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DOE Reliability TF- Meeting announcement and minutes

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Subject: UFTO Note – DOE Reliability TF- Meeting announcement and minutes
Date: Thu, 08 Jan 1998 13:29:04 -0800

Below is the announcement of the next (7th) meeting of the DOE/SEAB Task Force meeting, which also can be found on line at: http://www.hr.doe.gov/seab

The minutes of the 6th meeting (November 6th) will also be available on line in a day or two. I have a copy if you’d like it now.

DOE Secretary of Energy Advisory Board
Notice of Open Meeting —
Seventh Meeting of the Electric System Reliability Task Force

Tuesday, January 13, 1998, 8:30 AM – 4:00 PM.
Madison Hotel, Dolley Madison Ballroom,
15th & M Streets, NW, Washington, D.C.

FOR FURTHER INFORMATION CONTACT: Richard C. Burrow, DOE,
(202) 586-1709 or (202) 586-6279 (fax).

The meeting will build on the task force’s Interim Report and SRRO Letter Report, and will include discussions of the following items:

— Draft Position Paper on Technological Issues in Transmission System Reliability
— Draft Position Paper on the Role and Shape of the Independent System Operator
— Presentation on the Provision of Ancillary Services

Tentative Agenda
8:30 – 8:45 AM Opening Remarks & Objectives — Philip Sharp,
ESR Task Force Chairman
8:45 – 10:15 AM Working Session: Discussion of Draft Position
Paper on Technical Issues in Transmission System
Reliability — Facilitated by Philip Sharp
10:15 – 10:30 AM Break
10:30 – 11:30 AM Working Session: Discussion of a Draft Position
Paper on The Role and Shape of the Independent
System Operator — Facilitated by Jose Delgado
11:30 – 12:00 PM Public Comment Period
12:00 – 1:15 PM Lunch
1:15 – 2:30 PM Working Session: Presentation & Discussion on
The Provision of Ancillary Services — Eric Hirst
(ORNL) & Facilitated by Philip Sharp
2:30 – 3:45 PM Working Session: Presentation & Discussion on
Transmission Pricing Issues — Susan Tierney &
Facilitated by Philip Sharp
3:45 – 4:00 PM Public Comment Period
4:00 PM Adjourn

Information on the Electric System Reliability Task Force and the Task Force’s interim report may be found at the Secretary of Energy Advisory Board’s web site, located at http://www.hr.doe.gov/seab.

DOE Reliability TF PAPER

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Just received from Paul Carrier, Task Force Staff Director:

Attached is a copy of the Paper on “Maintaining Bulk-Power Reliability Through Use of a Self-Regulating Reliability Organization” approved by the Secretary’s Task Force on Electric System Reliability at it November 6 meeting. Also attached is a letter from Dr. Philip Sharp, Task Force Chairman, transmitting the Paper to the Chair of the Secretary of Energy Advisory Board.

(Also available in Word format on request)

——————
Dr. Walter Massey
Chairman, Secretary of Energy Advisory Board
c/o Morehouse College
830 Westview Drive, S.W.
Atlanta Georgia 30314

Dear Dr. Massey:

The Task Force on Electric System Reliability of the Secretary of Energy Advisory Board is writing to provide you with our Task Force Paper entitled Maintaining Bulk-Power Reliability Through Use of a Self-Regulating Organization. This Paper was approved by the Task Force members at our November 6, 1997 meeting.

This Paper expands on the recommendation in our earlier Interim Report that federal legislation clarify the Federal Energy Regulatory Commission’s authority to approve and oversee the operations of a private standard-setting, electric-reliability organization.

The Task Force anticipates preparing additional papers on a variety of electric-reliability topics over the next nine months, leading to a final report.

The Task Force appreciates the opportunity to provide the Department with this Paper and respectfully submits the recommendations therein.

Sincerely,

Dr. Philip Sharp
Chairman,
Task Force on Electric System Reliability

Enclosure

cc: Federico Peña
Elizabeth Moler
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Secretary of Energy Advisory Board
Task Force on Electric-System Reliability

MAINTAINING BULK-POWER RELIABILITY THROUGH USE OF A SELF-REGULATING ORGANIZATION: POSITION PAPER

November 6, 1997

In its Interim Report, the Task Force recommended that federal legislation clarify the Federal Energy Regulatory Commission’s (FERC) authority to approve and oversee the operations of an electric-reliability organization. This paper provides Task Force recommendations concerning the relationship between the FERC and a single, international, self-regulating reliability organization (SRRO) , such as a significantly reformed North American Electric Reliability Council (NERC) with a representative membership and governance system, to assure reliability of the bulk-power system.

1. BACKGROUND

Historically, NERC, the regional reliability councils, and individual utilities have managed reliability through a system of peer-reviewed standards coupled with voluntary cooperation and adherence to reliability rules. In that system, costs associated with maintaining reliability could be recovered through rates, and peer pressure and reciprocal treatment of costs were generally sufficient to keep utilities in compliance. Also, NERC, as an international organization, includes members from all countries sharing use of the interconnected transmission grid. Under this system, a set of effective reliability rules was developed and implemented.

The Task Force believes the system is clearly unsustainable in the increasingly decentralized and competitive U.S. electricity industry. Voluntary cooperation is unlikely to be sufficient because of the dramatic increase in the number of bulk-power transactions, the increased diversity of interests among participants, the growing unbundling (deintegration) of the electricity industry, the focus on price, and the lack of appropriate incentives for those entities contributing to reliability.

Most participants in and observers of the electricity industry agree that the voluntary system must be replaced with one that requires compliance with enforceable, non-discriminatory reliability rules applicable to all entities participating in the electricity market. This requires federal legislative authority.

NERC’s Board of Trustees agreed in principle in January 1997 to require adherence to NERC rules and procedures. This new system attempts to feature: measurable performance standards, the requirement that all participants in bulk-power systems meet these standards, enforcement of these standards, and penalties for failure to comply with these standards. The detailed refinement of the standards and implementation of these principles is a work in progress.

Questions remain whether NERC has the authority to require industry participants to abide by the new rules and procedures in the absence of legislation. It is not clear whether the FERC has sufficient statutory authority to enforce NERC rules. The FERC has issued several orders requiring parties to abide by the NERC standards and parties have assented to the requirements. However, the use of FERC’s conditioning authority to enforce NERC standards has not yet been challenged. Others question whether the FERC should enforce these rules in light of concerns over NERC’s governance and decision-making procedures.

In response to these concerns, the Task Force suggests that the U.S. Congress adopt legislation to clarify such authorities and enable the FERC to approve a national self-regulating organization to establish electric reliability standards similar to the National Association of Security Dealers (NASD) in the securities industry. Under federal law, the Securities and Exchange Commission (SEC) has authority to delegate significant regulatory authority to a number of private, member-owned and operated organizations in the securities industry. The SEC has authorized several self regulating organizations (SROs) under the statutory framework.

The experience in the securities industry has been relatively successful in this regard. Self regulation under a legal framework established by Congress, and administered and enforced by a duly appointed federal agency, has certain advantages over government regulation in terms of lower costs to the taxpayer, administrative efficiency and technical expertise in developing and enforcing technical standards, and greater compliance by the regulated firms (because they helped develop the regulations). On the other hand, without careful oversight from the government, SROs might not fully consider the perspectives of the general public and focus too narrowly on the interests of the industry being regulated, especially on issues that involve policy elements rather than technical issues.

SROs have been challenged in the courts and have been found to be legal, but only if properly structured. For example, the SEC Act was found to be a constitutional delegation because:
– The SEC has the power, according to reasonably fixed statutory standards, to approve or disapprove rules; and
– The SEC must make an independent decision on violations and penalties.

2. SRRO APPLICATION TO NERC AND THE FERC

Federal legislation should grant more explicit statutory authority to the FERC to approve and oversee an electric industry SRRO having responsibility for bulk-power reliability standards.

As the industry organization currently responsible for electric reliability, most of the members of the Task Force believe that the NERC and its regional reliability councils will evolve into an entity that could fill the role of the SRRO. Most believe the NERC has already initiated many of the changes that will be required for it to be the SRRO. However, we note that this will not occur automatically. In order to qualify as the SRRO, a reformed NERC will have to meet all of the requirements of legislation and the FERC with respect to governance and processes.

The SRRO would provide the technical expertise on how best to maintain high levels of bulk-power reliability. The FERC would have regulatory oversight to ensure compliance with and ultimately resolve disputes over any SRRO mandatory reliability standards. The SRRO would produce mandatory standards applicable to all participants in the domestic and international bulk-power system. The FERC would either confirm SRRO mandatory standards or deny them and refer them back to the SRRO with comments requesting revision and resubmittal of the standards.

The SRRO would develop measurable performance standards. These mandatory standards would replace the voluntary requirements that NERC has previously relied on. Importantly, however, NERC must expedite the development and implementation of measurable standards in an open process that includes full and fair representation of all stakeholders and market participants. The Task Force recognizes that many non-utility participants have significant concerns about membership and representation and believe that NERC and the regional reliability councils must immediately open their membership to balanced representation of all stakeholders and market participants.

Legislation should provide for the following:
FERC review and approval of a proposal for an electric industry SRRO;
FERC implementation of mandatory reliability standards for the nation through rulemakings in accordance with the Administrative Procedures Act;
FERC jurisdiction for reliability over the bulk-power system including those portions owned or operated by federal, cooperative, and municipal utilities and all other entities participating in the electricity market;
FERC review and approval of all SRRO mandatory standards including specified incentives and penalties for compliance;
FERC ability to require the SRRO to develop, modify, or replace standards when necessary;
Mandatory application of reliability standards to all entities using or operating the bulk-power system;
SRRO enforcement of mandatory standards, including imposition of penalties or fines, subject to FERC review;
FERC authority to expedite or temporarily waive procedures when necessary to address an ongoing or imminent reliability problem;
When requested by the SRRO or on its own initiative (e.g., in an emergency situation or stemming from a complaint), FERC review of any SRRO governance or process issues, standards, or SRRO enforcement action; and
Sufficient resources for the FERC to administer its new responsibilities including the authority to levy necessary fees on the industry and access industry computer models, data and transmission experts.

When considering an application for the SRRO, the FERC would give notice of the application and provide an opportunity for public comment in accordance with the Administrative Procedures Act. Particular consideration would be given to SRRO governance, processes, and funding. The SRRO must assure a fair governance process that cannot be dominated by any single industry sector. The FERC would review the application to ensure that the SRRO would function in a manner consistent with the public interest and national reliability policy.

Likewise, when reviewing SRRO mandatory reliability standards, the FERC would issue a notice of proposed rulemaking based on the standard and provide an opportunity for public comment. FERC approval of a standard would require a finding that the standard was fairly developed, is cost effective, and is consistent with the public interest and national reliability policy.

In recognition of the international nature of the interconnected transmission grid, the Task Force has taken the position that mandatory electric reliability standards must be developed by the SRRO and approved by the FERC in accordance with the Administrative Procedures Act. Standard development needs to be done by a single entity that can represent all countries using the interconnected transmission grid. Also, SRRO development of the mandatory standards would avoid the imposition of federally developed standards on those portions of the interconnected transmission grid located in Canada and Mexico. Currently, the Canadian government and electric industry is represented in NERC and it will be necessary to include both Canadian and Mexican representation in the SRRO. The interests of the United States would be protected by enabling the FERC to require the SRRO to develop or modify standards as necessary. It would be incumbent upon the SRRO to develop mandatory standards that are acceptable to all three countries.

Elec Reliability TF 6th meeting Nov 6

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Electric System Reliability Task Force 6th Meeting
Notice of Open Meeting — Advance Notice

The sixth meeting of the Secretary of Energy Advisory Board Task Force on Electric System Reliability will be held on Thursday, November 6, from 8:30 AM until 4:00 PM at the ANA Hotel, 2401 M Street, NW, Washington DC 20007. The draft agenda is available on line http://vm1.hqadmin.doe.gov:80/seab/esr6ann.html

The meeting will build on the task force’s Interim Report and will include discussions of the following items:

Draft Position Paper on a Self-Regulating Reliability Organization
Draft Paper on Technology Issues Affecting Reliability
A Panel Discussion on the Role of ISOs in Maintaining Reliability

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I just received this note from DOE, with the draft papers as attachments. If you want copies of these documents, let me know, and I’ll forward them to you individually (the full set of both versions is over 600K). Tell me if you want the WP or Word versions…

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Attached are three documents for discussion at the November 6 meeting of the Task Force on Electric System Reliability. These documents are:

* Draft Position Paper on Maintaining Bulk Power Reliability through Use of a Self-Regulating Organization;

* Discussion Paper on Maintaining Reliability in a Restructured Electric Power Industry: The Role of Transmission System Operators; and

* Draft Outline for a Position Paper on Technical Issues in Transmission System Reliability.

Each document is provided in both WordPerfect and Word formats. The documents are best viewed in WordPerfect format. Since the documents were prepared in WordPerfect, the Word files may not contain all graphics.

Next Meeting, Reliability TF

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We just received this advance notice of the next meeting.

DEPARTMENT OF ENERGY
Secretary of Energy Advisory Board –
Electric System Reliability Task Force

Thursday, November 6, 1997, 8:30 AM – 4:00 PM.
ANA Hotel, Ballroom I, 2401 M Street, NW, Washington, D.C. 20037

FOR FURTHER INFORMATION CONTACT: Richard C. Burrow, Secretary of Energy
Advisory Board (AB-1), U.S. Department of Energy, 1000 Independence Avenue,
SW, Washington, D.C. 20585, (202) 586-1709 or (202) 586-6279 (fax).

Background
The electric power industry is in the midst of a complex transition to competition, which will induce many far-reaching changes in the structure of the industry and the institutions which regulate it. This transition raises many reliability issues, as new entities emerge in the power markets and as generation becomes less integrated with transmission.

Purpose of the Task Force The purpose of the Electric System Reliability Task Force is to provide advice and recommendations to the Secretary of Energy Advisory Board regarding the critical institutional, technical, and policy issues that need to be addressed in order to maintain the reliability of the nation’s bulk electric system in the context of a more competitive industry.

Tentative Agenda
Thursday, November 6, 1997
8:30 – 8:45 AM Opening Remarks & Objectives —
Philip Sharp, ESR Task Force Chairman
8:45 – 9:45 AM Briefing: Reliability Council Progress in
Addressing Key Issues —
David Nevius, Vice President, NERC
9:45 – 10:00 AM Break
10:00 – 11:30 AM Working Session: Discussion of a Draft Position
Paper on a Self-Regulating Reliability Organization
11:30 – 12:00 PM Public Comment Period
12:00 – 1:15 PM Lunch
1:15 – 2:30 PM Working Session: Discussion of Draft Outline
of Technology Issues Affecting Reliability
2:30 – 3:45 PM Panel Discussion: The Role of ISOs in
Maintaining Reliability
3:45 – 4:00 PM Public Comment Period
4:00 PM Adjourn
This tentative agenda is subject to change. The final agenda will be
available at the meeting.

Public Participation: The Chairman of the Task Force is empowered to conduct the meeting in a fashion that will, in the Chairman’s judgment, facilitate the orderly conduct of business. During its meeting in Washington, D.C., the Task Force welcomes public comment. Members of the public will be heard in the order in which they sign up at the beginning of the meeting. The Task Force will make every effort to hear the views of all interested parties. Written comments may be submitted to Skila Harris, Executive Director, Secretary of Energy Advisory Board, AB-1, U.S. Department of Energy, 1000 Independence Avenue, SW, Washington, D.C. 20585.

Minutes:
Minutes and a transcript of the meeting will be available for public review and copying approximately 30 days following the meeting at the Freedom of Information Public Reading Room, 1E-190 Forrestal Building, 1000 Independence Avenue, SW, Washington, D.C., between 9:00 AM and 4:00 PM, Monday through Friday except Federal holidays. Information on the Electric System Reliability Task Force and the Task Force’s interim report may be found at the Secretary of Energy Advisory Board’s web site, located at http://www.hr.doe.gov/seab.

Reliability TF draft Interim Report

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Subject: UFTO Note – Reliability TF draft Interim Report
Date: Fri, 11 Jul 1997 11:12:59 -0700
From: Ed Beardsworth

— advance copy just received from contacts at DOE —

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
————————————————————–

—————————————-

The attached file contains a draft Interim Report that will be discussed and marked up at the July 23 – 24 meeting of the Secretary’s Electric System Reliability Task Force.

Please note that this draft has not yet been reviewed by the Task Force members.
—————————————–

DRAFT

Dr. Walter Massey
Chairman, Secretary of Energy Advisory Board
c/o Morehouse College
830 Westview Drive, SW
Atlanta, Georgia 30314

Dear Dr. Massey:

The Task Force on Electric System Reliability of the Secretary of Energy’s Advisory Board is writing to provide you interim comments on several issues important to the maintenance of reliability. Although the Task Force has not yet completed its deliberations under the Secretary of Energy Advisory Board’s Terms of Reference, its members are aware that the Department and the Administration may be making decisions on these issues and we want to be as helpful as possible.

As you know, the 24-member Task Force is a diverse group representing, for example, electricity producers, marketers, state agencies, consumers, environmental advocates, reliability organizations and academia. Not surprisingly, with such differing perspectives on changing and complex issues, it is not easy for the group to rapidly reach a consensus. Naturally, not every member agrees with every detail of this report.

We certainly all do agree, however, that the maintenance of system reliability must be a high priority and that the mechanisms for ensuring reliability must be changed to accommodate the changing electric market.

Since its establishment in January, 1997, the Task Force has convened in four open meetings. Thus far, we have focused primarily on issues relating to the bulk power transmission grid and in particular security issues—that is, questions about the operation and maintenance of that system–rather than the adequacy of supply or generation. We will be assessing a number of additional issues at future meetings.

The Task Force appreciates the opportunity to provide the Department with this Interim Report and respectfully submits the preliminary findings and recommendations contained therein.

Sincerely,

cc: Federico Peña
Elizabeth Moler

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Secretary of Energy Advisory Board
Task Force on Electric System Reliability

Interim Report

July 24, 1997

Background

This report makes recommendations regarding the security of the Nation’s bulk power system consisting of generation, transmission, and control facilities.

Electric reliability can be divided into two areas: reliability of the distribution system and reliability of the bulk power system. Bulk power system outages affect large areas and can have significant regional and national implications. Further, the rules for assuring reliable operation of the bulk power system can have an effect on the transactions occurring on the system. Federal regulators have responsibility for economic regulation of electricity in interstate commerce, including wholesale transactions involving most of the nation’s generation and transmission facilities, within and across state borders. An issue introduced by competition in bulk power markets is the need to assure reliable system operations in a competitively neutral way. While everyone agrees that system reliability must be maintained as a feature of a competitive electric industry and must be under the direction of experienced expert operators, not everyone agrees about how to resolve reliability issues in a manner that does not discriminate for or against certain participants in competitive bulk power markets.

While states have an interest in the performance of the bulk power system, state regulation has tended to focus on distribution system outages, that generally have only localized effects and are frequently characterized as being related to end-user customer service, which is an area of state jurisdiction. States have traditionally also had regulatory responsibility for economic and planning approval for certain generation facilities and recovery of their costs and siting approval of both generation and transmission facilities within the state.

Bulk power system reliability has two components: adequacy and security. Adequacy implies that there are sufficient generation and transmission resources available to meet projected needs at all times, including peak conditions, plus reserves for contingencies. Security implies that the system will remain intact even after planned and unplanned outages or other equipment failures occur. Most view transmission adequacy and system security as “public goods” that benefit all buyers and sellers of electricity, and which exhibit monopoly characteristics. While the market will likely play a role in providing certain services that are needed for transmission adequacy and system security, these are the areas of greatest national interest from a reliability point of view and the primary focus of this report.

Bulk power system reliability has historically been the responsibility of the electricity industry, as opposed to the government which has only indirect jurisdiction primarily through economic regulation of wholesale electricity sales by the Federal Energy Regulatory Commission (FERC). The Department of Energy and the FERC also have some limited authority under certain circumstances to order transmission, require interconnections, make reliability recommendations and collect information. The industry, through the North American Electric Reliability Council (NERC), a self-regulating organization traditionally made up of electric utilities, and the ten regional reliability councils establish reliability standards and monitor compliance. While these organizations have been effective in a world of vertically integrated electric utilities, there is concern today about the voluntary nature of their membership, their dominance by utilities, and the inability to mandate and enforce compliance among their members and other industry participants.

Further complicating reliability issues is incomplete jurisdictional authority. As mentioned above, the NERC and the regional reliability councils have jurisdiction only over their members. There are also thousands of municipal, cooperative, and power marketing utilities that are not subject to FERC or state jurisdiction.

Similarly, we recognize that the bulk power system is an international system. We recognize that the NERC, as a body that includes U.S., Canadian, and Mexican members, has a unique role in setting and monitoring international reliability standards and that close cooperation will be required between national, state, and provincial regulatory agencies that may be given authority for reliability oversight.

Reliability Institutions

The electric utility industry traditionally has been vertically integrated, fully regulated and composed of a limited number of entities. These entities were similar in makeup, in their investments in the bulk power system, and in their expectations for grid operation and use.

In this environment, three institutions evolved that are the focus of this report.

NERC – In 1968, the North American Electric Reliability Council was formed in response to the 1965 power outage that blacked out the northeastern United States and Ontario, Canada. For over two decades, NERC’s mission has been to promote electrical system reliability and thereby prevent further such occurrences. The NERC has been a voluntary, industry-constituted governing body that develops standards, guidelines and criteria for assuring system security and evaluating system adequacy. The NERC has been funded by regional reliability councils which adapt the rules to meet the needs of their regions. Through the work of its ten regional councils and one affiliate council, the NERC has largely succeeded in maintaining a high degree of transmission grid reliability throughout the country. Historically, the NERC has functioned without external enforcement powers, depending on voluntary compliance with standards and peer pressure.

System operators – Today the country is served by approximately 150 separate control areas, each with its own system operator. The operators of these systems rely on communications with each other, access to essential system information, and real time monitoring and control of certain facilities to maintain system reliability. When an emergency occurs on the system, the control area operator takes action — both through communication and direct physical action — to ensure the integrity and security of the system. These people take and direct others to take the actions necessary to “keep the lights on” and to protect against damage to the entire system in the event of emergencies.

FERC — The Federal Energy Regulatory Commission is the federal agency with jurisdiction over the bulk power market, including interstate transmission systems. As part of these responsibilities, the FERC is implementing policies to assure that the owners and operators of bulk power transmission facilities under the agency’s jurisdiction provide non-discriminatory service to all power suppliers in wholesale power markets. Historically, the FERC has not had to involve itself with regulating reliability functions. Increasingly, some parties are calling upon the FERC to begin to exercise its current authorities by addressing reliability issues that intersect with the commercial needs of the industry.

At the onset, we note that the electric industry is changing and, indeed, has already changed in several respects: wholesale electric markets are opening to competition under open access transmission tariffs; several states containing more than one-third of the nation’s population have decided to permit retail consumers to choose their suppliers (nearly all of the remaining states are studying retail competition); energy companies are merging and establishing innovative joint ventures; new competitors are entering markets, and new institutions are forming (e.g., independent system operators; power exchanges; spot markets).

These trends indicate that in the future, market forces will determine when, where and what type of generation sources will be built and which energy trades will be transacted. Also, it is apparent that the nation’s transmission grid will be used by a larger number of entities for many more transactions. There are challenges regarding maintenance of traditional reliability levels in this new environment.

While the traditional reliability institutions and processes have served us well in the past, these institutions and processes need to be modified to assure that reliability occurs in a competitively neutral fashion, without favoring one or another set of market participants. To attempt to accommodate these new reliability issues that arise with competitive markets, today’s existing reliably institutions, and most notably the NERC, have undertaken a number of new initiatives including expanding their membership to include new market participants in addition to those long-standing members drawn from the electric industry. The Task Force welcomes these changes.

Task Force Findings

The Task Force has reached consensus on several key points:
1) Restructuring of the electric industry offers economic benefits to the nation and may result in a more efficient electric industry

2) While the changes brought about by restructuring are complex, the reliability of the system need not be compromised provided appropriate steps are taken. Transmission grid reliability and an open, competitive market can be compatible.

3) The viability and vigor of the commercial market must not be unnecessarily restricted. The market forces being introduced now depend on fair and open access to the transmission grid.

4) Commercial markets should develop economic practices consistent with the ingenuity and mutual interest of the participants. However, grid reliability must be maintained through disciplined technical standards and practices.

5) Reliability standards must be clear, transparent, nondiscriminatory, enforceable and enforced. Compliance must be mandatory for all entities using the bulk power system.
6) Regulatory oversight is necessary to ensure compliance with reliability policies and standards and to resolve disputes.

7) It is reasonable and practical to build on the experience and reliability standards developed by the NERC over the past 28 years. However, these standards as well as NERC’s own system of governance must be modified to accommodate the complexities of the competitive market.

8) Grid reliability depends heavily on system operators who monitor and control the transmission grid in real-time. In order to assure competitive use of the grid, system operators must be independent from owners of generation and transmission; they should have no commercial interests in electricity markets.

9) Bulk power systems are regional in nature and can and should be operated more reliability and efficiently when operators are coordinated over large areas.

10) The reasonable and necessary costs for maintaining the reliability system should be fully recoverable and equitably distributed.

11) Transmission grid reliability is a North American issue; the reliability relationships with Canada and Mexico must be preserved.

Task Force Recommendations

The Task Force recommends that:

1) The NERC expedite — to the fullest extent possible and consistent with assuring sound results — the modification of its governance structure to assure fairness and lack of domination by any single industry sector.

2) The FERC undertake a review of existing NERC policies and standards that affect the operation of an open wholesale market and undertake a review of NERC’s organizational structure and governance. This proposed role for the FERC is important in order to make reliability standards enforceable and to assure that reliability standards and practices are not misused in ways that would be discriminatory in the competitive market. Given the considerable demands currently faced by the FERC, additional resources may be required by the agency in order to undertake this role.

3) Federal legislation may be useful to clarify FERC’s authority and responsibility for overseeing and setting and enforcement of reliability standards.

Reliability TF Draft “Framework”

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Subject: UFTO Note – Reliability TF Draft “Framework”
Date: Tue, 27 May 1997 07:37:59 -0700
From: Ed Beardsworth

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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Attached below is the first page of a revised draft of “An Organizational Framework for Bulk Electric System Reliability: Functions and Interrelationships”. This paper will be the focus of discussions at the June 3 Task Force meeting.

The entire paper is 7-12 pages (depending on font choice). I can send it as a Word attachment or in the body of an email note.

A copy will also be available at the meeting.

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Draft: May 20, 1997 Task Force on Electric System Reliability

AN ORGANIZATIONAL FRAMEWORK FOR BULK ELECTRIC SYSTEM RELIABILITY: FUNCTIONS AND INTERRELATIONSHIPS

INTRODUCTION Purpose:

This paper presents one possible organizational framework to ensure the reliable operation of the bulk power system. It was written to provide a focal point for future discussions within the Task Force on Electric System Reliability of the Secretary of Energy Advisory Board. The paper is based on discussions by Task Force members at their first two meetings as well as their comments on a draft of this paper. The organizational framework is, at this point, necessarily described in broad terms. This document will evolve through further Task Force discussions and will become more specific as issues and alternatives are considered and addressed.

This paper does not attempt to address whether there are sufficient legal authorities to accomplish what is proposed herein. The need for additional legal authorities will be addressed after a suitable organizational framework has been designed.

In addition, five supporting papers discuss and propose positions on some important issues that cut across the organizations proposed in this framework document.

DOE Electric Reliability TF-2nd Meeting Minutes

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Subject: UFTO Note – DOE Electric Reliability TF-2nd Meeting Minutes
Date: Mon, 19 May 1997
From: Ed Beardsworth

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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DOE SEAB Electric Reliability Task Force-2nd Meeting Minutes

According to our contacts at DOE, the second meeting went well. The group is starting to close on some basic assumptions regarding the future of the electric power industry and on a set of basic concepts/requirements for electric system reliability. In addition, the Task Force is gaining a better understanding of the differing viewpoints of NERC, Power Marketers, and DOE on how to maintain and assure reliability.

The complete minutes are posted at http://www.hr.doe.gov/seab

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Secretary of Energy Advisory Board
Task Force on Electric System Reliability

Minutes of Second Task Force Meeting March 25, 1997
Madison Hotel, Washington, D.C.

1.0 Opening Remarks and Perspectives

The second meeting of the Secretary’s Task Force on Electric System Reliability was held on March 25, 1997, in the Madison Hotel, Washington, D.C. Chairman Sharp opened the meeting at 8 a.m., noted that several new members had been added since the first meeting, and introduced those members. Following the introductions, Chairman Sharp stressed his receptiveness to advice from members at any time on how best to handle the agenda and schedule to make the best use of time. He stated his intent to try to get general consensus on a number of issues but stressed that at most some tentative conclusions might be reached at this meeting. He assured the members that they would have other opportunities to consider both the statement of the issues and the consensus Task Force position on each. He encouraged members to speak up and register their thoughts and concerns as the meeting proceeded.

Robert Hanfling, Chairman, Secretary of Energy Advisory Board (SEAB), was introduced by Chairman Sharp and welcomed the Task Force members on behalf of the SEAB and Secretary of Energy, Federico Peña.

2.0 Discussion of Assumptions Regarding the Future of the Electricity Industry

The Chairman thanked Dr. Theresa A. Flaim for her paper about how the electric industry is likely to evolve which proposed a division of assumptions into; A) those on which there may be emerging consensus; and, B) others. He asked that she lead the discussion of assumptions on which there may already be consensus among members. The Task Force opted to add several assumptions, including the one listed first, to better indicate its sense of priorities. There was preliminary consensus on each of the following assumptions:

Assumption #1: The reliability of the bulk electric power system will be maintained.
Comment: The reliability of the bulk electric power system must be a paramount objective in the transition to and maintenance of a competitive market. It was agreed among the members that introduction of competition should not be allowed to negatively impact the reliability of the nation’s integrated bulk electric power system.

Assumption #2: Retail customers will have their choice of supplier.
Comment: Retail customers in many states will also have the right not to choose (i.e., retain service from their existing supplier with a presumption that supplier would remain a provider of last resort).

Assumption #3: Generation can and likely will be deregulated as to price.
Comment: Although market power and transition costs were considered likely to be difficult issues, they were believed not to be closely linked to reliability.

Assumption #4: Transmission and distribution will remain regulated.
Comment: Some ancillary services may be purchased competitively on the open market.

Assumption #5: Power marketers, brokers and commodity retailers will have significant roles.
Comment: None.

Assumption #6: A reliable system will require a Regional Independent Operator (RIO).
Comment: The Task Force noted its unwillingness to use the term “ISO” because it is presently used in widely differing ways by other parties and to avoid appearing to support a particular type of institution at this time.

Assumption #7: The RIO will be a monopoly function and, thus, will need to be regulated.
Comment: This would not preclude a competitive process for acquiring RIO services or for outsourcing by the RIO for specific functions to for-profit contractors.

Assumption #8: Traditional obligation-to-serve compacts will be replaced by obligation-to- connect compacts.
Comment: None.

Assumption #9: RIO’s must not have a commercial interest in the market.
Comment: The security function must be separated completely from commercial operation of the market to avoid conflict of interest.

Assumption #10: RIOs must be able to direct and re-dispatch all generators and customers during emergencies.
Comment: However, RIOs would not necessarily need to have direct control of generation.

Assumption #11: The reliability of the bulk electric power system must be compatible with a range of reliability options for individual customers.
Comment: Customer end-use reliability should be conceptually distinguished from bulk electric power system reliability.

3.0 DOE Paper on Electric Systems Reliability Concepts

The Chairman moved to a discussion of a DOE staff paper intended to promote a better understanding of reliability by identifying basic system concepts and actions required for its attainment/maintenance. The members discussed the primary points made in the paper and reached general agreement on the following concepts:

Concept #1: Characteristics of Electric Systems
General Agreements: The Task Force generally agreed with the staff paper position as follows:

• The bulk power system needs continuous and near instantaneous balancing of generation and load.

• The transmission network is primarily passive but is becoming more active in time..e.g., FACTS.

• Any action can affect many other activities on the grid. — The activities of all players must be coordinated. However, all actions are not equally important.

• Cascading outages are unacceptable. — The physical system and the rules for its operation must minimize the likelihood of such outages.

• The need to be ready for the next credible contingency dominates the design and operation of the bulk power system.

Concept #2: Historical Design Criteria
General Agreements: The Task Force generally agreed with the staff paper position as follows:
• Generation & Transmission Adequacy — Capacity needed to maintain reliability is usually based on probabilistic analyses intended to meet a loss-of-load probability of one day in ten years.

• Generation & Transmission Security — Capacity needed to maintain reliability is based on
N-1 contingency.

Concept #3: Seven Critical Activities for A Reliable Power System
General Agreements: For the purposes of this discussion, the Task Force defined the term ‘system’ to include loads, transmission, distribution and generation and expanded the list of critical activities suggested in the DOE staff paper from five to seven. The additions are distinguished by an asterisk (*).

• Observe the network.
• Analyze and model the system.
• Communicate with operators of other systems.*
• Take control actions.
• Monitor and enforce compliance.
• Plan to expand and/or modify the system (including load management).
• Ensure incentive system for reliability.*

Concept #4: Time Scales for Reliability Maintenance.
General Agreements: The DOE staff paper pointed out that actions required to maintain system reliability take place in very different time frames, from cycles to minutes, to day ahead, to week ahead, to annual maintenance scheduling, and to several years ahead for transmission and generation planning. Each activity and its relative time frame is indicated in Table 1, shown at the end of this document.

Concept #5: Potential Restructuring Impacts
General Agreements: The Task Force generally agreed with the staff paper position that restructuring is likely to affect activities in different time frames, as follows:

• Automatic Protection — No effect
• Disturbance Response — Must consider contractual obligations
• Regulation and Voltage Control — Competitive markets will replace centralized control in selecting resources
• Economic Dispatch — Selecting units based on markets need not affect reliability
• Maintenance Scheduling — Scheduling of transmission maintenance should be under the authority of the Regional Independent Operator
• Fuel Planning — No effect
• Transmission Planning — If congestion rents can be captured, reliability constraints will be relieved. If not, there will be little incentive to take actions to relieve constraints.
• Generation Planning — Reliability will be maintained during the transition from central planning to the marketplace.
.
4.0 Panel Discussion and Roundtable on Policy and Institutional Issues

The Chairman moved to the next item on the agenda and introduced each of three panelists representing different perspectives on reliability and restructuring: Marc W. Chupka, DOE Acting Assistant Secretary for Policy and International Affairs; David R. Nevius, Vice President of the North American Electric Reliability Council (NERC); and, Barry N. P. Huddleston, Regional Manager, Regulatory Affairs, Destec Energy Corp. The Chairman pointed out that the panelists’ positions on each of the seven policy and institutional issues scheduled for discussion were documented in the meeting material and that, consequently, he would ask them to provide only brief introductions and then join in the Task Force roundtable discussion of each issue.

After a brief introduction by each panelist, the Chairman opened the discussion of the issues presented in the meeting material. While it is premature to consider any of the comments shown below as a conclusion or consensus by the Task Force, the following reflects some of the more notable opinions relative to each issue discussed.

Issue #1: Who should define and measure bulk power system reliability?
Comments:
• Reliability standards should not be legislated.
• The institutions setting reliability standards must be separated from those responsible for measurement or enforcement.
• The composition of the institutions setting reliability standards should reflect that of the restructured industry (including customers).
• Setting and enforcing reliability standards probably will require a regulatory backstop.
• Relationships established by legislation and contracts will need to be well understood (e.g., who has enforcement responsibility? who has an appellate function?).
• In the future, reliability will need to be defined in terms of customer perspectives but customers will not be able to purchase higher reliability than is designed into the bulk electric system unless they are willing to acquire localized resources for themselves.
• Approved tariffs of the future will be required to specify the applicable standards and the consequences that will apply if they are not met.
• Compacts among states to address reliability issues may alleviate the need for intervention by the federal government at the time of an emergency.
• States certainly will want to continue to be involved to protect their constituents.
• Additional federal authority may be needed to resolve all the compliance matters.
• NEPOOL depends on regulatory agencies in six states that have a history of long standing coordination and cooperation, but they rely on FERC regulation for backstop.
• FERC only exercises jurisdiction over 60-70% of the power system. The system also involves Canada and Mexico — clearly not under FERC jurisdiction. Legislation, or the threat of legislation, will be needed.
• A broad based organization (like NERC) is the best option to define standards regarding the security of the bulk electric power system. However, the marketplace should decide on matters of adequacy.
• A region like New England that decides to join together and operate in a unified system may not need federal authority except on issues that may affect the Regional boundaries.
• Legislation may be required to clarify federal authorities, as opposed to expanding them.

The Chairman concluded this portion of the discussion and opened the floor to comments by members of the public.

5.0 Public Comment Period.

The Chair recognized Mr. Mark Lively who indicated his concerns about how the industry will function in a deregulated environment, particularly in terms of two sciences, physics and economics. He referred to NERC’s interests as those representing the science of physics and FERC’s interests the science of economics. He stressed a need to consider them jointly and to be very precise in the definitions used in the process (e.g., utilities have not had an obligation to serve, they have had an obligation to serve at a price). He questioned whether transmission needs to remain a natural monopoly.

The Chair next recognized Mr. Jose Calvo of the Nuclear Regulatory Commission (NRC). Mr. Calvo stressed the need to set reliability standards before problems arise…not afterwards. He indicated NRC’s interests in the possible effects of restructuring on the availability of off-site power for nuclear plants. He noted that additional on-site backup power sources may be needed at nuclear plants if backup supplies from the grid cannot be assured at all times.
6.0 Panel Discussion and Roundtable (Cont’d)

Following comments by the public, the Chairman resumed discussion of the seven issues presented in the meeting material. Again, while it is premature to consider any of the comments shown below as a conclusion or consensus by the Task Force, the following reflects some of the more notable opinions relative to each issue discussed.

Issue #2: Should a minimum capacity requirement, or reserve margin, be established for all load-serving entities?
Comments:
• The Regional Independent Operator should assure that the necessary minimum reserve is available.
• If capacity reserves can be procured in the market, let the market supply them.
• The system can be operated reliably with insufficient reserves…those customers with reserves could continue to be served while those without would have service terminated.
• Customers that want to pay for 15% capacity overhang should be able to buy it — those that want 30% capacity overhang should be able to buy that — but to obtain higher reliability than the bulk system is designed for will require that customers acquire local supplies for themselves.
• The need to establish day-ahead minimum capacity requirements is clear. The issue is how far to go into the future — 6 months?–12 months?
• Another key issue is ‘who gets disconnected first?’ Those with reserves will stay connected. It is a matter of defining the rights and incentives (or penalties) of customers.
• Long term prices send signals for the investment community to build capacity and, in addition, customers are going to have contracts. The contracts will specify how much reliability customers want.
• Bulk system reliability has the characteristics of a “public good.” That is, everyone wants it. If it is obtained, everyone enjoys it whether they paid their share of its costs or not. Consequently, everyone has an incentive to avoid paying for it — which puts the good at risk.
• A basic problem: How to manage unpredictable loads while minimizing the need for installed capacity? Edicts by fiat on how much reserve capacity is needed for reliability are likely to be incorrect by a significant margin. The solution is to let the market resolve these balancing problems whenever possible.
• Legislation may be required to clarify federal authorities, as opposed to expanding them.

Issue #3: What is the appropriate use of engineering standards and markets to ensure adequate ancillary services?
Comments:
• The overall presumption of this committee should be biased toward letting the market provide ancillary services …if it can. If it can’t, the Regional Independent Operator takes over. Market rules should be relied on to the maximum extent. A basic problem: Where’s the boundary? Who determines it?
• Make Regional Independent Operators responsible for providing the services but allow self-provision of ancillary services by suppliers and customers as an option.
• Let individual buyers and sellers work out their own arrangements…but assure that the Regional Independent Operator takes over in default.
• Line loading relief and re-dispatch should be a Regional Independent Operator function.

Issue #4: Who should be responsible for transmission planning, construction and maintenance?
Comments:
• The issue is not who can build…but who has the capacity to collect from customers, so as to cover the costs of construction? Only a regulatory entity has the right to site.
• A regional focus for planning is essential.
• Transmission expansion does not present premium investment opportunities. There does not appear to be any way to avoid taking a regulated approach, with investment going into a rate base.
• The core issue seems to be who should be doing studies to determine whether new transmission is needed and, if so, where.
• Studies done in the 1980s on transmission siting by NGA and Keystone should be reviewed.

Issue #5: What authorities or incentives are needed to ensure that system operators will be able to compel real time actions by users of the bulk power system, when necessary, to maintain reliability?
Comments:
• Additional regulatory authorities are not needed. It should be possible to design and utilize contract provisions that are capable of ensuring proper behavior by users of the bulk power system.
• Penalty-backed financial decisions could be used to force customers off the system when necessary. After-the-fact assessments of very high costs for service (e.g. $90,000/kWh) are likely to be effective.
• We need an objective, duly appointed body to say what is fair and what the standard (penalty) should be. Probably FERC.
• After-the-fact penalty assessments will assure that someone pays, but in real time someone will have already paid for whatever extra capacity is available, and that margin gives others the opportunity to “lean” on the system. We need to be careful that this sort of opportunistic behavior does not erode the system’s resilience.

Issue #6: What legal recourse should customers, other market participants, or the public have if reliability is not maintained?
Comments:
• The court system permits utilities, RIOs , etc. to be sued. These entities will have to carry insurance…for which users will have to pay…somehow.
• A FERC-backed stiff penalty ($90,000/kWh) may be the answer.
• Penalties are preferable to extensive reliance on court proceedings.
• Litigation has not been effective in the Northwest.

Issue #7: What is the appropriate role for government in ensuring electric system reliability?
Comments:
• FERC may be the right agency to handle oversight responsibilities, but are they equipped to handle the additional mission?
• FERC could delegate oversight responsibilities to NERC.
• Bulk power should be a federal oversight responsibility. Local reliability should be a state function.
• An industry compact could cover all sectors that are now regulated by FERC plus some areas (Canada, Mexico) that are non-FERC jurisdictional.
• States may need help in dealing with new T&D issues [EPRI has good material on this, e.g., EPRI has a power quality benchmarking capability already].

7.0 Final Public Comment

The Chairman offered a final opportunity for public comment and Mr. Mark Lively was the only commentor. He offered his opinion that, if a very large penalty ($90,000) was adopted for customers leaning on the system in the short term, the long term will take care of itself. Investors will see the opportunity and invest accordingly.

The Chairman closed the meeting by thanking the members for their participation. He advised them that the next meeting would probably be scheduled sometime in late May but would be coordinated with everyone’s schedule, and adjourned the meeting at 4 p.m.

Mr. Rich Burrow, DOE staff representative to the SEAB, suggested that Task Force members use the SEAB Home Page for information pertaining to minutes of meetings, membership, notices of future meetings, reports, etc. He announced that the Internet address of the SEAB Home Page is: http: //www.hr.doe.gov/seab.
Table 1:
Services Affecting Bulk Power Reliability

Service Time Scale Description
Automatic Protection Instantaneous Minimize damage to equipment and service interruptions
Disturbance Response Instantaneous-minutes-hours Adjust generation, breaker, and other transmission equipment
Regulation & Voltage Control Seconds-minutes Adjust generation to match scheduled intertie flows and actual system load
Economic Dispatch Minutes-hours Adjust committed units to maintain frequency…at minimum cost
Unit Commitment Hour ahead & week ahead Decide when to start up and shut down generating units
Maintenance Scheduling
(Long Term) 1-3 years ahead Schedule and coordinate interutility sales and planned maintenance
Fuel Planning
(Long Term) 1-5 years ahead Develop least cost fuel supplies, contracts and delivery schedules
Transmission Planning
(Long Term) 2-10 years ahead Design regional and local system additions
Generation Planning
(Long Term) 2-5 years ahead Develop mix of new units, retirements, life extensions, and repowering based on long term load forecasts

Reliability TF, 3rd Meeting Notice, June 3

/0 Comments/in , /by

Subject: UFTO Note – Reliability TF, 3rd Meeting Notice, June 3
Date: Mon, 19 May 1997 13:29:09 -0700
From: Ed Beardsworth <edbeards@ufto.com>

————————————————————–
| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
————————————————————–

The next meeting of the DOE Reliablility Task Force, scheduled for June 3, 1997 in Philadelphia PA, will focus on several of the key policy and institutional differences between NERC, Power Marketers and DOE.

Here is the official notice to appear in the Federal Register.

———————————————
[6450-01-P]
DEPARTMENT OF ENERGY
Secretary of Energy Advisory Board
Notice of Open Meeting
SUMMARY: Consistent with the provisions of the Federal Advisory Committee Act (Public Law 92-463, 86 Stat. 770), notice is hereby given of the following advisory committee meeting:
Name: Secretary of Energy Advisory Board
– Electric System Reliability Task Force
Dates and Times: Tuesday, June 3, 1997, 8:30 AM – 4:00 PM
Place: Valley Forge Hilton
Rittenhouse Ballroom
251 West Dekalb Pike
King of Prussia, Pennsylvania 19406

FOR FURTHER INFORMATION CONTACT: Richard C. Burrow, Secretary of Energy Advisory Board (AB-1), U.S. Department of Energy, 1000 Independence Avenue, SW, Washington, DC 20585, (202) 586-1709 or (202) 586-6279 (fax).

SUPPLEMENTARY INFORMATION:

Background
The electric power industry is in the midst of a complex transition to competition, which will induce many far-reaching changes in the structure of the industry and the institutions which regulate it. This transition raises many reliability issues, as new entities emerge in the power markets and as generation becomes less integrated with transmission.

Purpose of the Task Force
The purpose of the Electric System Reliability Task Force is to provide advice and recommendations to the Secretary of Energy Advisory Board regarding the critical institutional, technical, and policy issues that need to be addressed in order to maintain the reliability of the nation’s bulk electric system in the context of a more competitive industry.

Tentative Agenda

8:30 – 8:45 Opening Remarks & Objectives;
Philip Sharp, Chairman, Electric System Reliability Task Force
8:45 – 9:15 Presentation and Discussion:
Legal Issues Regarding FERC as a “Backstop”
9:15 – 10:15 Discussion: Role of the FERC
10:15 – 10:30 Break
10:30 – 11:45 Discussion: Role of the National
Reliability Organization (NERC and RRCs)
10:30 – 11:45 Discussion: Role of the
National Reliability Organization (NERC and RRCs)
11:45 – 12:00 Public Comment
12:00 – 1:00 Lunch
1:00 – 2:15 Discussion: Role of the Regional
Independent System Operator
2:15 – 2:30 Break
2:30 – 3:45 Discussion:
Role of States and Regional Regulatory Agencies
3:45 – 4:00 Closing remarks; Philip Sharp, Chairman,
Electric System Reliability Task Force
4:00 Adjourn

This tentative agenda is subject to change. The final agenda will be available at the meeting.

Public Participation
The Chairman of the Task Force is empowered to conduct the meeting in a fashion that will, in the Chairman’s judgment, facilitate the orderly conduct of business. During its meeting in Washington, D.C. the Task Force welcomes public comment. Members of the public will be heard in the order in which they sign up at the beginning of the meeting. The Task Force will make every effort to hear the views of all interested parties. Written comments may be submitted to David Cheney, Acting Executive Director, Secretary of Energy Advisory Board, AB-1, 1000 Independence Avenue, SW, Washington, DC 20585.
Minutes

Minutes and a transcript of the meeting will be available for public review and copying approximately 30 days following the meeting at the Freedom of Information Public Reading Room, 1E-190 Forrestal Building, 1000 Independence Avenue, SW, Washington, DC, between 9:00 AM and 4:00 PM, Monday through Friday except Federal holidays.
Issued at Washington, DC, on

Rachel Samuel
Acting Deputy Advisory Committee Management Officer