from GMD System voltage issues Transformer heating Harmonic impacts 3 RELIABILITY ACCOUNTABILITY

19 Benchmark GMD Event Challenge: define and justify a benchmark for a high-impact, low-frequency (HILF) event The SDT used a well-known data set of modern magnetometers and statistical methods to characterize a 100-year benchmark Enables rigorous statistical analysis and review Benchmark above 95 percent confidence interval for a 100-year event Alternate approaches were considered by the SDT 4 RELIABILITY ACCOUNTABILITY

20 Action Action Adopt TPL Transmission System Planned Performance for Geomagnetic Disturbance Events 5 RELIABILITY ACCOUNTABILITY

21 6 RELIABILITY ACCOUNTABILITY