[Federal Register Volume 76, Number 82 (Thursday, April 28, 2011)]
[Notices]
[Pages 23801-23805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-10266]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RD11-4-000]


North American Electric Reliability Corporation; Order Approving 
Reliability Standard

April 21, 2011.

Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer, 
Philip D. Moeller, John R. Norris, and Cheryl A. LaFleur.

    1. On February 11, 2011, the North American Electric Reliability 
Corporation (NERC), the Commission-certified Electric Reliability 
Organization (ERO), submitted a petition for Commission approval of 
Emergency Preparedness and Operations (EOP) Reliability Standard EOP-
008-1 (Loss of Control Center Functionality). The Reliability Standard 
requires reliability coordinators, transmission operators, and 
balancing authorities to have an operating plan and facilities for 
backup functionality to ensure Bulk-Power System reliability in the 
event that a control center becomes inoperable. NERC also requests that 
the Commission approve the retirement of currently effective EOP-008-0 
concurrent with the effectiveness of the Standard approved in this 
Order.
    2. In this order, we approve Reliability Standard EOP-008-1, 
finding that the Reliability Standard is just, reasonable, not unduly 
discriminatory or preferential, and in the public interest. In 
addition, we approve the retirement of EOP-008-0 as requested by NERC. 
Also, we approve NERC's requested effective date, i.e., the date in 
which applicable entities are subject to mandatory compliance, of 24 
months after the first day of the first quarter after approval.

I. Background

    3. Currently-effective Reliability Standard EOP-008-0 (Plans for 
Loss of Control Center Functionality) contains a single Requirement R1, 
which provides ``Each Reliability Coordinator, Transmission Operator 
and Balancing Authority shall have a plan to continue reliability 
operations in the event its control center becomes inoperable.'' 
Requirement R1 also identifies mandatory elements of the continuity 
plan.
     4. On March 16, 2007, the Commission issued Order No. 693 
approving 83 Reliability Standards proposed by NERC, including EOP 
Reliability Standard EOP-008-0.\1\ In addition, pursuant to section 
215(d)(5) of the FPA, the Commission directed the ERO to develop 
modifications to EOP-008-0 to address specific issues identified by the 
Commission. In particular, the Commission directed the ERO to develop a 
modification through the Reliability Standards development process that 
includes a Requirement that provides, as a minimum, for backup 
capabilities that are independent from the primary control center, 
capable to operate for a prolonged period corresponding to the time it 
would take to replace the primary control center, and provide a minimum 
set of tools and facilities to replicate the critical reliability 
functions of the primary control center.\2\ The Commission directed 
that the extent of the backup capability should be consistent with the 
impact of the loss of the entity's primary control center on the 
reliability of the Bulk-Power System.
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    \1\ Mandatory Reliability Standards for the Bulk-Power System, 
Order No. 693, FERC Stats. & Regs. ] 31,242, order on reh'g, Order 
No. 693-A, 120 FERC ] 61,053 (2007).
    \2\ Id. P 663, 672.
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    5. The Commission also directed that reliability coordinators have 
fully complete, dedicated backup control centers.\3\ In addition, the 
Commission directed the ERO to modify the Reliability Standard to 
require that transmission operators and balancing authorities having 
operational control over significant portions of generation and load 
have minimum backup capabilities that replicate the critical 
reliability functions of the primary control center, but they may do so 
through contracting for these services instead of through dedicated 
backup control centers.\4\
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    \3\ Id. P 670
    \4\ Id. P 670, 672.
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II. NERC Petition

A. NERC Description of the Benefits of Reliability Standard EOP-008-1

    6. In its February 11, 2011 filing,\5\ NERC requests Commission 
approval of

[[Page 23802]]

proposed Reliability Standard EOP-008-1. NERC states that EOP-008-1 is 
intended to ensure that a plan is in place for backup functionality and 
that facilities and personnel are prepared to implement that plan. NERC 
states that the proposed Reliability Standard represents a significant 
revision and improvement to the current Standard by eliminating gaps, 
reducing ambiguity, eliminating fill-in-the-blank components, and 
addressing the relevant Commission directives in Order No. 693.
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    \5\ North American Electric Reliability Corp., February 11, 2011 
Petition of the North American Electric Reliability Corporation for 
Approval of One Emergency Preparedness and Operations Reliability 
Standard EOP-008-1 and Retirement of One Existing Reliability 
Standard EOP-008-0 (NERC Petition).
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    7. Discussing the benefits of EOP-008-1, NERC states that the 
Reliability Standard: (1) Delineates what must be included in a plan 
for backup functionality; (2) includes a provision for managing the 
risk to the Bulk-Power System during the transition from primary to 
backup functionality; (3) requires reliability coordinators to have a 
dedicated facility for its backup functionality; (4) provides that 
transmission operators and balancing authorities can have either a 
dedicated facility or may contract for services to provide backup 
functionality; (5) address the need for formal review and approval of 
the plan for backup functionality; (6) mandates independence of the 
primary and backup capabilities; (7) requires testing of the plan; and 
(8) establishes a procedure for creating a plan to re-establish backup 
capability following a catastrophic situation.\6\ In addition, NERC 
discusses how EOP-008-1 satisfies the factors set forth in Order No. 
672 for analyzing whether a Reliability Standard is just, reasonable, 
not unduly discriminatory or preferential, and in the public 
interest.\7\
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    \6\ NERC Petition at 4. Pursuant to 18 CFR 40.3 (2010), the ERO 
must post on its Web site currently effective Reliability Standards. 
NERC has posted Reliability Standard EOP-008-1 on the NERC Web site 
at http://www.nerc.com/page.php?cid=2[verbar]20.
    \7\ NERC Petition at 8-18. Rules Concerning Certification of the 
Electric Reliability Organization; and Procedures for the 
Establishment, Approval and Enforcement of Electric Reliability 
Standards, Order No. 672, FERC Stats. & Regs. ] 31,204, order on 
reh'g, Order No. 672-A, FERC Stats. & Regs. ] 31,212 (2006).
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B. Reliability Standard EOP-008-1

    8. Reliability Standard EOP-008-1 contains eight Requirements for 
the stated purpose of ensuring continued reliable operations of the 
bulk electric system in the event that a control center becomes 
inoperable. Requirement R1 requires each applicable entity to have a 
current operating plan describing the manner in which it will continue 
to meet its functional obligations in the event that its primary 
control center functionality is lost. Requirement R2 instructs each 
applicable entity to have a copy of its current plan for backup 
functionality at its primary control center and at the location 
providing backup functionality. Requirement R3 mandates that each 
reliability coordinator have a backup control center that provides 
functionality sufficient to maintain compliance with all Reliability 
Standards that depend on primary control center functionality.
    9. Reliability Standard EOP-008-1, Requirement R4 directs balancing 
authorities and transmission operators to have a backup functionality, 
either through a facility or contracted services, to maintain 
compliance with all Reliability Standards that depend on their primary 
control center functionality. Requirement R5 requires each applicable 
entity to review annually and approve its plan for backup 
functionality, and Requirement R7 requires each applicable entity to 
annually test and document the results of its plan demonstrating the 
transition time between the simulated loss of the primary control 
center and the full implementation of the backup functionality. 
Requirement R6 mandates that primary and backup functionality cannot 
depend on each other. Finally, each reliability coordinator, balancing 
authority or transmission operator that experiences a loss of either 
primary or backup functionality anticipated to last for more than six 
months must, in accordance with Requirement R8, provide a plan to its 
Regional Entity within six calendar months of the date when 
functionality is lost showing how it will re-establish such 
functionality.

III. Notice of Filing, Interventions and Comments

    10. On February 16, 2011, notice of NERC's filing was published in 
the Federal Register with interventions and protests due on or before 
March 4, 2011.\8\ Motions to intervene were timely filed by American 
Municipal Power, Inc. (AMP) and Modesto Irrigation District (MID). The 
ISO/RTO Council (ISO/RTO) timely filed a motion to intervene and 
comments supporting the adoption of proposed Reliability Standard EOP-
008-1 and the concurrent retirement of EOP-008-0. Pursuant to Rule 214 
of the Commission's Rules of Practice and Procedure,\9\ the timely, 
unopposed motions to intervene serve to make AMP, MID, and ISO/RTO 
parties to this proceeding.
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    \8\ 76 FR 13,345.
    \9\ 18 CFR 385.214.
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IV. Discussion

    11. The Commission approves Reliability Standard EOP-008-1 as just, 
reasonable, not unduly discriminatory or preferential and in the public 
interest.\10\ By providing detailed requirements for what must be 
included in a plan to meet functional obligations in the event a 
primary control center is lost, by now requiring formal, annual 
approval of such plans, and by specifically requiring reliability 
coordinators to have backup facilities and transmission operators and 
balancing authorities to have backup functionality, EOP-008-1 
represents a significant improvement to the currently effective 
Reliability Standard. The revised Standard addresses the relevant 
directives in Order No. 693 and specifically requires, among other 
things, independent backup capabilities, capable of operating for a 
prolonged period, and providing functionality sufficient to maintain 
compliance with all Reliability Standards that depend on primary 
control functionality.
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    \10\ 16 U.S.C. 824(d)(2).
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    12. Reliability Standard EOP-008-1 requires that all applicable 
entities have backup functionality. Reliability coordinators in 
particular must have full backup control centers while balancing 
authorities and transmission operators may elect to attain backup 
functionality either by a dedicated facility or by contracted service. 
This distinction recognizes the comparative difference in the scope of 
responsibility for a reliability coordinator versus a balancing 
authority or transmission operator, and the Standard satisfies the 
Commission directives in this regard.\11\
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    \11\ See Order No. 693, FERC Stats. & Regs. ] 31,242 at P 670.
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    13. Additionally, we note that Requirement R1 (section 1.5) permits 
a transition time between the loss of the primary control center and 
full implementation of backup functionality of up to two hours. NERC 
states that, in the standards development process, some stakeholders 
commented that the two hour transition period was too long, others 
considered it too short, and some argued that the timeframe seemed to 
weaken the current requirement.\12\ According to NERC, the standards 
drafting team ``attempted to develop a reasonable number that would 
allow for a backup control center to be placed sufficiently far away so 
that the chances of a single catastrophe affecting both sites were 
minimal, versus having it so far away that there may be a serious gap

[[Page 23803]]

in reliability during the intervening time before the backup is 
operational.'' \13\
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    \12\ NERC Petition at 37-38.
    \13\ Id.
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    14. The Commission is concerned that the two hour transition period 
may expose the grid to increased reliability risk without control 
functionality. For this reason it is imperative that full backup 
functionality occur as soon as possible after the loss of primary 
control functionality. Nonetheless, until data from drills, exercises 
and tests can support a specific time period, the Commission approves 
the Reliability Standard but notes it may revisit this transition 
timeframe once the applicable entities have developed experience 
operating under this new Standard.
    15. Accordingly, the Commission approves Reliability Standard EOP-
008-1, effective the first day of the first calendar quarter twenty-
four months after Commission approval. Further, as requested by NERC, 
we approve the retirement of currently-effective Reliability Standard 
EOP-008-0 concurrent with the implementation date of EOP-008-1.

V. Violation Risk Factors/Violation Security Levels

    16. To determine a base penalty amount for a violation of a 
Requirement within a Reliability Standard, NERC must first determine an 
initial range for the base penalty amount. To do so, NERC assigns a 
violation risk factor to each Requirement and sub-Requirement of a 
Reliability Standard that relates to the expected or potential impact 
of a violation of the Requirement on the reliability of the Bulk-Power 
System. The Commission has established guidelines for evaluating the 
validity of each violation risk factor assignment.\14\
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    \14\ See North American Electric Reliability Corp., 119 FERC ] 
61,145, order on reh'g, 120 FERC ] 61,145, at P 8-13 (2007).
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    17. NERC also will assign each Requirement and sub-Requirement one 
of four violation severity levels--low, moderate, high, and severe--as 
measurements for the degree to which the Requirement was violated in a 
specific circumstance. On June 19, 2008, the Commission issued an order 
establishing four guidelines for the development of violation severity 
levels.\15\
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    \15\ North American Electric Reliability Corp., 123 FERC ] 
61,284, at P 20-35, order on reh'g & compliance, 125 FERC ] 61,212 
(2008).
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    18. With respect to Reliability Standard EOP-008-1, NERC has 
assigned violation risk factors only to the main Requirements and did 
not propose violation risk factors for any of the sub-Requirements.\16\ 
NERC noted that such practice is consistent with NERC's August 10, 2009 
informational filing regarding the assignment of violation risk factors 
and violation severity levels.\17\
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    \16\ We note that in Version Two Facilities Design, Connections 
and Maintenance Reliability Standards, Order No. 722, 126 FERC ] 
61,255, at P 45 (2009), the ERO proposed to develop violation risk 
factors and violation severity levels for Requirements but not sub-
requirements. The Commission denied the proposal as ``premature'' 
and, instead, encouraged the ERO to ``develop a new and 
comprehensive approach that would better facilitate the assignment 
of violation severity levels and violation risk factors.'' As 
directed, on March 5, 2010, NERC submitted a comprehensive approach 
that is currently pending with the Commission in Docket No. RR08-4-
005.
    \17\ NERC Petition at 16-17.
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    19. On May 5, 2010, NERC incorporated by reference into Docket No. 
RR08-4-005,\18\ its August 10, 2009 Information Filing in which NERC 
proposes assigning violation risk factors and violation severity levels 
only to the main Requirements in each Reliability Standard, and not to 
the sub-Requirements. Because the assignment of violation risk factors 
and violation severity levels for EOP-008-1 is made in accordance with 
NERC's pending petition, the Commission defers discussion of the 
proposed violation risk factors and violation severity levels until 
after the Commission issues a final order acting on NERC's petition in 
Docket No. RR08-4-005.
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    \18\ Docket No. RR08-4-005 comprises NERC's March 5, 2010 
Violation Severity Level Compliance Filing submitted in response to 
Order No. 722. See Order No. 722, 126 FERC ] 61,255 at P 45.
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VI. Information Collection Statement

    20. The Office of Management and Budget (OMB) regulations require 
approval of certain information collection requirements imposed by 
agency action.\19\ 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 this Order will not be penalized 
for failing to respond to these collections of information unless the 
collections of information display a valid OMB control number.
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    \19\ 5 CFR 1320.11.
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    21. The Commission is submitting these reporting and recordkeeping 
requirements to OMB for its review and approval under section 3507(d) 
of the Paperwork Reduction Act. Comments are solicited on the 
Commission's need for this information, whether the information will 
have practical utility, the accuracy of provided burden estimates, 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.
    22. Rather than creating entirely new obligations with respect to 
the loss of control center functionality, Reliability Standard EOP-008-
1 upgrades the existing planning requirements contained in EOP-008-0 
and specifically requires reliability coordinators, balancing 
authorities and transmission operators to have backup functionality. 
Thus, this Order does not impose entirely new burdens on the effected 
entities. For example, EOP-008-0 requires each applicable entity to 
have a plan to continue reliable operations in the event its control 
center becomes inoperable and to conduct reviews and tests, at least 
annually, to ensure viability of the plan. This Order, however, imposes 
new requirements regarding the approval, placement, documentation and 
updating of plans as well as requires entities that may not already 
possessing backup functionality to obtain, possibly through contractual 
arrangements, backup capabilities.
    23. Burden Estimate: Our estimate below regarding the number of 
respondents is based on the NERC compliance registry as of February 17, 
2011. According to the registry, there are 23 reliability coordinators, 
120 balancing authorities and 176 transmission operators that will be 
involved in providing information. Under NERC's compliance registration 
program, however, entities may be registered for multiple functions or, 
particularly in the case of reliability coordinators, registered for 
the same function with multiple regional entities, so these numbers 
incorporate some double counting. The net number of entities responding 
will be 215, consisting of 17 reliability coordinators, 94 entities 
registered as both balancing authorities and transmission operators, 
and 104 entities registered solely as either a balancing authority or a 
transmission operator. This Order will require applicable entities to 
revise their plans and document compliance with the Reliability 
Standard's requirements. For those balancing authorities and 
transmission operators that do not already comply with the Standard's 
requirement for backup functionality, they will, at a minimum, be 
required to contract for such services. We understand that all 
reliability coordinators currently have backup control centers and 
estimate that approximately 27 entities will have to procure backup 
functionality. The estimated burden for the requirements in this Order 
follow:

[[Page 23804]]



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                                                        Number of
   FERC-725A  Data collection         Number of     annual responses  Hours per respondent per    Total annual
                                     respondents     per respondent           response                hours
                                               (A)               (B)  (C).....................       (A x B x C)
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Review and possible revision of                215                 1  20......................             4,300
 plan (one-time).
Updating, approving, and                       215                 1  Compliance: 6...........             1,290
 maintaining records.
                                  ................  ................  Recordkeeping: 2........               430
Balancing authorities and                       27                 1  120.....................             3,240
 transmission operators
 contracting for backup
 functionality (one-time).
Total one-time..................  ................  ................  ........................             7,540
Total recurring.................  ................  ................  ........................             1,720
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    Total.......................  ................  ................  ........................             9,260
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    Information Collection Costs: The Commission seeks comments on the 
costs to comply with these requirements and recordkeeping burden 
associated with Reliability Standard EOP-008-1.
     Total Annual Hours for Collection: (Compliance/
Documentation + Contracting) = 9,260 hours.
     Total One-Time Compliance Cost = 7,540 hours @ $120/hour = 
$904,800.
     Total Reoccurring Compliance Cost = 1,720 hours @ $120/
hour = $206,400.
     Total Recordkeeping Cost = 430 hours @ $28/hour = $10,240
     Total First Year Cost = $1,121,440.
     Title: Mandatory Reliability Standards for the Bulk-Power 
System.
     Action: FERC 725A, Proposed Modification to FERC-725A.
     OMB Control No: 1902-0244.
     Respondents: Business or other for profit, and/or not for 
profit institutions.
     Frequency of Responses: On occasion.
     Necessity of the Information: This Order approves revised 
Reliability Standard that modifies an existing requirement regarding 
preparing for the loss of control center functionality. Reliability 
Standard EOP-008-1 requires entities to revise and authorize operating 
plans for backup control center functionality. It also requires some 
entities to procure such backup functionality, and in every case 
imposes requirements to retain records.
    24. Interested persons may obtain information on the reporting 
requirements by contacting: Federal Energy Regulatory Commission, 888 
First Street, NE., Washington, DC 20426 [Attention: Ellen Brown, Office 
of the Executive Director, e-mail: [email protected], Phone: (202) 
502-8663, fax: (202) 273-0873]. Comments on the requirements of this 
order may also be sent to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Washington, DC 20503 
[Attention: Desk Officer for the Federal Energy Regulatory Commission]. 
For security reasons, comments should be sent by e-mail to OMB at 
[email protected]. Please reference OMB Control Number 
1902-0244 and the docket number of this Order in your submission.

VII. Environmental Analysis

    25. 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.\20\ The 
action taken in the Order falls within the categorical exclusion in the 
Commission's regulations for orders that are clarifying, corrective or 
procedural, for information gathering, analysis, and dissemination.\21\ 
Accordingly, neither an environmental impact statement nor an 
environmental assessment is required.
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    \20\ 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).
    \21\ 18 CFR 380.4(a)(5).
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VIII. Regulatory Flexibility Act

    26. The Regulatory Flexibility Act of 1980 (RFA) \22\ generally 
requires a description and analysis of orders that will have 
significant economic impact on a substantial number of small entities. 
The RFA mandates consideration of regulatory alternatives that 
accomplish the stated objectives of a proposed order and that minimize 
any significant economic impact on a substantial number of small 
entities. The Small Business Administration's (SBA's) Office of Size 
Standards develops the numerical definition of a small business.\23\ 
The SBA has established a size standard for electric utilities, stating 
that a firm is small if, including its affiliates, it is primarily 
engaged in the transmission, generation and/or distribution of electric 
energy for sale and its total electric output for the preceding twelve 
months did not exceed four million megawatt-hours.\24\
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    \22\ 5 U.S.C. 601-12.
    \23\ 13 CFR 121.101.
    \24\ 13 CFR 121.201, Sector 22, Utilities & n. 1.
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    27. Comparison of the NERC compliance registry with data submitted 
to the Energy Information Administration on Form EIA-861 indicates that 
perhaps as many as 54 balancing authorities and transmission operators 
to which the requirements of this Reliability Standard will apply will 
be deemed small entities. Reliability Standard EOP-008-1 clarifies the 
elements of a plan for the loss of control center functionality, 
imposes approval and updating requirements for such plans, and requires 
balancing authorities and transmission operators to have backup control 
center functionality. Of the 54 small entities, each will incur the 
compliance and recordkeeping costs of $3,176 associated with revising, 
approving, maintaining and updating their plans for loss of control 
center operability, but only that subset of small entities that has not 
already obtained backup control center functionality, which we estimate 
to be 27 entities, will face the one-time additional $14,400 burden of 
contracting for such functionality. The Commission estimates that, in 
addition to the cost of contracting, the first year's cost of obtaining 
backup functionality will be approximately $210,000 with each 
subsequent year costing $60,000. In aggregate, the Commission estimates 
that this Reliability Standard may impose on small entities that do not 
currently have backup functionality an initial cost of perhaps $227,576 
with the cost of subsequent years being reduced to $60,776. 
Accordingly, the cost of Reliability Standard EOP-008-1 should not 
present a significant operating cost to a substantial number of small 
entities.

[[Page 23805]]

    28. Based on this understanding, the Commission certifies that this 
Reliability Standard will not have a significant economic impact on a 
substantial number of small entities. Accordingly, no regulatory 
flexibility analysis is required.

IX. Effective Date

    29. This order will become effective June 27, 2011.

The Commission Orders

    (A) Reliability Standard EOP-008-1, submitted by the North American 
Electric Reliability Corporation, is hereby approved, as discussed in 
the body of this order.
    (B) Reliability Standard EOP-008-0 is hereby retired upon 
implementation of EOP-008-1, as discussed in the body of this order.

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2011-10266 Filed 4-27-11; 8:45 am]
BILLING CODE 6717-01-P