[Federal Register Volume 77, Number 88 (Monday, May 7, 2012)]
[Rules and Regulations]
[Pages 26686-26697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-10944]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket No. RM11-18-000; Order No. 762]


Transmission Planning Reliability Standards

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

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SUMMARY: Under section 215 of the Federal Power Act, the Federal Energy 
Regulatory Commission remands proposed Transmission Planning (TPL) 
Reliability Standard TPL-002-0b, submitted by the North American 
Electric Reliability Corporation (NERC), the Commission-certified 
Electric Reliability Organization. The proposed Reliability Standard 
includes a provision that allows for planned load shed in a single 
contingency provided that the plan is documented and alternatives are 
considered and vetted in an open and transparent process. The 
Commission finds that this provision is vague, unenforceable and not 
responsive to the previous Commission directives on this matter. 
Accordingly, the Final Rule remands NERC's proposal as unjust, 
unreasonable, unduly discriminatory or preferential, and not in the 
public interest.

DATES: This rule will become effective July 6, 2012.

ADDRESSES: You may submit comments, identified by docket number by any 
of the following methods:
     Agency Web Site: http://www.ferc.gov. Documents created 
electronically using word processing software should be filed in native 
applications or print-to-PDF format and not in a scanned format.
     Mail/Hand Delivery: Commenters unable to file comments 
electronically must mail or hand deliver comments to: Federal Energy 
Regulatory Commission, Secretary of the Commission, 888 First Street 
NE., Washington, DC 20426.

[[Page 26687]]


FOR FURTHER INFORMATION CONTACT: 
Eugene Blick (Technical Information), Office of Electric Reliability, 
Federal Energy Regulatory Commission, 888 First Street NE., Washington, 
DC 20426, Telephone: (202) 502-8066, [email protected].
Robert T. Stroh (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE., Washington, 
DC 20426, Telephone: (202) 502-8473, [email protected].

SUPPLEMENTARY INFORMATION:

139 FERC ] 61,060

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

Final Rule

Issued April 19, 2012.
    1. Under section 215(d) of the Federal Power Act,\1\ the Commission 
remands proposed Transmission Planning (TPL) Reliability Standard TPL-
002-0b, submitted by the North American Electric Reliability 
Corporation (NERC), the Commission-certified Electric Reliability 
Organization. The proposed Reliability Standard includes a provision 
that allows for planned load shed in a single contingency provided that 
the plan is documented and alternatives are considered and vetted in an 
open and transparent process.\2\ The Commission finds that this 
provision is vague, unenforceable and not responsive to the previous 
Commission directives on this matter. Accordingly, the Final Rule 
remands NERC's proposal as unjust, unreasonable, unduly discriminatory 
or preferential, and not in the public interest. We require NERC to 
utilize its Expedited Reliability Standards Development Process to 
develop timely modifications to TPL-002-0b, Table 1 footnote `b' in 
response to our remand.\3\
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    \1\ 16 U.S.C. 824o(d)(4) (2006).
    \2\ NERC filed a petition seeking approval of Table 1, footnote 
`b' of four Reliability Standards: Transmission Planning: TPL-001-
1--System Performance Under Normal (No Contingency) Conditions 
(Category A), TPL-002-1b--System Performance Following Loss of a 
Single Bulk Electric System Element (Category B), TPL-003-1a--System 
Performance Following Loss of Two or More Bulk Electric System 
Elements (Category C), and TPL-004-1--System Performance Following 
Extreme Events Resulting in the Loss of Two or More Bulk Electric 
System Elements (Category D). While footnote `b' appears in all four 
of the above referenced TPL Reliability Standards, its relevance and 
practical applicability is limited to TPL-002-0a.
    \3\ NERC Rules of Procedure, Appendix 3A, Standard Processes 
Manual at 34 (effective January 31, 2012).
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I. Background

    2. Section 215 of the FPA requires a Commission-certified Electric 
Reliability Organization (ERO) to develop mandatory and enforceable 
Reliability Standards, which are subject to Commission review and 
approval. Approved Reliability Standards are enforced by the ERO, 
subject to Commission oversight, or by the Commission independently. On 
March 16, 2007, the Commission issued Order No. 693, approving 83 of 
the 107 Reliability Standards filed by NERC, including Reliability 
Standard TPL-002-0.\4\ In addition, pursuant to section 215(d)(5) of 
the FPA, \5\ the Commission directed NERC to develop modifications to 
56 of the 83 approved Reliability Standards, including footnote `b' of 
Reliability Standard TPL-002-0.\6\
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    \4\ 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).
    \5\ 16 U.S.C. 824o(d)(5)(2006).
    \6\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1797.
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A. Transmission Planning (TPL) Reliability Standards

    3. Currently-effective Reliability Standard TPL-002-0b addresses 
Bulk-Power System planning and related transmission system performance 
for single element contingency conditions. Requirement R1 of TPL-002-0b 
requires that each planning authority and transmission planner 
``demonstrate through a valid assessment that its portion of the 
interconnected transmission system is planned such that the network can 
be operated to supply projected customer demands and projected firm 
transmission services, at all demand levels over the range of forecast 
system demands, under the contingency conditions as defined in Category 
B of Table I.'' \7\ Table I identifies different categories of 
contingencies and allowable system impacts in the planning process. 
With regard to system impacts, Table I further provides that a Category 
B (single) contingency must not result in cascading outages, loss of 
demand or curtailed firm transfers, system instability or exceeded 
voltage or thermal limits. With regard to loss of demand, current 
footnote `b' of Table 1 states:
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    \7\ Reliability Standard TPL-002-0a, Requirement R1.

    Planned or controlled interruption of electric supply to radial 
customers or some local Network customers, connected to or supplied 
by the Faulted element or by the affected area, may occur in certain 
areas without impacting the overall reliability of the 
interconnected transmission systems. To prepare for the next 
contingency, system adjustments are permitted, including 
curtailments of contracted Firm (non-recallable reserved) electric 
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power Transfers.

B. Order No. 693 Directive

    4. In Order No. 693, the Commission stated that it believes that 
the transmission planning Reliability Standard should not allow an 
entity to plan for the loss of non-consequential firm load in the event 
of a single contingency.\8\ The Commission directed the ERO to develop 
certain modifications, including a clarification of Table 1, footnote 
`b.'
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    \8\ See Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1794.
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    5. In a subsequent clarifying order, the Commission stated that it 
believed that a regional difference, or a case-specific exception 
process that can be technically justified, to plan for the loss of firm 
service would be acceptable in limited circumstances.\9\ Specifically, 
the Commission stated that ``a regional difference, or a case-specific 
exception process that can be technically justified, to plan for the 
loss of firm service at the fringes of various systems would be an 
acceptable approach.'' \10\
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    \9\ Mandatory Reliability Standards for the Bulk Power System, 
131 FERC ] 61,231, at P 21 (2010) (June 2010 Order).
    \10\ Id.
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C. NERC Petition

    6. On March 31, 2011, NERC filed a petition seeking approval of its 
proposal to revise and clarify footnote `b' ``in regard to load loss 
following a single contingency.'' \11\ NERC stated that it did not 
eliminate the ability of an entity to plan for the loss of non-
consequential load in the event of a single contingency but drafted a 
footnote that, according to NERC, ``meets the Commission's directive 
while simultaneously meeting the needs of industry and respecting 
jurisdictional bounds.'' \12\ NERC stated that its proposed footnote 
`b' establishes the requirements for the limited circumstances when and 
how an entity can plan to interrupt Firm Demand for Category B 
contingencies. According to NERC, the provision allows for planned 
interruption of Firm Demand when ``subject to review in an open and 
transparent stakeholder process.'' \13\ NERC's proposed footnote `b' 
states:
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    \11\ NERC Petition at 10.
    \12\ Id.
    \13\ Id.

    An objective of the planning process should be to minimize the 
likelihood and magnitude of interruption of firm transfers or Firm 
Demand following Contingency events. Curtailment of firm transfers 
is allowed when

[[Page 26688]]

achieved through the appropriate redispatch of resources obligated 
to re-dispatch, where it can be demonstrated that Facilities, 
internal and external to the Transmission Planner's planning region, 
remain within applicable Facility Ratings and the re-dispatch does 
not result in the shedding of any Firm Demand. It is recognized that 
Firm Demand will be interrupted if it is: (1) directly served by the 
Elements removed from service as a result of the Contingency, or (2) 
Interruptible Demand or Demand-Side Management Load. Furthermore, in 
limited circumstances Firm Demand may need to be interrupted to 
address BES performance requirements. When interruption of Firm 
Demand is utilized within the planning process to address BES 
performance requirements, such interruption is limited to 
circumstances where the use of Demand interruption are documented, 
including alternatives evaluated; and where the Demand interruption 
is subject to review in an open and transparent stakeholder process 
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that includes addressing stakeholder comments.

    7. NERC supplemented the filing on June 7, 2011, in response to a 
Commission deficiency letter. NERC explained that ``the approach 
proposed in footnote `b' is equally efficient because many of the 
stakeholder processes that will be used in footnote `b' planning 
decisions are already in place, as implemented by FERC in Order No. 890 
and in state regulatory jurisdictions.'' \14\ NERC also pointed to 
state public utility commission processes or processes existing in 
local jurisdictions that address transmission planning issues that 
could serve to provide a case-specific review of the planned 
interruption of Firm Demand. According to NERC, such processes would 
more likely engage the appropriate local-level decision-makers and 
policy-makers.
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    \14\ NERC Data Response at 4.
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    8. With respect to review and oversight by NERC and the Regional 
Entities, NERC submitted that an ERO-specific process would place the 
ERO in the position of managing and actively participating in a 
planning process, which conflicts with its role as the compliance 
monitor and enforcement authority. NERC also stated that neither the 
ERO nor the Regional Entities will review decisions regarding planned 
interruptions. Their role will be limited to reviewing whether the 
registered entity participated in a stakeholder process when planning 
to interrupt Firm Demand. NERC explained that Regional Entities will 
have oversight after-the-fact by auditing the entity's implementation 
of footnote `b' to determine if the entity planned on interrupting Firm 
Demand and whether the decision by the entity to rely on planned 
interruption of Firm Demand was vetted through the stakeholder process 
and qualified as one of the situations identified in footnote `b.'
    9. Furthermore, NERC stated that an objective of the planning 
process should be to minimize the likelihood and magnitude of planned 
Firm Demand interruptions. NERC contended that, due to the wide variety 
of system configurations and regulatory compacts, it is not feasible 
for the ERO to develop a one-size-fits-all criterion for limiting the 
planned firm load interruptions for Category B events. According to 
NERC, the standards drafting team evaluated setting a certain magnitude 
of planned interruption of Firm Demand, but there was no analytical 
data to support a single value, and it would be viewed as arbitrary.

D. Notice of Proposed Rulemaking

    10. On October 20, 2011, the Commission issued a Notice of Proposed 
Rulemaking (NOPR \15\) proposing to remand NERC's proposal to modify 
footnote `b.' In the NOPR, the Commission stated that it believed that 
NERC's proposal does not meet the directives in Order No. 693 and the 
June 2010 Order and does not clarify or define the circumstances in 
which an entity can plan to interrupt Firm Demand for a single 
contingency. The Commission expressed concern that the procedural and 
substantive parameters of NERC's proposed stakeholder process are too 
undefined to provide assurances that the process will be effective in 
determining when it is appropriate to plan for interrupting Firm 
Demand, does not contain NERC-defined criteria on circumstances to 
determine when an exception for planned interruption of Firm Demand is 
permissible, and could result in inconsistent results in 
implementation. The NOPR stated that the proposed footnote effectively 
turns the processes into a reliability standards development process 
outside of NERC's existing procedures. Furthermore, the NOPR stated 
that regardless of the process used, the result could lead to 
inconsistent reliability requirements within and across reliability 
regions. While the Commission recognized that some variation among 
regions or entities is reasonable, there are no technical or other 
criteria to determine whether varied results are arbitrary or based on 
meaningful distinctions.
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    \15\ Transmission Planning Reliability Standards, Notice of 
Proposed Rulemaking, 76 FR 66229 (Oct. 20, 2011), FERC Stats. & 
Regs. ] 32,683 (2011).
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    11. The Commission proposed to provide further guidance on 
acceptable approaches to footnote `b' and sought comment on certain 
options for revising footnote `b', as well as other potential options 
to solve the concerns outlined in the NOPR. In response to the NOPR, 
comments were filed by seventeen interested parties.\16\
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    \16\ NERC, The Edison Electric Institute (EEI), American Public 
Power Association (APPA), National Association of Regulatory Utility 
Commissioners (NARUC), ITC Holdings Corp. (ITC), Manitoba Hydro, 
California Department of Water Resources State Water Project 
(California SWP) Hydro One Networks, Inc and the Ontario Independent 
Electricity System Operator (Hydro One and IESO), Duke Energy 
Corporation (Duke), New York State Public Service Commission 
(NYPSC), Bonneville Power Administration (BPA), Kansas City Power & 
Light Company and KCP&L Greater Missouri Operations Company (KCPL), 
Midwest Independent System Operator, Inc. (MISO), Public Utility 
District No. 1 of Snohomish County, Washington (Snohomish), 
Transmission Access Policy Study Group (TAPS), Powerex Corp. 
(Powerex), and Florida Reliability Coordinating Council (FRCC).
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II. Discussion

    12. For the reasons discussed below, the Commission concludes that 
NERC's proposed TPL-002-0b does not meet the Commission's Order No. 693 
directives, nor is it an equally effective and efficient alternative. 
Further, the Commission finds that the proposal is vague, potentially 
unenforceable and may lack safeguards to produce consistent results. On 
this basis, the Commission remands the proposal to NERC as unjust, 
unreasonable, unduly discriminatory or preferential and not in the 
public interest. Below, the Commission also provides guidance on 
acceptable approaches to footnote `b.'
    13. The Commission adopts the proposed NOPR finding that the 
footnote `b' process lacks adequate parameters. The Reliability 
Standard requires that, when planning to interrupt Firm Demand, the 
Firm Demand interruption must be ``subject to review in an open and 
transparent stakeholder process that includes addressing stakeholder 
comments.'' \17\ Without meaningful substantive parameters governing 
the stakeholder process, the enforceability of this obligation by NERC 
and the Regional Entities would be limited to a review to ensure only 
that a stakeholder process occurred. As NERC explained, Regional 
Entities' involvement is limited to after-the-fact oversight by 
auditing the entity's implementation of footnote `b' to determine if 
the entity planned on interrupting Firm Demand and whether the decision 
by the entity to rely on planned interruption of Firm Demand was vetted 
through the stakeholder process and qualified as one of the situations 
identified in footnote `b.' \18\
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    \17\ NERC Petition at 10.
    \18\ NERC Data Response at 7-9.

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[[Page 26689]]

    14. Further, the NERC proposal leaves undefined the circumstances 
in which it is allowable to plan for Firm Demand to be interrupted in 
response to a Category B contingency. The Commission believes that 
proposed footnote `b' could be used as a means to override the 
reliability objective and system performance requirements of the TPL 
Reliability Standard without any technical or other criteria specified 
to determine when planning to interrupt Firm Demand would be allowable, 
and without violating any of the requirements of the TPL Reliability 
Standard. The TPL Reliability Standard requires that a planner 
demonstrate through a valid assessment that the transmission system is 
planned and can be operated to supply projected Firm Demand at all 
demand levels over a range of forecasted system demands.\19\ In 
addition, a planner must consider all single contingencies under Table 
1, Category B and demonstrate system performance.\20\ For single 
contingency events where system performance is not met, a planner must 
provide a written summary of its plans to achieve system performance 
including implementation schedules, in service dates of facilities and 
implementation lead times.\21\
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    \19\ Reliability Standard TPL-002-0b, Requirement R1.
    \20\ Reliability Standard TPL-002-0b, Requirement R1.3.7.
    \21\ Reliability Standard TPL-002-0b, Requirement R2.
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    15. However, if system performance is not met for any single 
contingency event(s) under NERC's proposed footnote `b,' a planner 
could plan to interrupt some portion of Firm Demand to meet system 
performance requirements thereby overriding the performance 
requirements of the TPL Reliability Standard. For example, if a planner 
determines during its annual assessment that for a single bulk-power 
system transformer contingency other bulk-power system elements would 
exceed their thermal ratings, a planner would have authority under the 
standard to plan to interrupt Firm Demand to relieve the exceeded 
thermal ratings of the bulk-power system elements rather than planning 
the system to withstand such a single contingency and avoid shedding 
firm load as the performance requirements of the TPL Reliability 
Standard require. Therefore, without articulating some bounds on the 
use of the planned shedding of Firm Demand, there could be instances of 
multiple exceptions that could affect the robustness of the system. 
Further, contrary to commenters contentions, NERC's proposal, for 
example, has no provision to evaluate this cumulative effect of the 
individual decisions to shed firm.\22\
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    \22\ BPA Comments at 5 (``The reasons for interrupting Firm 
Demand would be documented in studies and demonstrate that there 
would be no adverse impact to the BPS''); FRCC Comments at 3 
(``Indeed, the transmission planning entity is responsible as part 
of the system assessment process under the TPL standards to test 
remedies to ensure that they address the problems being caused and 
do not cause additional problems.''); and Hydro One Comments at 5 
(``Loss of load is under the purview of the regulatory authority and 
not NERC, unless it has an adverse impact on the BES which is 
already taken into consideration by the TPL standards * * * In all 
cases, steps are taken in planning, design and operations of the 
system to ensure that Firm Demand shedding would not adversely 
impact the BES * * *'').
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    16. The Commission disagrees with commenters that NERC's proposed 
footnote `b' will have no adverse impact on reliable planning of the 
bulk-power system because planning to shed Firm Demand is intended to 
ensure that single contingency events do not result in adverse impacts 
and intended to preserve bulk-power system reliability.\23\ Table 1 of 
the TPL Reliability Standard identifies the system performance 
requirements or ``System Limits or Impacts'' that a planner must apply 
during its assessment of Category B, single contingency events.\24\ 
Except in limited circumstances, if a planner determines that it must 
plan to interrupt Firm Demand so that it does not violate the Table 1 
system performance requirements, a planner should not apply footnote 
`b' as a mitigation plan to plan to operate reliably. The Commission 
therefore is concerned that NERC's proposal provides authority to 
adjust the TPL Reliability Standard and its system performance 
requirements for each single contingency event that does not meet the 
system performance requirements of Table 1.
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    \23\ See, e.g., NERC Comments at 11, TAPS Comments at 10, APPA 
Comments at 6.
    \24\ Reliability Standard TPL-002-0b, Table 1, Transmission 
System Standards--Normal and Emergency Conditions. Table 1 
identifies the system performance requirements or ``System Limits or 
Impacts'' which are as follows: ``System Stable and both Thermal and 
Voltage Limits within Applicable Rating'', ``Loss of Demand or 
Curtailed Firm Transfers'' and ``Cascading Outages.''
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    17. Further, NERC has not provided technically sound means of 
determining situations in which planning to interrupt Firm Demand would 
be allowable. While NERC expects that such determinations will be made 
in a stakeholder process, this provides no assurance that such a 
process will use technically sound means of approving or denying 
exceptions. The Commission concludes that the multiple stakeholder 
processes across the country engaging in such determinations could lead 
to inconsistent and arbitrary exceptions including, potentially, 
allowing entities to plan to interrupt any amount of Firm Demand in any 
location and at any voltage level.
    18. While the Commission recognizes that some variation among 
regions or entities is reasonable given varying grid topography and 
other considerations, there are no technical or other criteria to 
determine whether varied results are arbitrary or based on meaningful 
distinctions. The Commission, thus, concludes that NERC's proposal 
lacks safeguards to ensure against inconsistent results and arbitrary 
determinations to allow for the planned interruption of Firm Demand.
    19. A remand gives NERC and industry flexibility to develop an 
approach that would address the issues identified by the Commission 
with the proposed footnote `b' stakeholder process including, as 
discussed below, definition of the process and criteria or guidelines 
for the process.
    20. The Commission believes that, on remand, both NERC and the 
Commission will benefit from a more complete record regarding the 
electric industry's reliance on planned Firm Demand interruptions. In 
response to the Commission's request to explain and quantify the extent 
to which Firm Demand is planned to be interrupted pursuant to 
currently-effective footnote `b,' NERC explained:

    NERC and the Regional Entities have not collected statistics or 
preformed a survey concerning the prospective implementation of 
Footnote b under TPL-002-0a. During the drafting team's 
deliberations concerning TPL-001-2 and TPL-002-0a Footnote b, 
including the NERC Technical Conference on Footnote b, the informal 
assessments demonstrated that the use of Footnote b would not be 
widespread.\25\
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    \25\ NERC Data Response at 10.

    Likewise, several commenters state that the interruption of Firm 
Demand is rarely needed, but provide no support for this 
conclusion.\26\ For example, EEI asks the Commission to ``recognize'' 
that ``* * * the actions taken as outcomes of the planning review 
process, are likely to identify few/isolated circumstances in which 
these [footnote b] provisions would be invoked* * *.'' \27\ However, 
the Commission believes that more specific information regarding the 
specific circumstances and frequency with which Firm Demand is planned 
to be interrupted will assist both NERC in developing, and the 
Commission in reviewing, appropriate revisions to

[[Page 26690]]

footnote `b' on remand. Therefore, pursuant to section 39.2(d) of the 
Commission's regulations,\28\ we direct NERC to identify the specific 
instances of any planned interruptions of Firm Demand under footnote 
`b' and how frequently the provision has been used. We direct NERC to 
use section 1600 of its Rules of Procedure to obtain information from 
users, owners and operators of the bulk-power system to provide this 
requested data.\29\ NERC shall submit this information to the 
Commission with NERC's footnote `b' filing that addresses the concerns 
in this Final Rule.
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    \26\ See, e.g., FRCC Comments at 4; MISO Comments at 4; BPA 
Comments.
    \27\ EEI Comments at 2.
    \28\ 18 U.S.C. 39.2(d).
    \29\ NERC Rules of Procedure, Section 1601 (effective January 
31, 2012).
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    21. We urge NERC to develop in a timely manner an appropriate 
modification that is responsive to the Commission's directives in Order 
No. 693 and our concerns set forth in this Final Rule. In that regard, 
we require NERC to deploy its Expedited Reliability Standards 
Development Process to quickly respond to the remand. As the Commission 
noted in previous orders, the use of planned or controlled load 
interruption is a fundamental reliability issue and, certainty 
regarding the loss of non-consequential load for a single contingency 
event is warranted.\30\ Thus, using the Expedited Standards Development 
Process will more rapidly bring needed certainty to this fundamental 
reliability issue.
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    \30\ North American Electric Reliability Corp., 130 FERC ] 
61,200 (2010) (March 2010 Order); North American Electric 
Reliability Corp., 131 FERC ] 61,231 (2010) (June 2010 Order).
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    22. Below we discuss three concerns: (a) Jurisdictional issues, (b) 
lack of technical criteria, and (c) the stakeholder process. The 
Commission also provides guidance on other acceptable approaches.

A. Jurisdictional Issues

    23. A number of commenters express concern that the Commission is 
reaching beyond its FPA section 215 jurisdiction.\31\ Commenters assert 
that the Commission options exceed its jurisdiction involving 
acceptable levels and types of service. Commenters seek assurance that 
the Commission's proposal does not infringe on matters reserved to the 
States and instead ``only prescribe acceptable load shedding as it 
pertains to wholesale customers that are in a position to select 
interruptible or conditional firm transmission service.'' \32\ NARUC 
states that ``any NERC standard for shedding distribution level load 
must be guided by States and that a demonstration that interruption of 
the load will not cause instability, uncontrolled separation, or 
cascading failures on the bulk system is appropriate for a NERC 
standard.'' \33\ NARUC adds that specifications of what retail load and 
what levels of retail load can be interrupted is a State determination 
that is not reviewable by the Commission. TAPS agrees with NERC that 
issues pertaining to whether it is permissible to plan to interrupt 
firm load involves conflicts among federal, provincial, state, and 
local governing bodies.\34\
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    \31\ See, e.g., Comments of NERC, NARUC, APPA and TAPS.
    \32\ NYPSC Comments at 5.
    \33\ NARUC Comments at 3-4.
    \34\ TAPS Comments at 9.
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    24. The Commission disagrees that it is infringing on State 
Commissions or overstepping jurisdictional bounds. In this Final Rule, 
the Commission remands NERC's proposed footnote `b' as an inadequate 
mechanism to address planned curtailment of firm demand and not 
responsive to the Commission's directives in Order No. 693 regarding 
this matter. The Commission is not directing that NERC develop a 
specific solution or approach on remand. Thus, our remand of the NERC 
proposed modification to TPL-002-0b, Table 1, footnote `b' is fully 
within the Commission's authority pursuant to section 215(d)(4) to 
remand to the ERO for further consideration a modification to a 
proposed reliability standard that the Commission disapproves in whole 
or in part. Moreover, FPA section 215 gives the Commission jurisdiction 
over mandatory Reliability Standards to ensure reliability of the Bulk-
Power System.\35\ Consistent with its statutory authority, the 
Commission's interest and focus in this proceeding is on the planned 
interruption of Firm Demand on the Bulk-Power System. The Commission 
views this matter in the context of Reliability Standard TPL-002-0b, 
which requires that in planning the system to withstand the loss of a 
single Bulk-Power System element, Bulk-Power System performance 
criteria must be met. If it is not met, a corrective action plan is 
required to address the Bulk-Power System performance criteria 
violation. Contingencies studied pursuant to Reliability Standard TPL-
002-0b pertinent to Bulk-Power System facilities are subject to 
Commission jurisdiction under FPA section 215. In sum, the performance 
of the Bulk-Power System under the TPL-002-0b Reliability Standard is 
within the Commission's jurisdiction.
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    \35\ 16 U.S.C. 824o(b)(1).
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B. Lack of Technical Criteria

NOPR Proposal
    25. In the NOPR, the Commission proposed to remand NERC's proposal 
to modify Reliability Standard TPL-002-0b, Table 1, footnote `b.' The 
Commission stated that it believed that NERC's proposal does not meet 
the directives in Order No. 693 and the June 2010 Order and does not 
clarify or define the circumstances in which an entity can plan to 
interrupt Firm Demand for a single contingency.\36\ In the NOPR the 
Commission expressed concern that NERC's proposed footnote `b' lacks 
parameters. Without any substantive parameters governing the 
stakeholder process, the enforceability of this obligation by NERC and 
the Regional Entities would be limited to a review to ensure only that 
a stakeholder process occurred. The Commission noted that NERC appears 
to confirm this concern, as NERC explained that Regional Entities' 
involvement is limited to after-the-fact oversight by auditing the 
entity's implementation of footnote `b' to determine if the planned 
interruption of Firm Demand was vetted through the stakeholder 
process.\37\
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    \36\ NOPR, FERC Stats. & Regs. ] 32,683 at P 11.
    \37\ Id. P 12.
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    26. Further, in the NOPR the Commission stated that since the 
proposed footnote `b' contains no constraints, it could allow an entity 
to plan to interrupt any amount of planned Firm Demand, in any location 
or at any voltage level as needed for any single contingency, provided 
that it is documented and subjected to a stakeholder process. The 
Commission found this result remains contrary to the underlying 
Reliability Standard and prior Commission orders.\38\ The Commission 
requested comment on this specific concern of the lack of technical 
criteria or parameters.
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    \38\ Id.
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Comments
    27. Some commenters agree with the Commission that there is lack of 
technical criteria to determine planned interruption of Firm Demand. 
For example, California SWP states that Reliability Standards ``should 
ensure transparent criteria based on technical merits and not software 
limitations derived from a desire to mask [locational marginal pricing] 
price signals with socialized pricing or on status quo practices.'' 
\39\ ITC believes that there is a need for defined parameters that will 
guide the review of exceptions and that will prevent

[[Page 26691]]

planned interruptions from becoming commonplace.\40\ Manitoba Hydro 
states that the characteristics of openness and transparency are 
indicators of a non-discriminatory planning process; however, these 
characteristics do not ensure that certain reliability criteria of the 
planned facilities will be met.\41\
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    \39\ California SWP Comments at 4.
    \40\ ITC Comments at 2.
    \41\ Manitoba Hydro Comments at 6.
---------------------------------------------------------------------------

    28. Other commenters disagree with the Commission's concern that 
there is a lack of criteria to determine planned interruption of Firm 
Demand. NERC states that it does not believe that an exceptions process 
that provides defined criteria, with some allowances, could be crafted 
that would respect pre-existing decision making processes that occur at 
state and local jurisdictions. NERC argues that the decision to 
interrupt local load is essentially an economic decision--a quality of 
service issue, not a reliability issue.\42\
---------------------------------------------------------------------------

    \42\ NERC Comments at 13.
---------------------------------------------------------------------------

    29. MISO disagrees that additional language would reduce the 
potential for inconsistent results and points out that registered 
entities already have many established requirements that govern the 
transmission planning processes.\43\ MISO believes that if the 
Commission determines that criteria are needed, such criteria should be 
determined by the stakeholders in the regions though their established 
stakeholder processes.\44\ EEI does not believe that specific criteria 
should be developed until a better understanding is obtained regarding 
the role of service interruptions as a reliability tool.\45\ EEI 
believes that these are appropriate aspects of the NERC proposal that 
would be readily amenable to an initial implementation approach, 
followed by an adjustment period that would refine the overall process 
consistent with the Commission's concerns.
---------------------------------------------------------------------------

    \43\ MISO Comments at 3.
    \44\ Id. at 5.
    \45\ EEI Comments at 10.
---------------------------------------------------------------------------

Commission Determination
    30. We believe that openness and transparency do not alone ensure 
that bulk electric system performance criteria will be met to ensure 
system reliability. The Commission is not persuaded that developing 
technical criteria is unachievable. As the Commission observed in the 
NOPR, NERC has thresholds in other reliability contexts, such as 
vegetation management pursuant to Reliability Standard FAC-003-1 which 
applies to all transmission lines operated at 200 kV and above. 
Likewise, NERC's Statement of Compliance Registry Criteria includes 
numerous thresholds for determining eligibility for registration.\46\
---------------------------------------------------------------------------

    \46\ See, e.g., NERC Statement of Registry Criteria, section 
III. The Commission approved the Statement of Registry Criteria in 
Order No. 693. See Order No. 693, FERC Stats. & Regs. ] 31,242 at P 
95.
---------------------------------------------------------------------------

    31. The Commission does not agree with EEI's recommendation to 
implement a stakeholder process that is absent technical criteria but 
then amend it later. While the Commission has, in other circumstances, 
approved a Reliability Standard and, as a separate action, directed 
NERC to develop a modification pursuant to section 215(d)(5) of the 
FPA, in such proceedings the Commission concluded that the proposed 
Reliability Standard was just, reasonable, not unduly discriminatory or 
preferential and in the public interest. In the immediate proceeding, 
however, we cannot make such a finding in light of the flawed 
stakeholder process provision.
    32. In response to MISO's argument that such criteria should be 
determined by the stakeholders in the regions though their established 
stakeholder processes, the Commission would be amenable to such an 
approach if, for example, NERC and/or the Regional Entities developed 
an exception process that provides flexibility in decisions based on 
disparate topology or on other matters since they could utilize their 
technical expertise to determine the reliability impact from one region 
to another. For these reasons, the Commission concludes that a more 
defined process is needed with NERC-defined technical criteria to 
determine planned interruption of Firm Demand. However, we conclude 
that the approach of allowing a decentralized process without any 
overarching parameters is unacceptable.
    33. With regard to NERC's comment that the decision to interrupt 
local load is essentially an economic decision that is a quality of 
service issue, not a reliability issue, the Commission notes that in 
Order No. 693, we dismissed the argument that it may be preferable to 
plan the bulk electric system in such a manner that contemplates the 
interruption of some firm load customers in the event of a N-1 
contingency, and that such interruption is based largely on the matter 
of economics, not reliability.\47\
---------------------------------------------------------------------------

    \47\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1792.
---------------------------------------------------------------------------

C. Stakeholder Process

NOPR Proposal
    34. In the NOPR, the Commission expressed concern that NERC's 
proposed footnote `b' stakeholder process is insufficient to meet Order 
No. 693 and the June 2010 Order clarification that a regional 
difference, or a case-specific exception process that can be 
technically justified, to plan for the loss of firm services at the 
fringes of the systems is acceptable in limited circumstances.\48\ The 
Commission also noted that nothing in the proposed footnote `b' defines 
the stakeholder process, other than that it must be an open and 
transparent stakeholder process that includes addressing stakeholder 
comments.\49\ The Commission noted that any meeting that is open to 
stakeholders could meet this criteria.
---------------------------------------------------------------------------

    \48\ NOPR, FERC Stats. & Regs. ] 32,683 at P 19.
    \49\ Id. P 20.
---------------------------------------------------------------------------

    35. The Commission further stated that the lack of a defined 
stakeholder process could allow a transmission planner to develop a 
process that provides insufficient opportunity for stakeholder 
participation and transparency yet still comply with the standard. The 
Commission expressed its belief that nothing in the proposed footnote 
`b' restricts the stakeholder process, other than that it must be an 
open and transparent stakeholder process that includes addressing 
stakeholder comments. The Commission requested comment on whether a 
stakeholder process is the appropriate vehicle to approve or deny 
exceptions to allow entities to plan to interrupt Firm Demand for a 
single contingency and if so, whether the proposed footnote `b' would 
require any stakeholder due process.
Comments
    36. Several commenters believe that NERC's proposed stakeholder 
process is the appropriate venue to approve or deny exceptions to 
interrupt planned Firm Demand. NERC and other commenters contend that 
building on existing stakeholder processes is appropriate, rather than 
creating new, duplicative processes. While EEI, APPA, and TAPS concur 
with or acknowledge the Commission's concerns about the inadequacy of 
the proposed stakeholder process, they nonetheless urge the Commission 
to approve NERC's proposal stating that it reflects the considered 
expertise that instances of planned load shed are uncommon and not 
amenable to a one-size-fits-all approach.\50\ NERC believes the 
introduction of an additional planning process may contribute to 
further delays and regulatory confusion. NERC states

[[Page 26692]]

that ``keeping decision-making with those most impacted by decisions 
regarding reliability and costs, lack of jurisdictional authority, and 
the existence of established open and transparent stakeholder 
processes--are the reasons NERC did not create a new stakeholder 
process.'' \51\
---------------------------------------------------------------------------

    \50\ See, e.g., EEI Comments at 3, TAPS Comments at 5, APPA 
Comments at 3.
    \51\ NERC Comments at 12.
---------------------------------------------------------------------------

    37. Duke Energy believes that the current Order No. 890-type 
process involving the local transmission planning collaborative is the 
appropriate stakeholder process. Duke Energy suggests that footnote `b' 
should be revised to include a local regulatory authority process as 
the appropriate stakeholder process to allow entities to plan to 
interrupt Firm Demand for a single contingency. According to Duke 
Energy, in such a process a transmission planner would submit its plan 
to interrupt Firm Demand for a single contingency to its local 
regulatory authority that has jurisdiction over quality of service to 
local load prior to any actual interruption of Firm Demand.
    38. BPA states that the stakeholder process will keep the decision 
local, where the parties involved understand the different factors that 
must be considered in deciding the proper path forward.\52\ APPA 
maintains that these processes impose due process requirements on the 
transmission planner, including participation in an open and 
transparent stakeholder process that considers stakeholder 
comments.\53\
---------------------------------------------------------------------------

    \52\ BPA Comments at 4.
    \53\ APPA Comments at 5.
---------------------------------------------------------------------------

    39. FRCC disagrees with the Commission that enforceability is 
limited since the process requires development of a record documenting 
the decisions and stakeholder comments and planning authority 
responses. According to FRCC, the result will provide NERC and the 
Commission substantive and procedural grounds to assess whether 
sufficient consideration was given to maintaining reliability.\54\
---------------------------------------------------------------------------

    \54\ FRCC Comments at 3.
---------------------------------------------------------------------------

    40. Some commenters believe that NERC's proposed stakeholder 
process is not the appropriate vehicle to approve or deny exceptions to 
interrupt planned Firm Demand. ITC argues that the stakeholder process 
is inadequately undefined to ensure that planned Firm Demand 
interruptions are kept to a minimum. Manitoba Hydro indicates that by 
acknowledging an exception for interruptible Firm Demand, NERC appears 
to recognize that the right to interrupt is not solely a reliability 
issue, but also a commercial or legal issue based on contractual 
rights.\55\
---------------------------------------------------------------------------

    \55\ Manitoba Hydro Comments at 5.
---------------------------------------------------------------------------

    41. While TAPS encourages the Commission to accept NERC's proposed 
footnote `b,' it shares the NOPR's concerns about the adequacy of the 
open and transparent stakeholder process and has argued for a decision-
making role for transmission-dependent utilities in the Order No. 890 
and Order No. 1000 planning processes to ensure that stakeholder 
processes do not result in a presentation of a decision followed by the 
transmission provider simply ``rubber-stamping'' the decision.\56\ If 
the Commission determines that these objectives cannot be accomplished 
without more robust action from the Commission in this proceeding, TAPS 
urges the Commission not to remand the proposed footnote `b,' but 
instead to accept NERC's proposal and direct NERC to submit a further 
modified footnote `b' to address the parameters of the ``open and 
transparent stakeholder process that includes addressing stakeholder 
comments.'' \57\
---------------------------------------------------------------------------

    \56\ TAPS Comments at 5.
    \57\ Id. at 11.
---------------------------------------------------------------------------

Commission Determination
    42. The Commission is not persuaded that the stakeholder process is 
adequately defined. The Commission is concerned that the stakeholder 
process could undermine the system performance criteria of TPL-002-0b 
Reliability Standard. As the Commission stated in Order No. 693, one of 
the key reliability objectives of the TPL Reliability Standard is that 
the system can be operated following the loss of one element and supply 
projected firm customer demands and projected firm transmission 
services at all demand levels over the range of forecast system 
demands.\58\ The Commission finds that the stakeholder process without 
appropriate parameters is inconsistent with the reliability objective 
to supply projected firm customer demands for the loss of one element. 
While the Reliability Standard requires that the system is planned so 
that the system can be operated following the loss of one element and 
supply projected firm customer demands, the proposed stakeholder 
process could defeat this by allowing a transmission planner to plan to 
shed as much load as needed so that the system can be operated to 
supply whatever customers remain.
---------------------------------------------------------------------------

    \58\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1771.
---------------------------------------------------------------------------

    43. The Commission agrees with TAPS to the extent it observes that 
the proposal could allow a transmission planner to utilize a new or 
existing stakeholder process that provides insufficient opportunity for 
a stakeholder to provide meaningful input. We conclude that the 
stakeholder process with no criteria to objectively assess whether 
varied results are arbitrary or based on meaningful differences is 
unjust, unreasonable, unduly discriminatory or preferential, and not in 
the public interest. Nothing in proposed footnote `b' defines the 
stakeholder process, other than it must be an open and transparent 
stakeholder process that includes addressing stakeholder comments.
    44. The Commission is not persuaded by FRCC's comment that 
enforceability is not limited by proposed footnote `b' and that 
development of a record will provide NERC ``substantive and 
procedural'' grounds to assess the outcome of the process. Neither FRCC 
nor any other commenter identifies the minimum procedural safeguards to 
assure an adequate level of stakeholder participation and consideration 
of stakeholder comment in the decision-making process. Moreover, even 
NERC, which states that it can conduct after-the-fact audits, indicates 
that such audits would not explore substantive adequacy or the 
reliability basis for a decision to plan to shed Firm Demand.\59\ 
Further, the Commission is not persuaded by APPA and BPA comments that 
local stakeholder participation and due process requirements imposed on 
the transmission planner are sufficient. Rather, the Commission 
believes that if a transmission planner invokes a process that provides 
for minimal stakeholder involvement, it could argue that it satisfied 
the provision, even if the transmission planner is the ultimate 
decision maker and simply `rubber stamps' its own proposal to interrupt 
planned Firm Demand.
---------------------------------------------------------------------------

    \59\ NERC Data Response at 7-9.
---------------------------------------------------------------------------

D. Guidance on Acceptable Approaches to Footnote `b'

    45. The Commission proposed three options in the NOPR for further 
guidance on acceptable approaches to footnote `b.' In addition, the 
Commission requested comment on other potential options to solve the 
concerns outlined in the NOPR.
1. Existing Protocols To Develop Criteria/Quantitative Limits
    46. In the NOPR, the Commission acknowledged that NERC considered a 
variety of limits but observed that NERC's establishment of some form 
of

[[Page 26693]]

criteria for planning to interrupt Firm Demand could be an acceptable 
approach for footnote `b.' The Commission requested comment on whether 
existing protocols such as the Department of Energy's Electric 
Emergency Incident and Disturbance Report (Form OE-417), which requires 
an entity to report a certain amount of uncontrolled loss of firm 
system loads, or NERC's Statement of Compliance Registry Criteria could 
provide guidance to NERC to devise criteria.
Comments
    47. Commenters were unanimous that the examples of existing 
protocols would not be beneficial to devise criteria. NERC and others 
state that any bright-line megawatt limit would be inappropriate 
because the bright-line would be arbitrary.\60\ Some commenters do not 
believe that existing protocols, such as the requirement in Form OE-417 
should be used to determine criteria related to planned loss of Firm 
Demand.\61\
---------------------------------------------------------------------------

    \60\ NERC Comments at 14.
    \61\ ITC Comments at 5; see also Hydro One and IESO Comments.
---------------------------------------------------------------------------

    48. BPA, ITC, and Duke Energy comment that setting a quantitative 
limit would push transmission planners to plan to meet such a limit for 
a single contingency in all cases. Currently, transmission planners 
start from the premise that no load should be interrupted in the event 
of a single contingency. ITC believes that including such an acceptable 
lost load criterion as an option could lead to that option being chosen 
as the ``default solution,'' i.e., allowing for a certain amount of 
acceptable interruption of Firm Demand without a stakeholder exception 
review process.\62\ In the same vein, Duke indicates that a specific 
megawatt threshold may prohibit certain interruptions of Firm Demand 
that would be acceptable from a quality of service and local 
consequences perspectives.\63\
---------------------------------------------------------------------------

    \62\ ITC Comments at 5.
    \63\ Duke Comments at 6.
---------------------------------------------------------------------------

Commission Determination
    49. The Commission is persuaded by the commenters that Form OE-417 
or the Registry Criteria are not, by themselves, beneficial to use to 
devise criteria. The Commission also agrees that a bright-line criteria 
by itself does not present a viable option and would have the potential 
to constitute an acceptable de facto interruption and become 
commonplace to plan to interrupt Firm Demand. For example, if the 
bright-line criteria included up to 50 MW of planned interruptible Firm 
Demand under proposed footnote `b', then planners may choose to 
automatically shed up to 50 MW of load as their first course of action 
for any single contingency event that would cause a violation of system 
performance criteria. This is not an acceptable outcome.
2. A Blend of Quantitative and Qualitative Thresholds
    50. The Commission also sought comment on whether a blend of 
quantitative and qualitative thresholds to be used to interrupt planned 
Firm Demand would be an appropriate option for providing criteria that 
would be generally applicable, but also for allowing for certain cases 
that may exceed the criteria. For example, a Reliability Standard could 
require a process with a quantitative limitation on how much Firm 
Demand could be planned for interruption and the standard could provide 
an exception process where a registered entity would submit documents 
and explanation to the ERO or a Regional Entity for approval based upon 
certain considerations.\64\ The Commission suggested that setting 
generally applicable criteria for when an applicable entity can plan to 
shed Firm Demand, coupled with an exceptions process overseen by NERC 
and the Regional Entities, could mean that few exception requests must 
be processed by NERC and the Regional Entities.\65\ The Commission 
observed in the NOPR that this approach may satisfy the need for 
technical criteria while accounting for NERC's concerns about the 
difficulty of developing a one-size-fits-all criterion for limiting 
planned Firm Demand interruptions and the appropriateness and 
feasibility of managing and actively participating in each planning 
process.
---------------------------------------------------------------------------

    \64\ NOPR, FERC Stats. & Regs. ] 32,683 at P 18.
    \65\ Id. P 27.
---------------------------------------------------------------------------

Comments
    51. California SWP indicates that standards must constrain the use 
of firm load shedding as a reliability solution in transmission 
planning and at the same time, require a transparent and clearly 
defined stakeholder process to support any such planned use of load 
shedding for single contingency events.\66\ BPA suggests that, if the 
Commission does set a quantitative limit on planned interruption of 
Firm Demand, a limit based on a fraction of aggregated normal peak load 
would be one option that may be more effective and adaptable to all 
sizes of utilities.\67\
---------------------------------------------------------------------------

    \66\ California SWP Comments at 2.
    \67\ BPA Comments at 4.
---------------------------------------------------------------------------

    52. Other commenters disagree that a blend is a good option. NARUC 
indicates that rather than inventing another stakeholder process by 
requiring NERC to set specific quantitative or qualitative requirements 
for distribution load shedding, NERC should look to State commissions 
and existing State curtailment plans to guide load shedding in 
contingency planning.\68\ Duke Energy submits that a blend of 
quantitative and qualitative thresholds does not provide enough 
flexibility to permit the qualitative assessment of the loads and 
locations for which transmission planners may interrupt under their 
exercise of footnote `b' because a blended threshold may still rely too 
heavily on a quantitative threshold for planned interruption of Firm 
Demand.\69\ FRCC states it is not feasible to develop a single 
quantitative rule that would apply equitably to all stakeholders and 
regions.\70\
---------------------------------------------------------------------------

    \68\ NARUC Comments at 3.
    \69\ Duke Energy Comments at 7.
    \70\ FRCC Comments at 7.
---------------------------------------------------------------------------

    53. EEI believes that adopting a process that would provide greater 
clarity, reporting, and refinement would provide the specific 
information on the extent that the footnote `b' issue presents itself. 
EEI also agrees with NERC that efforts to create a one-size-fits-all 
approach have less value than a process that ensures openness and 
transparency.
Commission Determination
    54. The Commission believes that setting a quantitative and 
qualitative threshold in developing a limited exception for planned 
interruption of Firm Demand may be a workable solution. First, 
qualitative thresholds could be used to overcome the concern discussed 
immediately above regarding the quantitative threshold becoming an 
acceptable de facto interruption of planned Firm Demand. By utilizing a 
blend, the planner must also meet the qualitative threshold which could 
consist of, for example, the submittal of documents and explanation to 
the entity ultimately deciding whether the planned load shed is 
acceptable. For example, if 100 MW of planned Firm Demand was permitted 
to be interrupted, the planner could not automatically and unilaterally 
shed up to 100 MW of planned Firm Demand each time system performance 
criteria would be violated. Under the blend concept, the Commission 
envisions that

[[Page 26694]]

the planner would consider up to 100 MW of planned Firm Demand 
interruption along with other options to resolve the system performance 
criteria violation and submit its documentation and explanation to the 
entity deciding whether the planned load shed is acceptable. The 
concept of a blend of thresholds would prevent an acceptable de facto 
interruption of planned Firm Demand and avoid the difficulty of 
developing a one-size-fits-all criterion for limiting planned Firm 
Demand interruptions, but still allow for those limited circumstances 
to be reviewed in an exception process where a limited amount of 
planned interruption of Firm Demand may be acceptable.
    55. We believe it is appropriate for the Regional Entities, with 
NERC as the final authority, to make determinations under a ``blended'' 
exception process. First, NERC and the Regional Entities provide both 
objectivity in the decision-making process as well as the necessary 
reliability-focused expertise. Second, this should not overly burden 
NERC or Regional Entity resources as utilization of the planned load 
shed exception is--and would be--rarely utilized.\71\ Further, we are 
not persuaded by the assertion that NERC would be conflicted as the ERO 
and also inserting itself in the process. NERC's ERO role would 
continue, in coordination with its current responsibilities in 
implementing other exceptions such as the Technical Feasibility 
Exception process under the Critical Infrastructure Protection 
Reliability Standards.
---------------------------------------------------------------------------

    \71\ See, e.g., FRCC Comments at 4; MISO Comments at 4; BPA 
Comments.
---------------------------------------------------------------------------

    56. The Commission does not agree with BPA's suggestion of using 
quantitative thresholds based on a fraction of aggregated normal peak 
load. BPA's suggestion attempts to address the concerns of commenters 
that a bright-line threshold must be established that would be a one-
size-fits-all criteria. For example, instead of a megawatt bright-line 
threshold for all entities, the ERO could establish a threshold based 
on a percentage of aggregated normal peak load. The Commission believes 
that it would be difficult to demonstrate that adoption of BPA's 
suggestion would be just and reasonable, not unduly discriminatory or 
preferential and in the public interest. If criteria were established 
that permitted a percentage of aggregated normal peak load as an 
acceptable threshold for planned interruption of Firm Demand, even a 
small percentage could equate to entire towns, cities or regions of 
load.\72\ The Commission, therefore, does not support the planned 
interruption of Firm Demand based on a fraction of aggregated normal 
peak load. The Commission believes that an appropriate mechanism would 
be based on impact studies that consider minimizing planned 
interruption of Firm Demand within, and adjacent to, communities and 
small localities.
---------------------------------------------------------------------------

    \72\ For example, the PJM aggregated normal system peak load is 
approaching 160,000 MW, so a one percent threshold would equate to 
allowance of planned interruption for a single contingency of up to 
1600 MW of load, which is the size of some entire towns, cities or 
regions.
---------------------------------------------------------------------------

    57. The Commission offers guidance to NERC to consider the option 
of a blend of quantitative and qualitative thresholds. An example of a 
qualitative threshold could include identifying geographical or 
topological ``fringes of the system.'' While interruption at the 
fringes of the system may be expected by some consumers, not all 
customers necessarily have that same expectation. For example, we don't 
expect that many water treatment facilities or telecom switching 
stations normally plan to be interrupted for single contingency 
events.\73\ While the Commission has offered one example of a 
qualitative threshold, NERC may explore other qualitative thresholds on 
remand. The Commission believes that a blend of quantitative and 
qualitative thresholds coupled with an exception process overseen by 
NERC and the Regional Entities would be a reasonable option to allow 
for the limited interruption of planned Firm Demand. Accordingly, the 
Commission directs the ERO to consider some blend of quantitative and 
qualitative thresholds.
---------------------------------------------------------------------------

    \73\ While we anticipate that such facilities are prepared for 
distribution-level blackouts, we are not aware that they are 
prepared for a transmission-level blackout.
---------------------------------------------------------------------------

3. Customer or Community Consent
    58. In the NOPR the Commission also requested comment on whether a 
feasible option would be to revise footnote `b' to allow for the 
planned interruption of Firm Demand in circumstances where the 
``transmission planner can show that it has customer or community 
consent and there is no adverse impact to the Bulk-Power System.'' \74\ 
The Commission suggested that this would not require affirmative 
consent by every individual retail customer, but would recognize that 
either group would need to be adequately defined. The Commission 
requested comments on who might be able to represent the customer or 
community in this option and how customer or community consent might be 
demonstrated.\75\ The Commission also requested comment on how it would 
be determined that firm demand shedding with customer consent would not 
adversely impact the Bulk-Power System. Additionally, the Commission 
requested comment on whether a customer who would otherwise consent to 
having its planning authority or transmission planner plan to interrupt 
Firm Demand pursuant to this option could instead select interruptible 
or conditional firm service under the tariff to address cost concerns.
---------------------------------------------------------------------------

    \74\ NOPR, FERC Stats. & Regs. ] 32,683 at P 28.
    \75\ Id.
---------------------------------------------------------------------------

Comments
    59. Several commenters agreed with the Commission that the customer 
or community consent should be required. ITC believes the customers or 
entities should be involved in a stakeholder process such as a 
representative group for the affected load or customers (community 
representatives or a separate load serving entity where the 
transmission provider is not an integrated utility), the public 
service/utility regulatory commission for the affected load, the RTO or 
ISO for the affected area, and any other affected entity. California 
SWP also supports notice to and consent of loads (or their wholesale 
representatives) that are planned to be interrupted for the loss of a 
single element.\76\ In its comments, California SWP explains that it 
was ``surprised to learn that in lieu of transmission upgrades, [its 
transmission planner] relied on interruption of SWP's large firm pump 
loads supposedly receiving the same California Independent System 
Operator (CAISO) transmission service as provided to SCE loads. At that 
time, SWP was not consulted about the planned curtailment of its firm 
loads as an alternative to a transmission upgrade, and thus had no 
opportunity to correct this error.'' \77\
---------------------------------------------------------------------------

    \76\ California SWP Comments at 4.
    \77\ Id. at 2-3.
---------------------------------------------------------------------------

    60. Other commenters disagree that customer or community consent 
should be required. NERC states that it has no relationship with retail 
customers and, therefore, has no mechanism to bring retail customers 
into the conversation. NERC adds that both wholesale and retail 
customers are already involved in state processes which provide a forum 
for them to be heard.
    61. Hydro One and the IESO submit that customer interests are 
managed by the relevant regulatory authority and consent is through 
regulatory approval. In all cases, steps are taken in planning, design, 
and operations of the system to

[[Page 26695]]

ensure that Firm Demand shedding would not adversely impact the bulk 
electric system in addition to the fact that the customer also has 
other options such as to select interruptible service. NYPSC recommends 
that the Commission only prescribe acceptable load shedding as it 
pertains to wholesale customers that are in a position to select 
interruptible or conditional firm transmission service under 
Commission-approved tariffs.
    62. FRCC states that the evaluation of the possible use of 
interruptible or conditional firm service instead of planned 
interruptions of Firm Demand is not warranted. According to FRCC, the 
adoption of a Firm Demand interruption alternative would inherently 
entail customer benefits from foregone project costs and the non-
incurrence of environmental and other impacts. The customers would also 
generally enjoy a higher quality of service than traditional 
interruptible or conditional firm. Consequently, FRCC believes that 
applying any such rate in place of Demand interruption would present 
imponderable issues of quantification and application.
    63. BPA does not believe that this proceeding is appropriate to 
decide issues related to service choice. BPA argues that the Commission 
has determined that the rate for conditional firm service be the same 
as the firm rate. BPA does not anticipate that the interruption of Firm 
Demand would occur on a frequent basis, if at all. Thus, BPA does not 
believe that a customer should pay a different transmission rate under 
these circumstances. APPA states that footnote `b' arms wholesale 
transmission customers and communities served at retail with 
information and studies prepared by the transmission planner, 
documenting the specific circumstances (i.e., specific Bulk Electric 
System Contingency events) under which interruption of Firm Demand may 
be needed to address bulk electric system performance requirements.
Commission Determination
    64. We understand NERC's position that as the entity that addresses 
Bulk-Power System reliability, it does not have a mechanism to 
coordinate with customers. Likewise, how to define customers and 
community decisions and engage them in the NERC process could be 
challenging.\78\
---------------------------------------------------------------------------

    \78\ As suggested in the NOPR, customer or community consent 
would not require affirmative consent by every individual retail 
customer, but the process NERC developed would recognize that either 
group would need to be adequately defined. We note that, although 
NERC comments that it addresses Bulk-Power System reliability, the 
process that NERC proposes will impact firm load service to retail 
customers.
---------------------------------------------------------------------------

    65. At the same time, California SWP provides a compelling example 
of how a customer can be adversely affected by planned load shedding 
for Firm Demand if it was unaware its load would be interrupted until 
its load was actually shed. In contrast to California SWP's experience, 
a customer should have notice and understanding that the transmission 
planner plans to curtail certain Firm Demand in the event of a single 
contingency indentified in the system modeling under NERC's 
Transmission Planning requirements. NERC should consider these matters 
on remand.\79\
---------------------------------------------------------------------------

    \79\ We will not consider the tariff-related comments as they 
are beyond the scope of this rulemaking.
---------------------------------------------------------------------------

Summary
    66. In sum, the Commission remands the proposed footnote `b' and 
directs NERC to revise its proposal to address the Commission's 
concerns described above, subject to consideration of the additional 
guidance provided in this Final Rule.
    67. As stated in the NOPR, NERC will need to support the revision 
to footnote `b.' If there is a threshold component to the revised 
footnote, NERC would need to support the threshold and show that 
instability, uncontrolled separation, or cascading failures of the 
system will not occur as a result of planning to shed Firm Demand up to 
the threshold. In addition, if there is an individual exception option, 
the applicable entities should be required to find that there is no 
adverse impact to the Bulk-Power System from the exception and that it 
is considered in wide-area coordination and operations. Further, the 
Commission believes that any exception should be subject to further 
review by the Regional Entity or NERC.

III. Information Collection Statement

    68. The Office of Management and Budget (OMB) regulations require 
that OMB approve certain reporting and recordkeeping (collections of 
information) imposed by an agency.\80\ The information contained here 
is also subject to review under section 3507(d) of the Paperwork 
Reduction Act of 1995.\81\
---------------------------------------------------------------------------

    \80\ 5 CFR 1320.11.
    \81\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------

    69. As stated above, the subject of this Final Rule is NERC's 
proposed modification to Table 1, footnote `b' applicable in four TPL 
Reliability Standards. This Final Rule remands the footnote `b' 
modification to NERC. By remanding footnote `b' the applicable 
Reliability Standards and any information collection requirements are 
unchanged. Therefore, the Commission will submit this Final Rule to OMB 
for informational purposes only.
    70. Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street NE., Washington, DC 20426 [Attention: 
Ellen Brown, Office of the Executive Director, email: 
[email protected], phone: (202) 502-8663, or fax: (202) 273-
0873].

IV. Environmental Analysis

    71. 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.\82\ The 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment. Included in the exclusion are rules that are clarifying, 
corrective, or procedural or that do not substantially change the 
effect of the regulations being amended.\83\ The actions proposed 
herein fall within this categorical exclusion in the Commission's 
regulations.
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    \82\ Regulations Implementing the National Environmental Policy 
Act of 1969, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. 
& Regs., Regulations Preambles 1986-1990 ] 30,783 (1987).
    \83\ 18 CFR 380.4(a)(2)(ii).
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V. Regulatory Flexibility Act

    72. The Regulatory Flexibility Act of 1980 (RFA) \84\ generally 
requires a description and analysis of final rules 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 rule and that minimize 
any significant economic impact on a substantial number of small 
entities. The Small Business Administration's (SBA) Office of Size 
Standards develops the numerical definition of a small business.\85\ 
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.\86\ The RFA is not 
implicated by this Final Rule because the Commission is remanding

[[Page 26696]]

footnote `b' and not proposing any modifications to the existing burden 
or reporting requirements. With no changes to the Reliability Standards 
as approved, the Commission certifies that this Final Rule will not 
have a significant economic impact on a substantial number of small 
entities.
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    \84\ 5 U.S.C. 601-612.
    \85\ 13 CFR 121.201.
    \86\ Id. n.22.
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VI. Document Availability

    73. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's 
Public Reference Room during normal business hours (8:30 a.m. to 5:00 
p.m. Eastern time) at 888 First Street NE., Room 2A, Washington DC 
20426.
    74. From FERC's Home Page on the Internet, this information is 
available on eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number excluding the last three digits of this document in the docket 
number field.
    75. User assistance is available for eLibrary and the FERC's Web 
site during normal business hours from FERC Online Support at (202) 
502-6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
[email protected].

VII. Effective Date and Congressional Notification

    76. These regulations are effective July 6, 2012. The Commission 
has determined, with the concurrence of the Administrator of the Office 
of Information and Regulatory Affairs of OMB, that this rule is not a 
``major rule'' as defined in section 351 of the Small Business 
Regulatory Enforcement Fairness Act of 1996.

    By direction of the Commission. Commissioner Norris is 
dissenting in part and concurring in part with a separate statement 
attached.
Kimberly D. Bose,
Secretary.

    NORRIS, Commissioner, dissenting in part and concurring in part:

    The continued implementation and evolution of the mandatory 
reliability standards program enacted by Congress in 2005 has been 
at the forefront of our agenda since I arrived at the Commission in 
2010. As we have grappled with the difficult issues raised by 
proposed new or revised standards, and as I have discussed these 
issues with regulated industry, state regulators, and the public, I 
have consistently heard a common theme: mandatory reliability 
standards come with costs that consumers ultimately must bear.
    As I have thought about this issue, it has become clear to me 
that in any discussion of a new or revised mandatory reliability 
standard, there is always a tradeoff between the level of 
reliability to be achieved by that standard and the costs that the 
standard will impose. However, that tradeoff is rarely discussed 
explicitly in the standards development process or during the 
Commission's review of standards. But, we know that it is an 
implicit consideration of entities participating in the standards 
development process. I believe it is more appropriate to make those 
considerations, where they are relevant, explicit. Therefore, I have 
advocated for an open dialogue between NERC, the industry, and the 
Commission to consider the connection between the mandatory 
standards we approve to maintain and improve the reliability of the 
Bulk Power System and the costs required to meet those standards.
    However, I have perceived some hesitancy in openly addressing 
costs when considering reliability matters. This is not surprising, 
as there are no easy answers to these tough questions, and 
regulators and industry charged with assuring reliability will 
always be hesitant to be perceived as sacrificing reliability in an 
effort to save on costs. While I am not advocating for a cost-
benefit threshold for approving reliability standards, I do not 
believe that we can ignore the costs of proposed mandatory 
reliability standards as we consider whether they are ``just, 
reasonable, not unduly discriminatory or preferential, and in the 
public interest''.\1\ These are issues with real world implications, 
not just for the reliability and security of our Nation's electric 
grid, but for the day-to-day struggles of local communities to 
balance the economic realities of many competing obligations.
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    \1\ See 16 U.S.C. 824o(d)(2).
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    I am compelled to raise these issues in this proceeding because 
I believe that the Transmission Planning (TPL) Reliability Standard 
footnote `b' addressed in today's order presents a stark example of 
the tradeoffs that sometimes must be made between increasing levels 
of reliability and the costs that come with achieving them. As such, 
I hope my comments today will help generate a dialogue on how 
economics and reliability fit together when considering mandatory 
reliability standards.
    In today's order, I agree with the majority's decision to remand 
proposed TPL footnote `b' because it is vague, potentially 
unenforceable, and lacks adequate safeguards to determine when 
planning to shed firm load would be permitted. However, I am 
concerned that, in allowing for an exception to the TPL standards 
requirement that firm load must be maintained under N-1 scenarios, 
the order does not sufficiently recognize that this is both an 
economic and reliability issue, and must allow for a balancing of 
the economic and reliability considerations involved.
    There may be cases where planning to avoid shedding firm load in 
all N-1 scenarios will impose significant costs on customers, with 
perhaps little added reliability benefit for those customers. In 
such instances, I believe that wholesale transmission customers and 
local communities with retail load service should be empowered to 
consider the economic tradeoffs between incurring costs to avoid 
shedding firm load versus planning to shed firm load, as long as 
that decision does not adversely impact the reliability of the Bulk 
Power System. Simply put, if a customer seeks to avoid significant 
costs, and can do so without impacting its neighbors, the customer 
should be making that decision. Today's order fails to adequately 
acknowledge the economic consequences of having to invest in 
significant facility upgrades to avoid shedding firm load under 
certain N-1 scenarios that may be rare or unlikely and that would 
have only local impacts.\2\
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    \2\ Transmission Planning Reliability Standards, Order No. 762, 
139 FERC ] 61,060, at P 33 (2012) (``With regard to NERC's comment 
that the decision to interrupt local load is essentially an economic 
decision that is a quality of service issue, not a reliability 
issue, the Commission notes that in Order No. 693, we dismissed the 
argument that * * * such interruption is based largely on the matter 
of economics, not reliability.'') I also note that the brief 
Commission findings in Order No. 693 failed to acknowledge or 
sufficiently address this issue, leaving the uncertainty we are 
still faced with today. Mandatory Reliability Standards for the 
Bulk-Power System, Order No. 693, FERC Stats. & Regs. ] 31,242, at P 
1791-1794 (2007).
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    Accordingly, in my view, the Commission should have directed 
NERC to revise footnote `b' to address two broad concerns. First, 
wholesale transmission customers and retail load should have the 
ability to choose whether to shed firm load during an N-1 
contingency where that decision will not adversely impact the Bulk 
Power System. Second, the decision to shed firm load must be 
validated to ensure that there is no adverse impact on the Bulk 
Power System. Absent this reliability check, the planning of firm 
load shedding should not be permitted, because reliability of the 
Bulk Power System is paramount. While NERC, the Regional Entity, 
and/or the local planning authority must be involved in the 
reliability check, these entities would not be expected to be 
involved in the economic decision.
    Additionally, I agree with various comments filed in response to 
the NOPR that firm load shedding is and should be used rarely or 
infrequently. I do not expect that any new process that NERC may 
propose to determine whether firm load shedding is permitted would 
result in a rush by entities seeking to plan to shed firm load. In 
other words, I do not expect this exception to ``swallow the rule'' 
under the TPL standards that firm load may not be planned to be shed 
for N-1 contingencies.
    Finally, the concerns I note above regarding the failure to 
consider both the economic and reliability aspects of a decision to 
plan to shed firm load extend to the specific guidance provided in 
the order. The guidance in the order with respect to what

[[Page 26697]]

would constitute an allowable exception fails to provide a realistic 
means for entities to balance these economic and reliability 
considerations. Instead, I would have provided that an entity could 
submit its plan to shed firm load for a single contingency to its 
relevant regulatory authority or governing body prior to any actual 
interruption.\3\ The politically accountable regulatory authority or 
governing body would have then made the determination, based upon 
economics and in the best interests of its customers, as to whether 
firm load shedding should be permitted. Those determinations would 
be subject to oversight and review by NERC, the Regional Entity, 
and/or the planning authority to ensure that they will not adversely 
impact the Bulk Power System.\4\
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    \3\ See e.g., Duke Energy Corporation Dec. 22, 2011 Comments, 
Docket No. RM11-18-000.
    \4\ NERC may propose an alternative to Commission guidance that 
is equally efficient and effective at addressing the Commission's 
reliability concerns. Order No. 693 at P 31.
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    For these reasons, I respectfully dissent in part and concur in 
part.

John R. Norris,

Commissioner.

[FR Doc. 2012-10944 Filed 5-4-12; 8:45 am]
BILLING CODE 6717-01-P