Daily Rules, Proposed Rules, and Notices of the Federal Government
1. In this Final Rule, pursuant to section 215 of the FPA,
2. In Order No. 693, the Commission noted its concern that the current “bulk electric system” definition has the potential for gaps in coverage of facilities, and indicated that it would revisit the issue. This Final Rule is the next step towards addressing the Commission's concerns. The approved changes will help ensure reliability and consistency in the bulk electric system classification throughout the interconnected United States. The Commission takes this action as a continuation of Order No. 693's efforts to ensure that the mandatory Reliability Standards fulfill the intent of Congress in enacting section 215 of the FPA to protect reliability of the nation's Bulk-Power System. The aim of the Final Rule is to eliminate inconsistencies across regions, eliminate the ambiguity created by the current discretion in NERC's definition of bulk electric system, provide a backstop review to ensure that any variations do not compromise reliability, and ensure that facilities that could significantly affect reliability are subject to mandatory rules. The Commission is not adding any new or modified text to its regulations.
3. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005) was enacted into law. Title XII of EPAct 2005 added a new section 215 to the FPA,
4. In February 2006, the Commission issued Order No. 672
5. On March 16, 2007, in Order No. 693, pursuant to section 215(d) of the FPA,
6. In Order No. 693, the Commission explained that section 215(a) of the FPA broadly defines the Bulk-Power System as:
Facilities and control systems necessary for operating an interconnected electric energy transmission network (or any portion thereof) [and] electric energy from generating facilities needed to maintain transmission system reliability.
The Commission also approved NERC's definition of “bulk electric system,” which is an integral part of the NERC Reliability Standards and is included in the NERC Glossary of Terms Used in Reliability Standards (NERC Glossary):
As defined by the Regional Reliability Organization, the electrical generation resources, transmission lines, interconnections with neighboring systems, and associated equipment, generally operated at voltages of 100 kV or higher. Radial transmission facilities serving only load with one transmission source are generally not included in this definition.
7. The Commission approved NERC's definition of “bulk electric system” with reservations. The Commission stated in Order No. 693 that, “at least for an initial period, the Commission will rely on the NERC definition of `bulk electric system' and NERC's registration process to provide as much certainty as possible regarding the applicability to and the responsibility of specific entities to comply with the Reliability Standards.”
8. In a June 14, 2007 filing, NERC submitted the regional definitions of “bulk electric system.”
9. As noted in the NOPR, NERC's June 2007 Filing indicated that NPCC uses the NERC definition of “bulk electric system” supplemented by additional criteria. Unlike the supplemental criteria of other Regional Entities, however, NPCC utilizes a significantly different approach to identifying bulk electric system elements. According to NERC, NPCC identifies elements of the bulk electric system using an impact-based methodology, as opposed to a voltage-based methodology. Further, as part of its approach to defining the “bulk electric system,” NPCC includes its own definition of “bulk power system.”
10. According to NERC, NPCC analyzes all system elements within its footprint regardless of size (voltage) to determine their impact based on its “bulk electric system” definition. NPCC also utilizes a guidance document, which provides further information on the NPCC definition of “bulk power system” and how it is applied.
11. In a December 2008 Order, the Commission directed NERC and NPCC to submit to the Commission a comprehensive list of bulk electric system facilities located within the United States portion of the NPCC region.
12. In September 2009, NERC and NPCC submitted a compliance filing in which NPCC evaluated the impact and usefulness of a 100 kV “bright-line” “bulk electric system” definition as well as another optional method, which utilizes Transmission Distribution Factor calculations to determine reliability impacts. The NPCC definition would exclude radial network portions of the transmission system, as opposed to radial lines.
13. On March 18, 2010, the Commission issued a NOPR proposing to direct NERC to revise the definition of “bulk electric system” in the NERC Glossary. The current “bulk electric system” definition provides Regional Entities discretion to define “bulk electric system,” including the ability to exclude facilities 100 kV or above, without ERO or Commission oversight. The Commission's proposed revised definition would continue to include all facilities rated above 100 kV and eliminate regional variations, providing a consistent identification of bulk electric system facilities across the nation's reliability regions. The proposal called for Commission and NERC approval for exempting facilities that would otherwise qualify as part of the bulk electric system on a facility-by-facility basis.
14. The NOPR identified inconsistencies between regions that resulted from the existing definition, such as NPCC not including two 115 kV transmission lines as part of the bulk electric system in its region even though the sections of these same lines that connect to PJM's balancing authority area are considered bulk electric system elements within the ReliabilityFirst footprint. As an additional example, seven higher voltage (
15. The Commission issued the NOPR on March 18, 2010, and required that comments be filed within 45 days after publication in the
16. After consideration of the comments submitted, the Commission adopts the NOPR's proposal with some modifications. The Commission directs the ERO to revise the definition of “bulk electric system” through the NERC Standards Development Process to address the Commission's concerns discussed herein. The Commission believes the best way to address these concerns is to eliminate the Regional Entities' discretion to define “bulk electric system” without ERO or Commission review, maintain a bright-line threshold that includes all facilities operated at or above 100 kV except defined radial facilities, and adopt an exemption process and criteria for excluding facilities that are not necessary to operate an interconnected electric transmission network. However, NERC may propose a different solution that is as effective as, or superior to, the Commission's proposed approach in addressing the Commission's technical and other concerns so as to ensure that all necessary facilities are included within the scope of the definition.
17. In the NOPR, the Commission proposed, pursuant to section 215(d)(5) of the FPA and § 39.5(f) of our regulations, to require NERC to submit a revised NERC definition of “bulk electric system” that provides a 100 kV threshold for facilities that are included in the bulk electric system and eliminates the currently-allowed discretion of a Regional Entity to define “bulk electric system” within its system without NERC or Commission oversight.
18. Several commenters argue that the Commission's proposal exceeds its statutory authority.
19. NERC supports the Commission's objectives of ensuring a common understanding and consistent application of “bulk electric system” across the regions, while allowing variations to the definition based on reliability. However, NERC objects to the Commission making unilateral decisions with respect to the definition, as it did in the NOPR, rather than allowing this issue to be addressed through the NERC Reliability Standards
20. NERC states that by directing this change, the Commission is bypassing the NERC Reliability Standards Development Process, and the Commission will not have the opportunity to consider NERC's guidance in developing an equally effective and perhaps superior alternative. NERC states that the approach in the Commission's NOPR would accomplish indirectly that which it is prohibited from doing directly, in contravention of well-established judicial precedent. NERC notes that the Commission refrained from taking similar unilateral action in Order No. 693. NERC requests the Commission clarify in the Final Rule that any modification to the definition of bulk electric system be accomplished through the NERC Reliability Standards Development Process.
21. Similarly, EEI, Duke Energy, APPA/NRECA, and other commenters assert that the Commission should defer to the NERC Reliability Standards Development Process, and allege that the proposal unreasonably departs from the Commission's precedent in Order No. 693.
22. Snohomish also asserts that the proposed rule fails to defer to the technical expertise of the regional reliability organizations and inappropriately interferes in the local work of Snohomish's Board regarding decisions on levels of service.
23. TAPS states that Congress did not intend for the Commission to undertake a facility-by-facility review of all facilities above 100 kV, and that the proposed rule is contrary to section 215's apportionment of primary responsibility for reliability administration to the ERO.
24. NYSRC argues that section 215 does not provide a “bright-line” test for Bulk-Power System facilities and states that the statutory intent of section 215 limits the Commission's jurisdiction to facilities that are necessary for the reliable operation of the Bulk-Power System.
25. GTC/GSOC add that the proposed change would make the definition of “bulk electric system” broader than the statutory definition of “Bulk-Power System,” and therefore would exceed the Commission's authority.
26. Several other parties assert that the proposed rule will inappropriately include distribution facilities as part of the bulk electric system, and argue that the Commission's proposal is contrary to Congress's definition of “Bulk-Power System” and the Commission's own precedent regarding transmission versus local distribution.
27. The NYPSC contends that the Commission's proposal exceeds its jurisdiction by encompassing local distribution facilities that are not necessary for operating the interconnected transmission network. It states that 138 kV facilities in New York City operate above 100 kV but do not serve a bulk system function due to the high concentration of load served by these lines. It asserts that transmission facilities such as these that move power between Bulk-Power System and distribution facilities do not affect the reliable operation of the bulk system. The New York Transmission Owners contend that the Long Island Power Authority's (LIPA) system east of the Northport system is composed of 138 kV lines with limited connections to other areas that is not affected by other regional flows, but instead mirrors a radial system feeding local load.
28. Snohomish, Consumers Energy, PGE, Tacoma Power and other commenters argue that the Commission's proposal, unless clarified to exclude distribution facilities, is contrary to statute because section 215 directs that distribution facilities should be excluded on a functional basis regardless of voltage.
29. We disagree that the Commission exceeded its statutory authority by directing the ERO to revise the definition of bulk electric system in its Glossary of Terms. We agree with NERC that the NERC Glossary is part of the Reliability Standards and therefore falls under the same section 215 process. Pursuant to section 215(d)(5), the Commission may order the ERO to submit a proposed Reliability Standard or a modification to a Reliability Standard that addresses a specific matter. Here, by directing a revision to the definition of bulk electric system, the Commission orders a modification to a definition of a term contained in a
30. For the reasons discussed more fully below, the Commission finds that the current definition of bulk electric system is insufficient to ensure that all facilities necessary for operating an interconnected electric energy transmission network are included under the “bulk electric system” rubric. Therefore, pursuant to section 215(d)(5) of the FPA,
31. In accordance with Order No. 693, the ERO may develop an alternative proposal for addressing the Commission's concerns with the present definition with the understanding that any such alternative must be as effective as, or more effective than, the Commission's proposed approach in addressing the identified technical and other concerns,
32. The Commission further finds that revising the definition to address the identified concerns is a significant step toward improving the reliability of the Bulk-Power System in North America because it protects the reliability of the bulk electric system and provides clarity and consistency across the nation's reliability regions in identifying bulk electric system facilities.
33. The Commission directs the ERO to submit these modifications no later than one year from the effective date of this Final Rule. We will address each proposal and the specific comments received on each proposal in the remainder of this Final Rule.
34. With regard to the concerns raised by some commenters about the prescriptive nature of the Commission's proposed modifications, we agree that, consistent with Order No. 693, a direction for modification should not be so overly prescriptive as to preclude the consideration of viable alternatives that may produce an equally effective or efficient solution. However, some guidance is necessary, as the Commission explained in Order No. 693:
[I]n identifying a specific matter to be addressed in a modification * * * it is important that the Commission provide sufficient guidance so that the ERO has an understanding of the Commission's concerns and an appropriate, but not necessarily exclusive, outcome to address those concerns. Without such direction and guidance, a Commission proposal to modify a Reliability Standard might be so vague that the ERO would not know how to adequately respond.
35. Thus, due to the importance of the bulk electric system definition to our overall ability to carry out the mandates of section 215, and the problems we have identified with the current definition, we provide specific details regarding the Commission's expectations. We intend by doing so to provide useful direction to assist in the Reliability Standards Development Process, not to impede it. As we explained in Order No. 693, we find that this is consistent with statutory language that authorizes the Commission to direct the ERO to submit a modification “that addresses a specific matter” if the Commission considers it appropriate to carry out section 215 of the FPA.
36. With regard to the alleged conflict between “bulk electric system” and “Bulk-Power System,” the Commission noted in Order No. 693 that Congress chose to create a new term, “Bulk-Power System,” with a definition that is distinct from the term of art (“bulk electric system”) used by industry, and thus there is an intentional distinction between the Bulk-Power System and the bulk electric system.
37. The Commission has stated that the statutory term “Bulk-Power System” defines the jurisdiction of the Commission.
38. The Commission disagrees with comments that appear to assert that the Commission's jurisdiction extends only to facilities that could, if improperly operated, singularly cause cascading outages, uncontrolled separation or instability. By this narrow metric, the facilities that caused the 2003 Blackout would not be viewed as critical since not one of the individual facilities caused the outage. In defining jurisdictional facilities, section 215(a)(1) focuses on whether facilities are necessary to operate the interconnected transmission system, not solely on the consequences of unreliable operation of those facilities. Lower voltage facilities needed to reliably operate the grid tend to operate in parallel with other high voltage and extra high voltage facilities, interconnect significant amounts of generation sources and may operate as part of a defined flow gate. These parallel facilities operated at 100-200 kV will experience similar loading as higher voltage facilities at any given time. Additionally, the lower voltage facilities will be relied upon during contingency scenarios.
39. For example, we are not persuaded by the NYPSC's argument that the 138 kV system in New York, and specifically the 138 kV system including those facilities in the Astoria area, are all distribution facilities. We do not believe that most of these facilities are local distribution because: the facilities are not primarily radial in character, as they are connected to the 345 kV network in the Astoria area at over six different points; the 138 kV system is networked amongst itself; power flows both in and out of the system into both NYISO and PJM facilities depending on time of day and loading; and the system is not constrained to a comparatively restricted geographical area due to multiple interconnections. The 138 kV system in the Astoria area includes six major substations that are interconnected at 345 kV to both NYISO and PJM facilities that are integral parts of the Eastern Interconnection. There are ten 138 kV phase angle regulators connecting the 345 kV stations to the 138 kV network, which are necessary to control the appropriate distribution of power flows between the 345 kV and 138 kV systems to accommodate power transfers from upstate New York and PJM into southeastern New York. In addition, there are approximately 9,000 MW of capacity resources directly connected to the 138 kV network in the New York City area at different points, 2,000 MW of which is connected in the Astoria area. Similarly over 10,000 MW of customer firm demand in the area is supplied from the 138 kV to lower voltage levels via step-down transformers. None of these characteristics is consistent with any reasonable definition of local distribution.
40. Nor are we persuaded by the Indicated New York Transmission Owners' statement that LIPA's service territory—which includes a majority of Long Island, identified as Zone K by NYISO and, as reported in the NYISO “Load & Capacity Data,” had a 2010 summer peak load of 5,300 MW—“mirrors a radial system feeding local load.” As with the 138 kV network in New York City discussed above, the LIPA system contains significant capacity resources (5,700 MW), is interconnected with other portions of NYISO, ISO-NE, and PJM, and its operations affect and depend on operations in other portions of New York, as well as New Jersey and Connecticut.
41. Some commenters allege that the proposal is an unexpected departure from the Commission's previous actions regarding the bulk electric system in Order No. 693. To the contrary, the Commission was very clear about its reservations in accepting the NERC bulk electric system definition in Order No. 693 and expressly accepted the definition for an “initial period”
42. In the NOPR, the Commission proposed to direct the ERO to revise its definition of the term “bulk electric system” to include all electric transmission facilities with a rating of 100 kV or above.
43. NERC argues that the proposed definitional change would have a much broader impact than acknowledged by the Commission. Among other things, NERC states that the proposed change to “rated at” from the current “operated at” will dramatically expand the scope of facilities and entities affected by the change. NERC states that the proposal will unnecessarily include some facilities that entities built at higher voltage levels (i.e., 138 kV) to accommodate future load growth while presently operating the facilities at lower voltages (i.e., 69 kV).
44. Several commenters seek clarification that the definition of “bulk electric system” is not intended to supersede voltage thresholds specified in specific Reliability Standards.
45. Joint Western Commenters and Bay Area Municipal argue that the definition of “bulk electric system” that the Commission ultimately accepts should clarify that if an element is determined to be part of the bulk electric system, such an element is not necessarily a transmission asset.
46. Joint Western Commenters state that an entity should be able to de-register as a Distribution Provider and Load-Serving Entity if it does not own any bulk electric system elements.