[Federal Register Volume 78, Number 145 (Monday, July 29, 2013)]
[Proposed Rules]
[Pages 45479-45490]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-18000]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket No. RM13-11-000]


Frequency Response and Frequency Bias Setting Reliability 
Standard

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission proposes to approve Reliability Standard BAL-
003-1 (Frequency Response and Frequency Bias Setting), submitted by the 
North American Electric Reliability Corporation, the Commission-
certified Electric Reliability Organization. The proposed Reliability 
Standard defines the necessary amount of frequency response needed for 
reliable operations for each Balancing Authority within an 
Interconnection.

DATES: Comments are due September 27, 2013.

ADDRESSES: Comments, identified by docket number, may be filed in the 
following ways:
     Electronic Filing through 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: Those unable to file electronically 
may mail or hand-deliver comments to: Federal Energy Regulatory 
Commission, Secretary of the

[[Page 45480]]

Commission, 888 First Street NE., Washington, DC 20426.
    Instructions: For detailed instructions on submitting comments and 
additional information on the rulemaking process, see the Comment 
Procedures Section of this document.

FOR FURTHER INFORMATION CONTACT:

Daniel Woldemariam (Technical Information), Office of Electric 
Reliability, Division of Reliability Standards, Federal Energy 
Regulatory Commission, 888 First Street NE., Washington, DC 20426, 
Telephone: (202) 502-8080
Ron LeComte (Legal Information), Office of the General Counsel, Federal 
Energy Regulatory Commission, 888 First Street NE., Washington, DC 
20426, Telephone: (202) 502-8405

SUPPLEMENTARY INFORMATION: 

Notice of Proposed Rulemaking

Table of Contents

 
                                                               Paragraph
                                                                  No.
 
I. Background...............................................           6
    A. Section 215 of the FPA...............................           6
    B. Procedural History...................................           7
    C. Frequency Response and Frequency Bias Setting........          10
II. NERC Petition...........................................          13
    A. Proposed Reliability Standard BAL-003-1..............          15
    B. Implementation Plan..................................          20
III. Discussion.............................................          22
    A. Use of the ``Median'' in Determining the Frequency             24
     Response Measure.......................................
    B. Determination of Interconnection Frequency Response            28
     Obligation.............................................
        1. Eastern Interconnection--Prevailing UFLS First
         Step 29............................................
        2. Western Interconnection--Largest N-2 Event 31....
    C. Methods for Obtaining Frequency Response.............          33
    D. Premature Withdrawal of Primary Frequency Response...          35
    E. Light-Load Case Study................................          39
    F. Assignment of Violation Risk Factors and Violation             42
     Severity Levels........................................
    G. Supporting/Associated Documents......................          45
IV. Information Collection Statement........................          47
V. Environmental Analysis...................................          55
VI. Regulatory Flexibility Act..............................          56
VII. Comment Procedures.....................................          58
VIII. Document Availability.................................          62
 

144 FERC ] 61,057

    1. Pursuant to section 215(d) of the Federal Power Act (FPA),\1\ 
the Commission proposes to approve Reliability Standard BAL-003-1 
(Frequency Response and Frequency Bias Setting), submitted by the North 
American Electric Reliability Corporation (NERC), the Commission-
certified Electric Reliability Organization (ERO). The proposed 
Reliability Standard includes requirements pertaining to the 
measurement and provision of frequency response.\2\ NERC's proposal 
addresses a gap in reliability as well as directives on the matter from 
Order No. 693.\3\ While the Commission proposes to approve proposed 
Reliability Standard BAL-003-1, the Commission also has concerns about 
certain provisions of the proposed Reliability Standard and, therefore, 
proposes that NERC submit a report and develop modifications to address 
the identified concerns. The Commission also proposes to approve four 
proposed new or revised definitions to the NERC Glossary, NERC's 
implementation plan, most proposed violation risk factors and violation 
severity levels, and NERC's proposed retirement of currently effective 
Reliability Standard BAL-003-0.1b.\4\
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    \1\ 16 U.S.C. 824o (2006).
    \2\ NERC defines ``frequency response'' in the NERC Glossary of 
Terms Used in Reliability Standards (Glossary) as follows:
    Equipment: The ability of a system or elements of the system to 
react or respond to a change in system frequency. System: The sum of 
the change in demand, plus the change in generation, divided by the 
change in frequency, expressed in megawatts per 0.1 Hertz (MW/0.1 
Hz).
    \3\ See Mandatory Reliability Standards for the Bulk-Power 
System, Order No. 693, FERC Stats. & Regs. ] 31,242, at P 375, order 
on reh'g, Order No. 693-A, 120 FERC ] 61,053 (2007).
    \4\ The Commission proposes to approve BAL-003-1 as it applies 
to the ERCOT Interconnection and the United States portions of the 
Eastern and Western Interconnections. The Commission proposes to 
take no action as BAL-003-1 applies to the Quebec Interconnection.
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    2. Frequency response is a measure of an Interconnection's ability 
to stabilize frequency immediately following the sudden loss of 
generation or load, and is a critical component of the reliable 
operation of the Bulk-Power System, particularly during disturbances 
and recoveries. Frequency response is predominately provided by the 
automatic and autonomous actions of turbine-governors with some 
response being provided by changes in demand due to changes in 
frequency. Failure to maintain frequency can disrupt the operation of 
equipment and initiate disconnection of power plant equipment to 
prevent it from being damaged, which could lead to wide-spread 
blackouts.
    3. The proposed Reliability Standard establishes a minimum 
Frequency Response Obligation \5\ for each Balancing Authority, 
provides a uniform calculation of frequency response, establishes 
Frequency Bias Settings that establish values closer to actual 
Balancing Authority frequency response, and encourages coordinated 
automatic generation control (AGC) operation.\6\ These matters are not 
addressed in any currently-effective Reliability Standard. Because the 
proposed Reliability Standard addresses a gap in reliability, as well 
as certain directives from Order No. 693, we

[[Page 45481]]

propose to approve the proposed Reliability Standard BAL-003-1.
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    \5\ NERC proposes to define Frequency Response Obligation as 
``[t]he Balancing Authority's share of the required Frequency 
Response needed for the reliable operation of an Interconnection. 
This will be calculated as MW/0.1Hz.''
    \6\ NERC proposes to revise the definition of Frequency Bias 
Setting as ``[a] number, either fixed or variable, usually expressed 
in MW/0.1 Hz, included in a Balancing Authority's Area Control Error 
equation to account for the Balancing Authority's inverse Frequency 
Response contribution to the Interconnection, and discourage 
response withdrawal through secondary control systems.''
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    4. While we propose to approve BAL-003-1, we also have concerns 
regarding certain provisions of the proposed standard, some of which 
NERC itself identifies in the reports included in its petition. We 
discuss below our specific concerns regarding: (1) Requirement R1, the 
calculation of Frequency Response Measure by using the median 
statistical method, i.e., selecting the middle value in a set of data 
that is arranged in an ascending or descending order; \7\ (2) the 
potential for early withdrawal of primary frequency response before 
secondary frequency response, i.e., automatic generation control, is 
activated; (3) the need to study frequency response during low-load 
conditions; (4) appropriate identification of resource contingency 
criteria in the Western Interconnection; and (5) the need to adequately 
ensure that each Balancing Authority has available the resources it 
needs to meet its frequency response obligation. With regard to these 
concerns, the Commission seeks comments, and in some cases proposes 
that NERC develop modifications, conduct additional studies and/or 
submit a report to the Commission, as discussed below.
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    \7\ NERC proposes to define Frequency Response Measure as 
``[t]he median of all the frequency response observations reported 
annually by Balancing Authorities or Frequency Response Sharing 
Groups for frequency events specified by the ERO. This will be 
calculated as MW/0.1Hz.''
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    5. Frequency response, while a highly technical matter, is one 
fundamental measure of the reliability and robustness of the Bulk-Power 
System. It is incumbent on the Commission, the ERO, Balancing 
Authorities and, ultimately frequency response resources, to ensure 
that frequency response is timely and adequately provided, as well as 
accurately measured. Thus, we propose to approve proposed Reliability 
Standard BAL-003-1, but also propose to direct future development to 
address certain provisions that will better enable accurate measurement 
of delivered frequency response and ensure availability of adequate 
frequency response on the Bulk-Power System.

I. Background

A. Section 215 of the FPA

    6. Section 215 of the FPA requires the Commission-certified ERO to 
develop mandatory and enforceable Reliability Standards, subject to 
Commission review and approval. Once approved, the Reliability 
Standards may be enforced by the ERO subject to the Commission's 
oversight, or by the Commission independently.\8\ Pursuant to the 
requirements of FPA section 215, the Commission established a process 
to select and certify an ERO,\9\ and subsequently certified NERC as the 
ERO.\10\
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    \8\ See 16 U.S.C. 824o(e)(3).
    \9\ 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).
    \10\ North American Electric Reliability Corp., 116 FERC ] 
61,062, order on reh'g and compliance, 117 FERC ] 61,126 (2006) 
(certifying NERC as the ERO responsible for the development and 
enforcement of mandatory Reliability Standards), aff'd sub nom. 
Alcoa Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009).
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B. Procedural History

    7. On March 16, 2007, in Order No. 693, the Commission approved 83 
of 107 proposed Reliability Standards pursuant to FPA section 215(d), 
including currently-effective BAL-003-0. In addition, pursuant to 
section 215(d)(5) of the FPA, the Commission directed NERC, among other 
things, to develop modifications to BAL-003-0 to address certain issues 
identified by the Commission. Specifically, the Commission directed 
NERC to:

Develop a modification to BAL-003-0 through the Reliability 
Standards development process that: (1) Includes Levels of Non-
Compliance; (2) determines the appropriate periodicity of frequency 
response surveys necessary to ensure that Requirement R2 and other 
requirements of the Reliability Standard are being met, and to 
modify Measure M1 based on that determination; and (3) defines the 
necessary amount of Frequency Response needed for Reliable Operation 
for each balancing authority with methods of obtaining and measuring 
that the frequency response is achieved.\11\
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    \11\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 375.

    8. On March 18, 2010, the Commission established a six month 
compliance deadline for NERC to submit modifications to Reliability 
Standard BAL-003-0 responsive to the Commission's directives in Order 
No. 693.\12\ NERC requested rehearing and clarification. On rehearing 
for further consideration, the Commission directed Commission staff to 
convene a technical conference to provide an opportunity for a public 
discussion regarding technical issues pertaining to the development of 
a frequency response requirement.\13\ The Commission also directed NERC 
to submit a proposed schedule that includes firm deadlines for 
completing studies and analyses needed to develop a frequency response 
requirement, and for submission of a modified BAL-003-0 Reliability 
Standard responsive to the Commission directives in Order No. 693.
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    \12\ Mandatory Reliability Standards for the Bulk-Power System, 
130 FERC ] 61,218 (2010).
    \13\ Mandatory Reliability Standards for the Bulk-Power System, 
131 FERC ] 61,136, at P 15 (2010).
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    9. On October 25, 2010, NERC submitted an action plan and estimated 
timelines for completing studies and analyses needed to develop a 
frequency response requirement. NERC indicated that it would complete 
the revised Reliability Standard by May 2012.\14\ On March 30, 2012, 
NERC submitted a motion for an extension of time to submit 
modifications, and on May 4, 2012, the Commission granted the request 
through May 2013.\15\ NERC submitted its petition requesting approval 
of proposed Reliability Standard BAL-003-1 on March 29, 2013.
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    \14\ The Commission accepted NERC's proposed action plan on 
December 16, 2010. Mandatory Reliability Standards for the Bulk-
Power System, 133 FERC ] 61,212 (2010).
    \15\ Mandatory Reliability Standards for the Bulk-Power System, 
139 FERC ] 61,097 (2012).
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C. Frequency Response and Frequency Bias Setting

    10. As mentioned above, frequency response is a measure of an 
Interconnection's ability to stabilize frequency immediately following 
the sudden loss of generation or load. NERC explains that ``[s]ystem 
frequency reflects the instantaneous balance between generation and 
load. Reliable operation of a power system depends on maintaining 
frequency within predetermined boundaries above and below a scheduled 
value, which is 60 Hertz (Hz) in North America.'' \16\ As discussed in 
this Notice of Proposed Rulemaking (NOPR), frequency response is 
provided in two stages, referred to as primary frequency response and 
secondary frequency response.
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    \16\ NERC Petition at 3.
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    11. Primary frequency control involves the autonomous, automatic, 
and rapid action of a generator, or other resource, to change its 
output (within seconds) to rapidly dampen large changes in frequency. 
The ability of a power system to withstand a sudden loss of generation 
or load depends on the presence and adequacy of resources capable of 
providing rapid incremental power changes to counterbalance the 
disturbance and arrest a frequency deviation.\17\
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    \17\ Conventional turbine-generators, as well as other 
resources, are capable of providing primary frequency response. See 
NERC Petition, Exh. D at 3.
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    12. Secondary frequency response, also known as automatic 
generation control (AGC), is produced from either

[[Page 45482]]

manual or automated dispatch from a centralized control system.\18\ It 
is intended to balance generation, interchange and demand by managing 
the response of available resources within minutes as opposed to 
primary frequency response, which manages response within seconds. 
Frequency bias is an input used in the calculation of a Balancing 
Authority's area control error (ACE) to account for the power changes 
associated with primary frequency response. However, frequency bias is 
not the same as frequency response. Frequency Bias Setting is a 
secondary control setting of the AGC system, not a primary control 
parameter, and changes in the Frequency Bias Setting of a Balancing 
Authority do not change the primary frequency response. The Frequency 
Bias Setting is used in AGC to prevent withdrawal of generator primary 
control action following a disturbance as long as frequency is off its 
nominal value.\19\
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    \18\ NERC Petition at 11. Additional background information 
about the engineering concepts that pertain to frequency response is 
discussed in the Frequency Response Background Document, NERC 
Petition, Exh. D.
    \19\ NERC Petition at 11.
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II. NERC Petition

    13. NERC submitted its petition on March 29, 2013, seeking approval 
of Reliability Standard BAL-003-1, four new or modified definitions for 
inclusion in the NERC Glossary, violation risk factors and violation 
severity levels, an implementation plan for the proposed standard, and 
retirement of currently-effective BAL-003-0.1b. NERC explains that, 
beginning in 2010, NERC conducted a frequency response initiative to 
perform an in-depth analysis of Interconnection-wide frequency response 
``to achieve a better understanding of the factors influencing 
frequency response across North America.'' \20\ According to NERC, one 
of the basic objectives of the frequency response initiative included 
increasing coordinated communication and outreach on the issue, 
including webinars, and NERC alerts.\21\
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    \20\ Id. at 11-12.
    \21\ Id. at 12.
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    14. NERC developed several reports that provide the conclusions and 
recommendations resulting from the frequency response initiative, which 
NERC includes as exhibits to its petition.\22\ Further, NERC states 
that a detailed explanation of the development, testing, and 
implementation of proposed BAL-003-1 is provided in the Frequency 
Response Standard Background Document, included as Exhibit D to the 
petition.
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    \22\ See NERC Petition, Exh. F (Frequency Response Initiative 
Report), Exh. G (Status of Recommendations), and Exh. H 
(Supplemental Report).
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A. Proposed Reliability Standard BAL-003-1 \23\
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    \23\ Proposed Reliability Standard BAL-003-1 is not attached to 
the notice of proposed rulemaking. The complete text of BAL-003-1 is 
available on the Commission's eLibrary document retrieval system in 
Docket No. RM13-11-000 and is posted on the ERO's Web site, 
available at http://www.nerc.com.
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    15. NERC states that the purpose of the proposed Reliability 
Standard is to ensure that ``a Balancing Authority's Frequency Bias 
Setting is accurately calculated to match its actual Frequency 
Response'' and also ``to provide consistent methods for measuring 
Frequency Response and determining the Frequency Bias Setting.'' \24\ 
The proposed Reliability Standard consists of four requirements, and is 
applicable to Balancing Authorities and Frequency Response Sharing 
Groups.\25\
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    \24\ NERC Petition at 15. See also proposed BAL-003-1, Purpose 
Statement:
    To require sufficient Frequency Response from the Balancing 
Authority (BA) to maintain Interconnection Frequency within 
predefined bounds by arresting frequency deviations and supporting 
frequency until the frequency is restored to its scheduled value. To 
provide consistent methods for measuring Frequency Response and 
determining the Frequency Bias Setting.
    \25\ NERC proposes to define Frequency Response Sharing Group as 
``[a] group whose members consist of two or more Balancing 
Authorities that collectively maintain, allocate, and supply 
operating resources required to jointly meet the sum of the 
Frequency Response Obligations of its members.'' NERC Petition at 
13. The proposed Reliability Standard allows Balancing Authorities 
to cooperatively form Frequency Response Sharing Groups as a means 
to jointly meet the obligations of the standard. Id.
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    16. Requirement R1 requires that each Balancing Authority or 
Frequency Response Sharing Group must achieve an annual Frequency 
Response Measure that is ``equal to or more negative than its Frequency 
Response Obligation'' needed to ensure sufficient Frequency Response. 
Specifically, Requirement R1 provides:

    Each Frequency Response Sharing Group (FRSG) or Balancing 
Authority that is not a member of a FRSG shall achieve an annual 
Frequency Response Measure (FRM) (as calculated and reported in 
accordance with Attachment A) that is equal to or more negative than 
its Frequency Response Obligation (FRO) to ensure that sufficient 
Frequency Response is provided by each FRSG or BA that is not a 
member of a FRSG to maintain Interconnection Frequency Response 
equal to or more negative than the Interconnection Frequency 
Response Obligation.

    NERC explains the Requirement R1 has the primary objective of 
``determin[ing] whether a Balancing Authority has sufficient Frequency 
Response for reliable operations.'' \26\ According to NERC, Requirement 
R1 achieves this objective ``via FRS Form 1 and the process in 
Attachment A that provides the method for determining the 
Interconnections' necessary amount of Frequency Response and allocating 
it to the Balancing Authorities.'' \27\ According to NERC, another main 
objective of Requirement R1 is to provide the information needed to 
calculate Control Performance Standard limits and Frequency Bias 
Settings. NERC asserts that Requirement R1 and Attachment A satisfy the 
Commission's directive in Order No. 693 to ``determine the appropriate 
periodicity of frequency response surveys necessary to ensure that 
Requirement R2 and other requirements of the Reliability Standard are 
met . . .'' \28\

    \26\ Id. at 15.
    \27\ Id. NERC explains that ``Attachment A (appended to the 
proposed standard) is a supporting document for proposed Reliability 
Standard BAL-003-1 that discusses the process the ERO will follow to 
validate the Balancing Authority's FRS Form 1 data and publish the 
official Frequency Bias Settings. FRS Form 1 provides the guidance 
as to how to account for and measure Frequency Response. FRS Form 1, 
and the underlying data retained by the Balancing Authority, will be 
used for measuring whether sufficient Frequency Response was 
provided.'' NERC Petition at 4.
    \28\ Id. at 16 (citing Order No. 693, FERC Stats. & Regs. ] 
31,242 at P 375).
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    17. Requirement R2 requires that:

    Each Balancing Authority that is a member of a multiple 
Balancing Authority Interconnection and is not receiving Overlap 
Regulation Service and uses a fixed Frequency Bias Setting shall 
implement the Frequency Bias Setting determined in accordance with 
Attachment A, as validated by the ERO, into its Area Control Error 
(ACE) calculation during the implementation period specified by the 
ERO and shall use this Frequency Bias Setting until directed to 
change by the ERO.

NERC explains that setting the frequency bias to better approximate the 
Balancing Authority natural response characteristic will improve the 
quality of ACE control and general AGC system control response. NERC 
states that the ERO, in coordination with the regions of each 
Interconnection, will annually review Frequency Bias Setting data 
submitted by the Balancing Authorities.

    18. Requirement R3 provides that:

    Each Balancing Authority that is a member of a multiple 
Balancing Authority Interconnection and is not receiving Overlap 
Regulation Service and is utilizing a variable Frequency Bias 
Setting shall maintain a Frequency Bias Setting that is: (1.1) Less 
than zero at all times, and (1.2) Equal to or more negative than its 
Frequency Response Obligation when Frequency varies from 60 [Hertz] 
Hz by more than +/- 0.036 Hz.


[[Page 45483]]


NERC explains that, in an Interconnection with multiple Balancing 
Authorities, the Frequency Bias Setting should be coordinated among all 
Balancing Authorities in the Interconnection. According to NERC, when 
there is a minimum Frequency Bias Setting requirement, it should apply 
for all Balancing Authorities. However, Balancing Authorities using a 
variable Frequency Bias Setting may have non-linearity in their actual 
response for a number of reasons including the deadband settings of 
their generator governors. The measurement to ensure that these 
Balancing Authorities are conforming to the Interconnection minimum is 
adjusted to remove the deadband range from the calculated average 
Frequency Bias Setting actually used.\29\
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    \29\ NERC Petition at 20. NERC further states that ``For BAs 
using variable bias, FRS Form 1 has a data entry location for the 
previous year's average monthly Bias. The BA and the ERO can compare 
this value to the previous year's Frequency Bias Setting minimum to 
ensure Requirement R3 has been met.''
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    19. Requirement R4 requires that:

    Each Balancing Authority that is performing Overlap Regulation 
Service shall modify its Frequency Bias Setting in its ACE 
calculation, in order to represent the Frequency Bias Setting for 
the combined Balancing Authority Area, to be equivalent to either:
     The sum of the Frequency Bias Settings as shown on FRS 
Form 1 and FRS Form 2 for the participating Balancing Authorities as 
validated by the ERO, or
     the Frequency Bias Setting shown on FRS Form 1 and FRS 
Form 2 for the entirety of the participating Balancing Authorities' 
Areas.

NERC states that proposed Requirement R4 is similar to Requirement R6 
in the currently-effective BAL-003-0.1b. NERC explains that overlap 
regulation service is a method of providing regulation service in which 
a Balancing Authority incorporates another Balancing Authority's actual 
interchange, frequency responses, and schedule into the providing 
Balancing Authority's AGC/ACE equation.\30\
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    \30\ Id. at 21.
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B. Implementation Plan

    20. NERC requests approval of an implementation plan for proposed 
BAL-003-1, pursuant to which (1) Requirement R2, Requirement R3 and 
Requirement R4 would become effective the first day of the first 
calendar quarter that is twelve months following the effective date of 
a Final Rule in this docket, and (2) Requirement R1 would become 
effective the first day of the first calendar quarter that is twenty-
four months following the effective date of a Final Rule in this 
docket. NERC proposes retirement of the existing Reliability Standard 
BAL-003-0.1b at midnight of the day immediately prior to the effective 
date of Requirements R2, Requirement R3 and Requirement R4 of the 
proposed Reliability Standard.
    21. NERC requests approval of three new definitions and the revised 
definition of Frequency Bias Setting effective the first day of the 
first calendar quarter that is twelve months following the effective 
date of a Final Rule in this docket.\31\
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    \31\ NERC proposes to incorporate the proposed revised 
definition for Frequency Bias Setting in Reliability Standards (1) 
BAL-001-0.1a Real Power Balancing Control Performance, (2) BAL-004-0 
Time Error Correction, (3) BAL-004-1 Time Error Correction, and (5) 
BAL-005-0.1b Automatic Generation Control. NERC also proposes 
retirement of the existing definition of Frequency Bias Setting at 
midnight of the day immediately prior to the effective date of 
Requirement R2, Requirement R3, and Requirement R4 of the proposed 
Reliability Standard.
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III. Discussion

    22. Pursuant to section 215(d) of the FPA, we propose to approve 
the proposed Reliability Standard BAL-003-1 as just, reasonable, not 
unduly discriminatory or preferential, and in the public interest. The 
proposed Reliability Standard establishes a minimum Frequency Response 
Obligation for each Balancing Authority, provides a uniform calculation 
of frequency response, establishes Frequency Bias Settings that are 
closer to actual Balancing Authority frequency response, and encourages 
coordinated automatic generation control operation. The proposed 
Reliability Standard addresses a gap in reliability as these matters 
are either not--or not adequately-addressed in any currently-effective 
Reliability Standard. Further, proposed BAL-003-1 addresses certain 
directives from Order No. 693. We also propose to approve the proposed 
new and modified definitions, most violation severity levels and 
violation risk factors, and retirement of the currently-effective 
standard and NERC's implementation plan.
    23. While we propose to approve BAL-003-1, we have concerns 
regarding certain provisions of the proposed standard, some of which 
NERC itself identifies in the reports included in its petition. 
Specifically, below, we discuss the following issues: (A) The use of 
median in determining the Frequency Response Measure; (B) determination 
of Interconnection Frequency Response Obligation; (C) methods of 
obtaining frequency response; (D) withdrawal of primary frequency 
response before secondary frequency response is activated; (E) light-
load case study; (F) assignment of Violation Risk Factors and Violation 
Severity Levels; and (G) the associated and supporting documents, 
including Attachment A and the Procedure for ERO Support of Frequency 
Response and Frequency Bias Setting Standard. While we will not set 
deadlines for proposed directed modifications based on NERC's finding 
in its 2013 State of Reliability Report that actual frequency response 
is no longer declining in recent years,\32\ we will expect NERC to 
continue to monitor such trends, and any change toward further 
frequency response decline will justify revisiting the issue of 
deadlines.
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    \32\ See NERC, State of Reliability 2013 (May 2013), available 
at http://www.nerc.com/pa/RAPA/PA/Performance%20Analysis%20DL/2013_SOR_May%2015.pdf.
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A. Use of the ``Median'' in Determining the Frequency Response Measure

    24. As discussed above, Requirement R1 of BAL-003-1 provides that 
each Balancing Authority or Frequency Response Sharing Group achieve an 
annual Frequency Response Measure that is equal to or more negative 
than its Frequency Response Obligation needed to ensure sufficient 
Frequency Response. NERC proposes to define the Frequency Response 
Measure as ``the median of all the Frequency Response observations 
reported annually by Balancing Authorities or Frequency Response 
Sharing Groups for the frequency events specified by the ERO.'' \33\ 
NERC defines the ``median'' as ``the numerical value separating the 
higher half of a one-dimensional sample, a one-dimensional population, 
or a one-dimensional probability distribution from the lower half. The 
median of a finite list of numbers is found by arranging all the 
observations from lowest value to highest value and picking the middle 
one.'' \34\
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    \33\ NERC Petition at 13.
    \34\ Id., Exh. F (Frequency Response Initiative Report) at 72. 
NERC developed a procedure for selecting frequency response 
observations. See NERC Petition, Exh. C (Procedure for ERO Support 
of Frequency Response and Frequency Bias Setting Standard). The 
Procedure is referenced, but not included, in Attachment A of BAL-
003-1.
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    25. NERC states that the standard drafting team evaluated different 
approaches for averaging individual event observations to compute a 
technically sound estimate of Frequency Response Measure, including 
median and linear regression analysis.\35\

[[Page 45484]]

Explaining why the drafting team chose to use the median, NERC states:
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    \35\ NERC Petition at 17-18. The Frequency Response Initiative 
Report defines the linear regression method as the linear average of 
a multi-dimensional sample, or a multi-dimensional population. See 
id., Exh F at 73.

    In general, statisticians use the median as the best measure of 
a central tendency when a population has outliers. Based on the 
analyses performed thus far, the standard drafting team believes 
that the median's superior resiliency to this type of data quality 
problem makes it the best aggregation technique at the time. 
However, the standard drafting team sees merit and promise in future 
research with sample filtering combined with a technique such as 
linear regression. When compared with the mean, linear regression 
shows superior performance with respect to the elimination of noise 
because the measured data is weighted by the size of the frequency 
changes associated with the event. . . . The standard drafting team 
acknowledges that linear regression should be re-evaluated for use 
in the BAL-003 Reliability Standard once more experience is gained 
with data collected.\36\
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    \36\ Id. at 17-18 (footnote omitted). See also id, Exh. F at 72-
78. NERC explains that the ``noise'' refers to factors that can 
influence data and produce outliers. Id. at 18, n.34.

However, the Frequency Response Initiative Report compared the median, 
mean, and linear regression methods for measuring the frequency 
response, and found that the linear regression method is preferred. The 
Frequency Response Initiative Report recommended using a linear 
regression method for calculating the Balancing Authority Frequency 
Response Measure for compliance with the proposed standard.\37\ This 
recommendation was not incorporated into the draft standard.\38\
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    \37\ See NERC Petition, Exh. F at 78.
    \38\ NERC and the Frequency Response Working Group will include 
an update of the linear regression analysis from the Frequency 
Response Initiative Report during the annual review of the process 
for selection of frequency events for the Balancing Authorities. See 
NERC Petition, Exh. G (Status of Recommendations of the Frequency 
Response Initiative Report) at Recommendation 13.
---------------------------------------------------------------------------

    26. NERC has provided adequate rationale for using the median to 
determine the required Frequency Response Measure. NERC explains that 
application of the median is supported by the analyses performed to 
date. The Commission proposes to approve BAL-003-1 on that basis.\39\
---------------------------------------------------------------------------

    \39\ NERC Petition at 17.
---------------------------------------------------------------------------

    27. However, as NERC acknowledges in both its petition and 
Frequency Response Initiative Report, the use of linear regression is a 
superior method to determine the required Frequency Response Measure. 
According to NERC, the standard drafting team recognizes that the use 
of linear regression should be re-evaluated once more experience is 
gained with data collected.\40\ We are also concerned whether use of 
the median adequately represents actual data that could, on occasions, 
be significantly higher or lower than the median. Thus, the Commission 
proposes to direct that NERC develop a modification to apply a more 
appropriate methodology for determining the required Frequency Response 
Measure. For example, based on the record in this docket, it appears 
that the linear regression method is superior to the median when 
determining the Frequency Response Measure. We seek comment on whether 
a more appropriate methodology should be used in the determination of 
the Frequency Response Measure.
---------------------------------------------------------------------------

    \40\ Id. at 18.
---------------------------------------------------------------------------

B. Determination of Interconnection Frequency Response Obligation

    28. Proposed BAL-003-1 establishes a target contingency protection 
criterion for each Interconnection, known as the Interconnection 
Frequency Response Obligation. The proposed methodology for determining 
each Interconnection's obligation for obtaining the necessary amount of 
frequency response is set forth in Attachment A of the proposed 
Reliability Standard. The Interconnection Frequency Response Obligation 
is based on the ``resource contingency criteria,'' which is the largest 
``Category C'' event for the Interconnection,\41\ except for the 
Eastern Interconnection, which uses the largest event in the last ten 
years.\42\ The Interconnection Frequency Response Obligation for each 
Interconnection is a function of the resource contingency criteria and 
the maximum change in frequency. The maximum change in frequency is 
calculated by adjusting the starting frequency for each Interconnection 
by the ``prevailing UFLS first step,'' i.e., under-frequency load 
shedding for the Interconnection as adjusted by specific information on 
the frequency deviations for the observed events which make up the data 
set used to calculate the Frequency Response Measure.\43\ For multiple 
Balancing Authority Interconnections, the Frequency Response Obligation 
is allocated to Balancing Authorities based on the formula set forth in 
Attachment A. FRS Form 1 and the underlying data retained by the 
Balancing Authorities are used for measuring whether frequency response 
was provided.
---------------------------------------------------------------------------

    \41\ See Proposed Reliability Standard BAL-003-1, Attachment A 
at 1. Category C events are defined in Reliability Standard TPL-003-
0 (System Performance Following Loss of Two or More BES Elements), 
Table 1.
    \42\ For the Eastern Interconnection, the largest event in the 
last ten years is 4,500 MW, which occurred on August 4, 2007. See 
Proposed Reliability Standard BAL-003-1, Attachment A at 1; NERC 
Petition, Exh. F at 34-37, 54.
    \43\ Id. Under frequency load shedding is intended to be a 
safety net to prevent against system collapse from severe 
contingencies. The resource contingency criteria is selected to 
avoid violating the under frequency load shedding settings. See NERC 
Petition, Exh. D at 36 (``in general, the goal is to avoid 
triggering the first step of under[hyphen]frequency load shedding 
(UFLS) in the given Interconnection for reasonable contingencies 
expected'').
---------------------------------------------------------------------------

1. Eastern Interconnection--Prevailing UFLS First Step
    29. For the Eastern Interconnection, Attachment A identifies 59.5 
Hz as the ``first step'' of under-frequency load shedding in the 
calculation of the default Interconnection Frequency Response 
Obligation. Attachment A notes that this set point is ``a compromise 
value set midway between the stable frequency minimum established in 
PRC-006-1 (59.3 Hz) and the local protection under frequency load 
shedding setting of 59.7 Hz used in Florida and Manitoba.'' \44\ The 
Frequency Response Initiative Report notes that the Florida Reliability 
Coordinating Council (FRCC) concluded that the Interconnection 
Frequency Response Obligation starting frequency of the prevalent 59.5 
Hz for the Eastern Interconnection is acceptable in that it imposes no 
greater risk of under frequency load shedding operation in FRCC for an 
external resource loss than for an internal FRCC event.\45\
---------------------------------------------------------------------------

    \44\ Proposed Reliability Standard BAL-003-1, Attachment A at 2.
    \45\ See NERC Petition, Exh. F (Frequency Response Initiative 
Report) at 4, n. 3.
---------------------------------------------------------------------------

    30. NERC does not provide support for the statement that the first-
step value of 59.5 Hz in the calculation of the Interconnection 
Frequency Response Obligation imposes no greater risk of under 
frequency load shedding operation in FRCC for an external resource loss 
than for an internal FRCC event. Noting that the actual first-step of 
under-frequency load shedding for the Eastern Interconnection is 59.7 
Hz, we seek comment from NERC and others on the technical source or 
support for this statement. That is, we seek clarification and support 
if the intent of the proposal is that FRCC will start shedding load 
automatically before an event meets the value of 59.5 Hz used in the 
proposed Reliability Standard to determine the Interconnection 
Frequency Response Obligation.
2. Western Interconnection--Largest N-2 Event
    31. As previously noted, the Interconnection Frequency Response 
Obligation is based on the largest Category C event, or N-2 (loss of 
two or more BES elements) for the Interconnection. The default

[[Page 45485]]

Interconnection Frequency Response Obligation for the Western 
Interconnection uses the loss of two Palo Verde generating station 
units, which nets 2,400 MW as the resource contingency criteria.\46\ 
However, NERC indicates that the default Interconnection Frequency 
Response Obligation calculation scenarios and the calculation of the 
Frequency Response Measure for the Western Interconnection do not take 
into account the intentional tripping of generation that will occur 
during the operation of remedial action schemes. For example, the 
Frequency Response Initiative Report indicates that operation of the 
Pacific Northwest Remedial Action Scheme trips up to 3,200 MW of 
generation in the Pacific Northwest on loss of the Pacific DC 
Intertie.\47\ The Frequency Response Initiative Report recommends that 
NERC and the Western Interconnection analyze the implications of 
operation of the Pacific Northwest Remedial Action Scheme.\48\
---------------------------------------------------------------------------

    \46\ See Id., Exh. F at 53.
    \47\ The Pacific Northwest Remedial Action Scheme, among other 
things, blocks frequency response from a number of generators and 
Balancing Authorities to avoid overloading the Pacific AC ties. See 
NERC Petition, Exh. F at 62.
    \48\ See Id. NERC notes that the maximum value of the Pacific 
Northwest Remedial Action Scheme has been updated to be 2,850 MW. 
See NERC Petition, Exh. G (Status of Recommendations of the 
Frequency Response Initiative Report).
---------------------------------------------------------------------------

    32. We are concerned whether the N-2 contingency identified as an 
input to the Attachment A methodology for calculating the 
Interconnection Frequency Response Obligation identifies the largest N-
2 event in the Western Interconnection. NERC's study suggests that, for 
example, the Pacific Northwest Remedial Action Scheme could result in a 
larger contingency that, if included as an input to the Attachment A 
calculation, would produce more accurate results. Accordingly, we 
propose to direct that NERC submit a compliance filing that analyzes, 
with supporting documentation, the implications of the Pacific 
Northwest Remedial Action Scheme or any other Remedial Action Scheme 
which involves intentional tripping of greater than 2,400 MW of 
generation, and whether such a contingency would provide a more 
accurate basis for the determination of the Western Interconnection 
default Interconnection Frequency Response Obligation.

C. Methods for Obtaining Frequency Response

    33. In Order No. 693, the Commission directed NERC to develop a 
modification to BAL-003-0 that includes methods for ``obtaining'' 
frequency response.\49\ While the proposed Reliability Standard 
establishes an Interconnection Frequency Response Obligation and 
allocates this obligation to the Balancing Authorities within the 
Interconnection, the proposed Reliability Standard imposes no 
obligation on resources that are capable of providing frequency 
response. NERC states that ``the creation of Frequency Response Sharing 
Groups is one of the ways the standard drafting team addressed the 
Commission's directive to provide methods for obtaining Frequency 
Response.'' \50\ In addition, NERC states that there are various 
methods of obtaining frequency response, including regulation services, 
contractual services, tariff provisions, generator interconnection 
agreements, and contracts with an internal resource or loads.\51\
---------------------------------------------------------------------------

    \49\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 375. The 
Commission directed NERC to develop a modification to BAL-003-0 that 
``defines the necessary amount of Frequency Response needed for 
Reliable Operation for each balancing authority with methods of 
obtaining and measuring that the frequency response is achieved.'' 
Id. (emphasis added).
    \50\ NERC Petition at 13, 15-17.
    \51\ Id. at 14, n. 30; Exh. D at 37.
---------------------------------------------------------------------------

    34. The proposed Reliability Standard imposes an obligation on each 
Balancing Authority to obtain frequency response, and a Balancing 
Authority not meeting its obligation would be in noncompliance of 
proposed BAL-003-1. We recognize that the Balancing Authorities must, 
in turn, obtain frequency response from available resources, and the 
proposed Reliability Standard imposes no obligation on those resources 
to provide frequency response.\52\ The Commission proposes to direct 
NERC to submit a report 15 months after implementation of BAL-003-1 
that provides an analysis of the availability of resources for each 
Balancing Authority to meet its Frequency Response Obligation during 
the first year of implementation. The report should also provide data 
indicating whether actual Frequency Response was sufficient to meet 
each Balancing Authority's Frequency Response Obligation. Further, upon 
completion of this analysis, should the findings indicate that the 
Frequency Response Obligation was not met, NERC should provide 
appropriate recommendations to ensure that frequency response can be 
maintained at all times within each Balancing Authority's footprint.
---------------------------------------------------------------------------

    \52\ NERC points out that improvements in frequency response 
have been achieved in the ERCOT Interconnection. See NERC Petition 
at 12, n. 27. For example, the ERCOT Nodal Operating Guides Section 
2 has specified requirements for governor deadband settings. NERC 
Petition, Exh. F at 81. In addition, the Texas Reliability Entity 
Board of Directors has approved a Regional Reliability Standard, 
which is currently under review by the NERC Board of Directors, that 
requires generators to maintain prescribed deadband and droop 
settings that assure generator governors provide automatic sustained 
frequency response for specified frequency deviations. See BAL-001-
TRE-1. http://www.texasre.org/CPDL/BAL-001-TRE-1_5.24.11.docx.
---------------------------------------------------------------------------

D. Premature Withdrawal of Primary Frequency Response

    35. As explained above, following the sudden loss of generation, 
the automatic and immediate increase in power output by resources 
providing primary frequency control seeks to quickly arrest and 
stabilize the frequency of the interconnection, usually within 30 
seconds or less. After this rapid primary frequency response, AGC 
provides secondary frequency response to return frequency to the 
scheduled value in time frames of several minutes after the loss of 
generation. If a significant amount of primary frequency response is 
withdrawn before the secondary frequency response is activated, a 
further drop in frequency response will occur. This drop in frequency 
is illustrated by the following diagram: \53\
---------------------------------------------------------------------------

    \53\ NERC Petition, Exh. F at 35, fig. 21.

---------------------------------------------------------------------------

[[Page 45486]]

[GRAPHIC] [TIFF OMITTED] TP29JY13.009

    36. NERC indicates that, while the standards drafting team 
addressed the early withdrawal of primary frequency response, there are 
no requirements that address this issue and it remains a concern.\54\ 
Specifically, during the initial recovery from the loss of a generator, 
a ``gap'' can occur if significant amounts of primary frequency 
responses are withdrawn before the secondary response is fully 
activated. As previously noted, the Interconnection Frequency Response 
Obligation for each Interconnection is a function of the resource 
contingency criteria and the maximum change in frequency.\55\ The 
Frequency Response Initiative Report recommends that an adjustment 
should be made to the maximum allowable change in frequency to 
compensate for the predominate withdrawal of primary frequency response 
exhibited in an Interconnection until such withdrawal is no longer 
exhibited.\56\ NERC includes an adjustment to provide an additional 
primary frequency response when early withdrawal of primary frequency 
response would occur.\57\ This adjustment only partially addresses the 
concern because, while increased primary frequency response is 
beneficial, it still does not address early withdrawal of primary 
frequency response that otherwise would allow time for secondary 
frequency response to prevent further decline in frequency. The 
Frequency Response Initiative Report also recommends that this 
adjustment should be carefully monitored and recalculated during the 
annual Interconnection Frequency Response Obligation calculations.\58\ 
The Frequency Response Initiative Report notes that there are potential 
ways of alleviating this withdrawal symptom, including, as discussed 
below, modification of outer-loop control systems that could prevent 
withdrawal of primary frequency response.
---------------------------------------------------------------------------

    \54\ See Id., Exh. D (Frequency Response Standard Background 
Document) at 19 (``the intentional withdrawal of response before 
frequency has been restored to schedule can cause a decline in 
frequency beyond that which would be otherwise expected. This 
intentional withdrawal of response is highly detrimental to 
reliability. Therefore, it can be concluded in general that 
sustained response has a higher reliability value than 
un[hyphen]sustained response.'').
    \55\ The maximum change in frequency is an amount of frequency 
deviation based on the loss of the identified resource contingency 
that will not trigger under-frequency load shedding.
    \56\ NERC Petition, Exh. F at 5.
    \57\ In addition NERC extends the time period (to 20-52 seconds 
from the time of the frequency event) for the measurement of the low 
point of frequency deviation to provide an incentive to reduce 
primary frequency response withdrawal.
    \58\ Id. at 50. This adjustment is initially applied in the 
Eastern Interconnection.
---------------------------------------------------------------------------

    37. NERC's 2012 Frequency Response Initiative Report states 
``[w]ithdrawal of primary frequency response is an undesirable 
characteristic associated most often with digital turbine-generator 
control systems using setpoint output targets for generator output. 
These are typically outer-loop control systems that defeat the primary 
frequency response of the governors after a short time to return the 
unit to operating at a requested MW output.'' \59\ The Frequency 
Response Initiative Report recommends measuring and tracking frequency 
response sustainability trends.\60\ The Frequency Response Initiative 
Report also recommends that ``NERC should include guidance on methods 
to reduce or eliminate the effects of primary frequency response 
withdrawal by outer-loop unit or plant control systems.'' \61\
---------------------------------------------------------------------------

    \59\ Id. at 31.
    \60\ Id. at 35. The Frequency Response Initiative Report also 
recognizes unit characteristics and operating philosophies as 
typical causes.
    \61\ Id. at 41-42.
---------------------------------------------------------------------------

    38. We are concerned that proposed Reliability Standard BAL-003-1 
does not adequately address the reliability issue associated with the 
withdrawal of primary frequency response prior to activation of 
secondary frequency response. The premature withdrawal of primary 
frequency response absent activation of resources providing secondary 
frequency response may lead to under-frequency load shed and possible 
cascading outages. Accordingly, we propose to direct that NERC develop 
a modification to BAL-003-1 to address the concern of premature 
withdrawal of frequency response prior to the activation of secondary 
frequency response.

E. Light-Load Case Study

    39. NERC's Frequency Response Initiative Report recognizes that

[[Page 45487]]

``[s]ustainability of primary frequency response becomes more important 
during light-load conditions when there are generally fewer frequency-
responsive generators online.'' \62\ This is because inertia, i.e., the 
resistance to a change in the motion of an object, plays a crucial role 
in how fast frequency declines following the sudden loss of 
generation.\63\ When the inertia on the system is low (i.e. fewer 
generators on line), the loss of generation creates a steeper frequency 
excursion and thus the need for faster frequency response.\64\
---------------------------------------------------------------------------

    \62\ Id. at 32.
    \63\ Id. at 39-40. Inertia is provided from the stored energy in 
the rotating mass of the turbine-generators and synchronous motors 
on the Interconnection. See Id., Exh. D at 16-17.
    \64\ Id., Exh. F at 40. The reduction in inertia also drives a 
need for higher speed response to frequency excursions.
---------------------------------------------------------------------------

    40. For the Eastern Interconnection, the proposed Reliability 
Standard's resource contingency criterion for calculating the 
Interconnection Frequency Response Obligation is based on an event that 
took place during heavy system load conditions. The stability 
simulation testing for the Eastern Interconnection resource contingency 
criteria used in the determination of the Interconnection Frequency 
Response Obligation was limited to analysis using a generic governor 
stability case, therefore representing conditions far different than 
light-load conditions when system inertia and load response would be 
expected to be lower than in the generic case. The Frequency Response 
Initiative Report recommends the development of a new light-load case 
study, and that the resource contingency criterion for the Eastern 
Interconnection Frequency Response Obligation should be re-
simulated.\65\ According to NERC, the Eastern Interconnection 
Reliability Assessment Group has agreed to prepare an updated generic 
governor 2013 summer light-load case (from the 2012 case series) by 
August 1, 2013, and evaluate Eastern Interconnection Frequency Response 
Obligation during the expected light-load conditions.\66\
---------------------------------------------------------------------------

    \65\ Id. at 99.
    \66\ Id., Exh. G. A study conducted by the National Renewable 
Energy Laboratory explored the relationship between system 
disturbance and grid frequency perturbation See National Renewable 
Energy Laboratory, Eastern Frequency Response Study (May 2013). A 
key finding is that the dynamic model of the Eastern Interconnection 
can be adjusted to more closely capture the observed behavior. In 
particular, the amount of generation with governor controls 
activated was adjusted to model the contingency used in calculating 
the Eastern Interconnection Frequency Response Obligation. In 
addition, a light load power flow case was selected with the 
expectation that it would represent one of the more challenging 
conditions for the Eastern Interconnection with respect to frequency 
response. See http://www.nrel.gov/docs/fy13osti/58077.pdf.
---------------------------------------------------------------------------

    41. We agree with NERC that the study of light-load scenarios is 
useful to determining an appropriate Interconnection Frequency Response 
Obligation, in particular for the Eastern Interconnection.\67\ 
Accordingly, we propose to direct that NERC submit the results of the 
light-load case, together with NERC's recommendations on whether 
further actions are warranted.
---------------------------------------------------------------------------

    \67\ According to NERC, ``[m]odeling of frequency response 
characteristics has been a known problem since at least 2008, when 
forensic modeling of the Eastern Interconnection required a `de-
tuning' of the existing [Multiregional Modeling Working Group] 
dynamics governor to 20% of modeled (80% error) to approach the 
measured frequency response values from the [August 4, 2007] 
event.'' See NERC Petition, Exh. F at 35.
---------------------------------------------------------------------------

F. Assignment of Violation Risk Factors and Violation Severity Levels

    42. In its Petition, NERC proposes a ``medium'' violation risk 
factor for each requirement of the proposed Reliability Standard. We do 
not believe that NERC adequately justifies assignment of a medium 
violation risk factor to Requirement R1, which establishes the 
Frequency Response Measure a Balancing Authority must achieve to arrest 
a decline in system frequency. NERC asserts that a violation of this 
requirement will not cause bulk electric system instability, separation 
or cascading failures because ``a Balancing Authority's previous year's 
Frequency Bias setting is included within its ACE equation and would 
provide support for the contingency.'' \68\ This explanation does not 
apply to Requirement R1. The ACE equation provides input to secondary 
frequency control. As identified in NERC's background document for BAL-
003-1, secondary frequency is delivered within minutes while the time 
needed to arrest a frequency decline is within seconds.\69\ NERC 
describes frequency response as a critical component to the reliable 
operation of the Bulk-Power System, indicating that Requirement R1 does 
not impose merely an administrative burden. The medium violation risk 
factor that the Commission approved for each BAL-003-0.1b requirement 
does not apply to Requirement R1 because it has no equivalent in that 
standard. We propose to direct NERC to assign a high violation risk 
factor to Requirement R1. We seek comments on this proposal.
---------------------------------------------------------------------------

    \68\ Id., Exh. J at 7.
    \69\ Id., Exh. D at 38.
---------------------------------------------------------------------------

    43. We propose several changes to NERC's proposed violation 
severity level assignments. For Requirement R1, NERC proposes two 
violation severity levels depending on whether a Balancing Authority or 
a Frequency Response Sharing Group has an annual Frequency Response 
Measure ``less negative than its Frequency Response Obligation by more 
than 1% but by at most 30%, or 15 MW/0.1Hz, whichever one is the 
greater deviation from its [Frequency Response Obligation].'' This 
violation would have a ``lower'' severity level if ``[t]he summation of 
the Balancing Authorities' [Frequency Response Measure] within an 
Interconnection was equal to or more negative than the 
Interconnection's IFRO,'' and a ``high'' severity level if this 
summation ``did not meet its [Interconnection Frequency Response 
Obligation].'' Based on these two possibilities for this summation, 
NERC proposes either a ``medium'' severity level and a ``severe'' 
severity level for a Balancing Authority or Frequency Response Sharing 
Group with an Frequency Response Measure that is ``less negative than 
its [Frequency Response Obligation] by more than 30% or by more than 15 
MW/0.1 Hz, whichever is the greater deviation from its [Frequency 
Response Obligation].''
    44. NERC assigns these severity levels partly on performance of 
Requirement R1 by all other responsible entities in the Interconnection 
in which a violator is located. We do not agree with these assignments. 
Violation severity levels focus on a violator's deviation from required 
performance, not the risk the violation is expected to pose to 
reliability or performance by other entities.\70\ A Balancing Authority 
or Frequency Response Sharing Group subject to Requirement R1 does not 
control compliance with this requirement by any other Balancing 
Authority or Frequency Response Sharing Group within the same 
Interconnection. It is unfair to base a penalty on a responsible entity 
in part upon the collective compliance or lack of compliance by 
independent entities. We propose that NERC modify its severity level 
assignments for Requirement R1 to remove references to performance by 
other entities or otherwise to address our concern. We seek comments on 
this proposal.
---------------------------------------------------------------------------

    \70\ Sanction Guidelines of the North American Electric 
Reliability Corporation (effective January 31, 2012), at 8 (section 
3.1.2).
---------------------------------------------------------------------------

G. Supporting/Associated Documents

    45. Proposed Reliability Standard BAL-003-1 has several supporting 
or associated documents. Attachment A is appended to the proposed 
Reliability Standard, and is explicitly referenced in Requirements R1 
and R2. For example, Requirement R1 provides in part that

[[Page 45488]]

``[e]ach Frequency Response Sharing Group (FRSG) or Balancing Authority 
. . . shall achieve an annual Frequency Response Measure (FRM) (as 
calculated and reported in accordance with Attachment A) that is equal 
to or more negative than its Frequency Response Obligation . . .'' 
NERC's Procedure for ERO Support of Frequency Response and Frequency 
Bias Setting Standard (Procedure), is included as an ``associated 
document'' in the proposed Reliability Standard, and is referenced in 
Attachment A.\71\ Likewise, Requirement 4 of proposed BAL-003-1 
references FRS Forms 1 and 2, stating that ``each Balancing Authority 
that provides Overlap Regulation Service shall modify its Frequency 
Bias Setting in its ACE calculation . . . to be equivalent to ``the sum 
of Frequency Bias Settings as shown on FRS Form 1 and Form 2 . . . as 
validated by the ERO.'' \72\
---------------------------------------------------------------------------

    \71\ The Procedure is provided as Exh. C to the NERC petition. 
NERC states that it included the Procedure in the petition for 
informational purposes and NERC does not request Commission approval 
of the document. NERC Petition at 4.
    \72\ Proposed Reliability Standard BAL-003-1 identifies FRS Form 
1 and FRS Form 2 as ``associated documents.'' Neither form is 
included in the NERC Petition.
---------------------------------------------------------------------------

    46. These associated and supporting documents are explicitly 
referenced in the Requirements of the Reliability Standard. Thus, 
failure of a Balancing Authority to comply with such associated and 
supporting documents could result in non-compliance with the underlying 
Requirement.\73\
---------------------------------------------------------------------------

    \73\ Attachment A and the Procedures also require NERC to take 
certain actions pertaining to the calculation of frequency response 
measure and allocation among balancing authorities. The ERO is not 
an applicable entity pursuant to proposed Reliability Standard BAL-
003-1. The ERO, however, has an independent obligation to ``ensure 
compliance with a reliability standard or any Commission order 
affecting the ERO or a regional entity'' and the Commission can take 
``such action as is necessary or appropriate'' to ensure that the 
ERO fulfills this responsibility under Attachment A and the 
Procedures. See 16 U.S.C. 824o(e)(5).
---------------------------------------------------------------------------

IV. Information Collection Statement

    47. This NOPR proposes to approve Reliability Standard BAL-003-1, 
which establishes an Interconnection Frequency Response Obligation 
based on the frequency response observations reported annually by 
Balancing Authorities or Frequency Response Sharing Groups for the 
frequency events specified by the ERO. The collection of information 
contained in the proposed Reliability Standard BAL-003-1 is subject to 
review by the Office of Management and Budget (OMB) under section 
3507(d) of the Paperwork Reduction Act of 1995 (PRA).\74\ OMB's 
regulations require that OMB approve certain reporting and 
recordkeeping requirements (collections of information) imposed by an 
agency.\75\ Upon approval of a collection of information, OMB will 
assign an OMB control number and expiration date. Respondents subject 
to the filing requirements of this rule will not be penalized for 
failing to respond to these collections of information unless the 
collections of information display a valid OMB control number.
---------------------------------------------------------------------------

    \74\ 44 U.S.C. 3507(d) (2006).
    \75\ 5 CFR 1320.11 (2012).
---------------------------------------------------------------------------

    48. Comments are solicited on the Commission's need for this 
information, whether the information will have practical utility, the 
accuracy of the provided burden estimate, 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. Specifically, the Commission 
asks that any revised burden or cost estimates submitted by commenters 
be supported by sufficient detail to understand how the estimates are 
generated.
    49. Public Reporting Burden: The proposed Reliability Standard 
requires the collection of certain information to establish the 
Interconnection Frequency Response Obligation and the Frequency Bias 
Setting for each Balancing Authority. Each Balancing Authority reports 
its previous year Frequency Response Measure and Frequency Bias Setting 
to NERC, and revised Frequency Bias Settings are based on data from 
events the Balancing Authorities report on the proposed FRS Form 1. The 
information provided on the FRS Form 1 is based on events which qualify 
for analyses,\76\ and NERC states that it will identify between 20 to 
35 events in each Interconnection for calculating the Frequency 
Response Measure and Frequency Bias Setting and the Frequency Response 
Measure.\77\
---------------------------------------------------------------------------

    \76\ NERC states that it will provide quarterly posting of 
candidate events to assist the Balancing Authorities with 
compliance, and lessen the burden of the annual submission of FRS 
Form 1 data. NERC Petition, Exh. C at 3-4.
    \77\ Id. at 1. The Frequency Response Initiative Report states 
that between 20 and 25 events are necessary for statistical 
analysis. Id., Exh. F at 72.
---------------------------------------------------------------------------

    50. Allotting eight hours for Balancing Authorities to compile the 
information on candidate events,\78\ multiplied by 28 events per 
Balancing Authority per year yields 224 hours per year per Balancing 
Authority as the regulatory burden for compliance.\79\ As of May 31, 
2013, there are 132 registered Balancing Authorities.\80\ Accordingly, 
the Commission estimates the annual regulatory burden for compliance 
with the proposed Reliability Standard to be $13,560 per Balancing 
Authority,\81\ with an estimated total annual cost for all Balancing 
Authorities to be $1,789,920.\82\
---------------------------------------------------------------------------

    \78\ The information is automatically generated from computer 
data bases. However, time is allotted to compile, verify, and review 
the information.
    \79\ Assuming an average of between 20 and 35 events per year.
    \80\ NERC Compliance Registry List, May 30, 2013.
    \81\ The estimated hourly loaded cost (salary plus benefits) for 
an engineer is assumed to be $60/hour, based on salaries as reported 
by the Bureau of Labor Statistics (BLS) (http://bls.gov/oes/current/naics2_22.htm). Loaded costs are BLS rates divided by 0.703 and 
rounded to the nearest dollar. http://www.bls.gov/news.release/ecec.nr0.htm
    \82\ The estimated total annual cost includes an annual data 
retention burden of $15,840 for all Balancing Authorities.

----------------------------------------------------------------------------------------------------------------
                                  Number of
BAL-003-1 (frequency response     balancing       Number of        Average      Total annual    Estimated total
 and frequency  bias setting)     authority     responses per   burden hours    burden hours    annual cost  ($)
                                 respondents     respondent     per response
                                          (1)             (2)             (3)     (1) x (2) x  Total hours x $60
                                                                                          (3)
----------------------------------------------------------------------------------------------------------------
Annual Reporting.............             132              28               8          29,568         $1,774,080
Data Retention...............             132               1               2             264             15,840
                              ----------------------------------------------------------------------------------
    Total....................  ..............  ..............  ..............          29,832          1,789,920
----------------------------------------------------------------------------------------------------------------


[[Page 45489]]

    Title: FERC-725R, Mandatory Reliability Standards: Reliability 
Standard BAL-003-1.
    Action: Proposed Collection of Information.
    OMB Control No.: To be determined.
    Respondents: Business or other for-profit, and not-for-profit 
institutions.
    Frequency of Responses: Annual.
    51. Necessity of the Information: The proposed revision of NERC 
Reliability Standard BAL-003-1 is part of the implementation of the 
Congressional mandate of the Energy Policy Act of 2005 to develop 
mandatory and enforceable Reliability Standards to better ensure the 
reliability of the nation's Bulk Power System. Specifically, the 
proposed Reliability Standard BAL-003-1 would ensure sufficient 
Frequency Response from the Balancing Authorities to maintain 
Interconnection Frequency within predefined bounds.
    52. Internal Review: The Commission has reviewed the proposed 
revision to the current Reliability Standard and made a determination 
that its action is necessary to implement section 215 of the FPA. The 
Commission has assured itself, by means of its internal review, that 
there is specific, objective support for the burden estimate associated 
with the information requirements.
    53. 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, fax: (202) 273-0873].
    54. For submitting comments concerning the collection of 
information and the associated burden estimate, please send your 
comments to the Commission and to the Office of Management and Budget, 
Office of Information and Regulatory Affairs, Washington, DC 20503 
[Attention: Desk Officer for the Federal Energy Regulatory Commission, 
phone: (202) 395-4638, fax: (202) 395-7285]. For security reasons, 
comments to OMB should be submitted by email to: [email protected]. Comments submitted to OMB should include Docket 
Number RM13-11-000.

V. Environmental Analysis

    55. 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.\83\ The 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment. The actions proposed here fall within the categorical 
exclusion in the Commission's regulations for rules that are 
clarifying, corrective or procedural, or do not substantially change 
the effect of the regulations being amended.\84\ The actions proposed 
herein fall within this categorical exclusion in the Commission's 
regulations.
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    \83\ 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).
    \84\ 18 CFR 380.4(a)(2)(ii) (2012).
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VI. Regulatory Flexibility Act

    56. The Regulatory Flexibility Act of 1980 (RFA) \85\ generally 
requires a description and analysis of proposed rules that will have 
significant economic impact on a substantial number of small entities. 
The NERC registry includes 132 individual Balancing Authorities. 
Comparison of the NERC Compliance Registry with data submitted to the 
Energy Information Administration on Form EIA-861 indicates that, of 
these entities, 15 may qualify as small entities.\86\
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    \85\ 5 U.S.C. 601-612.
    \86\ The RFA definition of ``small entity'' refers to the 
definition provided in the Small Business Act (SBA), which defines a 
``small business concern'' as a business that is independently owned 
and operated and that is not dominant in its field of operation. See 
15 U.S.C. 632 (2006). According to the Small Business 
Administration, an electric utility is defined as ``small'' if, 
including its affiliates, it is primarily engaged in the generation, 
transmission, and/or distribution of electric energy for sale and 
its total electric output for the preceding fiscal year did not 
exceed 4 million megawatt hours.
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    57. As noted above, the Commission estimates the annual regulatory 
burden for compliance with the proposed Reliability Standard to be 
$13,560 per Balancing Authority. This estimate for all Balancing 
Authorities was established using 28 events per year, but smaller 
entities may have fewer events which qualify for analysis,\87\ and the 
costs for these smaller entities may be reduced. Further, while the 
proposed Reliability Standard establishes a Balancing Authority's 
Frequency Response Obligation, because Balancing Authorities are 
currently providing frequency response, we do not anticipate additional 
compliance costs. Accordingly, we do not consider the cost of the 
proposed Reliability Standard to be a significant economic impact for 
small entities because it should not represent a significant percentage 
of an affected small entity's operating budget. Accordingly, no 
regulatory flexibility analysis is required.
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    \87\ The Procedures establish a minimum of 20 events for 
analysis, and a process for identifying when fewer than 20 events 
are available for analysis.
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VII. Comment Procedures

    58. The Commission invites interested persons to submit comments on 
the matters and issues proposed in this notice to be adopted, including 
any related matters or alternative proposals that commenters may wish 
to discuss. Comments are due September 27, 2013. Comments must refer to 
Docket No. RM13-11-000, and must include the commenter's name, the 
organization they represent, if applicable, and their address in their 
comments.
    59. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's Web site at http://www.ferc.gov. The Commission accepts most standard word processing 
formats. Documents created electronically using word processing 
software should be filed in native applications or print-to-PDF format 
and not in a scanned format. Commenters filing electronically do not 
need to make a paper filing.
    60. Commenters that are not able to file comments electronically 
must send an original of their comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE., 
Washington, DC 20426.
    61. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this proposal are 
not required to serve copies of their comments on other commenters.

VIII. Document Availability

    62. 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 the Commission's Home Page (http://www.ferc.gov) and 
in the Commission'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.
    63. From the Commission'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

[[Page 45490]]

last three digits of this document in the docket number field.
    64. User assistance is available for eLibrary and the Commission's 
Web site during normal business hours from the Commission's 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].

    By direction of the Commission.
Kimberly D. Bose,
Secretary.
[FR Doc. 2013-18000 Filed 7-26-13; 8:45 am]
BILLING CODE 6717-01-P