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FERC Approves Streamlined NERC “Find, Fix, Track” Enforcement Process
In terms of NERC’s enforcement procedures, the FFT process occupies the middle ground between NERC’s previously available procedural avenues, namely, a Notice of Penalty (NOP) process (which may result in monetary penalties) and complete dismissal for matters ultimately deemed not to be violations. To the extent that the circumstances meet the requirements for inclusion in the FFT program, NERC could make FFT informational filings in lieu of filing a NOP. Under the FFT process, NERC does not make a finding of violation. Therefore, FFT matters would be processed as “possible violations.” Although these “possible violations” would not be subject to a penalty, they would become part of the registered entity’s compliance history.
FERC approved the proposal subject to a variety of conditions, including: (1) limiting use of the FFT process to possible violations that constitute a minimal risk to the BPS (NERC proposed to include within the FFT program potential violations that posed either a minimal or moderate risk), (2) subjecting FFT filings to a sixty day FERC review period, and (3) NERC filing guidance regarding how it will evaluate an entity’s compliance history in determining whether FFT treatment is appropriate.
In a departure from NERC's proposal, FERC found that the FFT process was inappropriate for moderate risk violations and conditioned its approval on NERC using the FFT process for only minimal-risk violations. FERC also clarified that NERC’s risk assessment should not be based on a “no harm, no foul” theory, under which NERC and the regional entities deem a possible violation to constitute a minimal risk simply because no harm resulted.
In its FFT proposal, NERC explained that it would determine the appropriate enforcement process (i.e., NOP, FFT, or dismissal) by examining:
- The underlying facts and circumstances,
- The Reliability Standard at issue,
- The applicable Violation Risk Factor (VRF) and Violation Severity Level (VSL),
- The potential and actual level of risk to reliability, including mitigating factors,
- The Registered Entity’s compliance program, and
- The Registered Entity compliance history.
According to NERC, the VRF and VSL will be the starting point of the analysis, but are not the dispositive factors. Instead, NERC will assess the specific facts and circumstances of the possible violation to determine the appropriate enforcement mechanism. For this analysis, NERC will consider:
- The size of the registered entity,
- The nature of the facilities and location on the grid,
- The possible violation’s impact on third parties, including load, neighboring utilities, and other registered entities,
- The time horizon that is relevant to the violated reliability standard (i.e., real time, on or off peak, or planning period),
- The specific act or omission and its likelihood of reoccurrence, and
- The potential and actual risk, and factors that mitigate the risk during the violation.
Further, in order to promote accountability and deterrence, FERC insisted that the publically-available versions of FFT informational filings include the name of the offending entity. This represents a significant departure from NERC’s proposal, which would not have identified such entities.
NERC will implement its FFT proposal in two phases. In the first phase, Compliance and Enforcement Staff will consult regarding the best means of disposing of violations, but discretion over whether to assign a possible violation to the FFT or NOP process will rest ultimately with NERC’s Enforcement Staff. However, once NERC has amassed adequate experience with the FFT program, it will, in Phase II allow both Compliance and Enforcement Staff to share this discretion. Further, consistent with its proposal, NERC is subject to certain future reporting obligations to FERC to address NERC’s experience with the FFT program.
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