127 FERC ¶ 61,158 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 40 

[Docket No. RM08-16-000; Order No. 724] 

Electric Reliability Organization Interpretations of Specific Requirements of Frequency 

Response and Bias and Voltage and Reactive Control Reliability Standards 

(Issued May 21, 2009) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Final Rule. 

SUMMARY: Pursuant to section 215 of the Federal Power Act, the Federal Energy 

Regulatory Commission hereby approves the North American Electric Reliability 

Corporation’s (NERC) interpretation of one Commission-approved Reliability Standard, 

BAL-003-0, Frequency Response and Bias; and remands NERC’s proposed interpretation 

of VAR-001-1, Voltage and Reactive Control, for reconsideration consistent with this 

Final Rule. 

EFFECTIVE DATE: The Final Rule will become effective [insert date that is 30 days 

from the date that the Final Rule is published in the FEDERAL REGISTER]. 

FOR FURTHER INFORMATION CONTACT: 

Patrick Harwood (Technical Information) 

Office of Electric Reliability 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

Telephone: (202) 502-6125 

Patrick.harwood@ferc.gov 
Docket No. RM08-16-000 - 2 - 

Richard M. Wartchow (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

Telephone: (202) 502-8744 

SUPPLEMENTARY INFORMATION:
127 FERC ¶ 61,158 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Jon Wellinghoff, Chairman; 

 Suedeen G. Kelly, Marc Spitzer, 

 and Philip D. Moeller. 

Electric Reliability Organization Interpretations of 

Specific Requirements of Frequency Response and Bias 

and Voltage and Reactive Control Reliability Standards 

Docket No. RM08-16-000 

ORDER NO. 724 

FINAL RULE 

 (Issued May 21, 2009) 

1. Pursuant to section 215 of the Federal Power Act (FPA), the Commission hereby 

approves the interpretation proposed by the North American Electric Reliability 

Corporation (NERC) of Commission-approved Reliability Standard BAL-003-0, 

Frequency Response and Bias, but remands NERC’s proposed interpretation of 

Reliability Standard VAR-001-1, Voltage and Reactive Control, for additional 

clarification.1

 

I. Background

A. EPAct 2005 and Mandatory Reliability Standards

2. Section 215 of the FPA requires a Commission-certified Electric Reliability 

Organization (ERO) to develop mandatory and enforceable Reliability Standards, which 

 1

 16 U.S.C. 8240 (2006). The Commission is not adding any new or modified text 

to its regulations. 
Docket No. RM08-16-000 - 2 - 

are subject to Commission review and approval. Once approved, the Reliability 

Standards may be enforced by the ERO, subject to Commission oversight, or by the 

Commission independently.2

3. Pursuant to section 215 of the FPA, the Commission established a process to select 

and certify an ERO3

 and, subsequently, certified NERC as the ERO.4 On April 4, 2006, 

as modified on August 28, 2006, NERC submitted to the Commission a petition seeking 

approval of 107 proposed Reliability Standards. On March 16, 2007, the Commission 

issued a Final Rule, Order No. 693, approving 83 of these 107 Reliability Standards and 

directing other action related to these Reliability Standards.5

 In addition, pursuant to 

section 215(d)(5) of the FPA, the Commission directed NERC to develop modifications 

to 56 of the 83 approved Reliability Standards.6

 2 See 16 U.S.C. 824o(e)(3). 

3 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). 

4 North American Electric Reliability Corp., 116 FERC ¶ 61,062, order on reh’g 

& compliance, 117 FERC ¶ 61,126 (2006), appeal docketed sub nom. Alcoa, Inc. v. 

FERC, Case No. 06-1426 (D.C.Cir. Dec. 29, 2006). 

5 Mandatory Reliability Standards for the Bulk-Power System, Order No. 693, 

FERC Stats. & Regs. ¶ 31,242, order on reh’g, Order No. 693-A, 120 FERC ¶ 61,053 

(2007). 

6

 16 U.S.C. 824o(d)(5). Section 215(d)(5) provides: “The Commission . . . may 

order the Electric Reliability Organization to submit to the Commission a proposed 

reliability standard or a modification to a reliability standard that addresses a specific 

matter if the Commission considers such a new or modified reliability standard 

(continued) 
Docket No. RM08-16-000 - 3 - 

4. NERC’s Rules of Procedure provide that a person that is “directly and materially 

affected” by Bulk-Power System reliability may request an interpretation of a Reliability 

Standard.7

 In response to a request, the ERO’s standards process manager assembles a 

team with relevant expertise to address the requested interpretation and forms a ballot 

pool. NERC’s Rules provide that, within 45 days, the team will draft an interpretation of 

the Reliability Standard, with subsequent balloting. If approved by ballot, the 

interpretation is appended to the Reliability Standard and filed with the applicable 

regulatory authority for approval.8

 

B. NERC Filing

5. On July 28, 2008, NERC submitted a Petition for Approval of Formal 

Interpretations to Reliability Standards (Petition), seeking Commission approval of 

interpretations of BAL-003-0, Requirements R2 and R5; and VAR-001-1, Requirement 

R4. 

6. For BAL-003-0, the Electric Reliability Council of Texas (ERCOT) requested 

clarification that the provision in BAL-003-0, Requirement R2, permitting use of a 

variable bias setting, did not conflict with BAL-003-0, Requirement R5, which states that 

the frequency bias setting for Balancing Authorities serving native load should be at least 

 

appropriate to carry out this section.” 

7

 NERC Rules of Procedure, Appendix 3A, Reliability Standards Development 

Procedure, Version 6.1, at 26-27 (2007). 

8

 The NERC board of trustees approves Reliability Standard interpretations once 

they are posted and presented for adoption. Id. at 23-24, 26-27. 
Docket No. RM08-16-000 - 4 - 

one percent of yearly peak demand. For VAR-001-1, Dynegy, Inc. (Dynegy) requested 

clarification whether there are implicit requirements that the voltage schedule and 

associated tolerance band to be provided by the transmission operator under Requirement 

R4 be technically based, reasonable and practical for a generator to maintain. 

7. Consistent with the NERC Rules of Procedure, a NERC-assembled ballot body, 

consisting of industry stakeholders, developed the interpretations using the NERC 

Reliability Standards Development Procedure,9

 and the NERC Board of Trustees 

approved the interpretations.10 The interpretations do not modify the language contained 

in the requirements under review. NERC requested the Commission to approve the 

interpretations, effective immediately after approval, consistent with the Commission’s 

procedures. 

C. NOPR

8. In Response, the Commission issued a Notice of Proposed Rulemaking and 

proposed to approve the ERO’s formal interpretation of Requirements R2 and R5 of 

BAL-003-0 but remand the proposed interpretation of VAR-001-1, and requested 

comment on its proposals.11 

 9 See NERC’s Rules of Procedures, Appendix 3A. 

10 NERC Petition at 3. 

11 Electric Reliability Organization Interpretations of Specific Requirements of 

Frequency Response and Bias and Voltage and Reactive Control Reliability Standards, 

Notice of Proposed Rulemaking, 73 FR 71971 (Nov. 26, 2008), FERC Stats. & Regs. 

¶ 32,639 (2008) (NOPR). 
Docket No. RM08-16-000 - 5 - 

II. Discussion

A. Procedural Matters

9. NERC, Ameren Services Co. (Ameren), Edison Electric Institute (EEI), 

FirstEnergy Service Co. (FirstEnergy) and The Independent Electricity System Operator 

of Ontario (IESO)12 filed comments, largely addressing the Commission’s proposal to 

remand the proposed interpretation of VAR-001-1. 

B. BAL-003-0

1. NOPR Proposal

10. BAL-003-0, Requirement 2 states that a “Balancing Authority shall establish and 

maintain a Frequency Bias Setting that is as close as practical to, or greater than, the 

Balancing Authority’s Frequency Response.” BAL-003-0, Requirement 5 states that 

“Balancing Authorities that serve native load [such as ERCOT] shall have a monthly 

average Frequency Bias Setting that is at least one percent of the Balancing Authority’s 

estimated yearly peak demand per 0.1 Hz change.” ERCOT requested clarification 

whether there is a conflict between BAL-003-0, Requirement R2, and BAL-003-0, 

Requirement R5. In response, NERC proposed the following interpretation: 

Frequency Response and Bias Requirement 2 requires a 

Balancing Authority to analyze its response to frequency 

excursions as a first step in determining its frequency bias 

setting. The Balancing Authority may then choose a fixed 

bias (constant through the year) per Requirement 2.1, or a 

 12 The IESO administers wholesale electricity markets and operates the integrated 

power system in Ontario, Canada and is subject to oversight by the Ontario Energy 

Board. 
Docket No. RM08-16-000 - 6 - 

variable bias (varies with load, specific generators, etc.) per 

Requirement 2.2. 

Frequency Response and Bias Requirement 5 sets a minimum 

contribution for all Balancing Authorities toward stabilizing 

interconnection frequency. The 1% bias setting establishes a 

minimum level of automatic generation control action to help 

stabilize frequency following a disturbance. By setting a 

floor on bias, Requirement 5 also helps ensure a consistent 

measure of control performance among all Balancing 

Authorities within a multi-Balancing Authority 

interconnection. However, ERCOT is a single Balancing 

Authority interconnection. The bias settings ERCOT uses do 

produce, on average, the best level of automatic generation 

control action to meet control performance metrics. The bias 

value in a single Balancing Authority interconnection does 

not impact the measure of control performance. 

11. In the NOPR, the Commission proposed to find NERC’s interpretation of BAL003-0, Requirements R2 and R5 to be reasonable in providing consistency in frequency 

bias setting determinations, used in area control error (ACE) calculations.13 The 

Commission viewed the interpretation as consistent with an earlier, Order No. 693 

finding that the requirements of BAL-003-0 do not conflict with one another.14 In Order 

No. 693, the Commission found that Requirement R2 provides the relationship between 

 13 A frequency bias setting is a value expressed in MW per 0.1 Hz, set into a 

balancing authority’s ACE algorithm, which allows the balancing authority to contribute 

its frequency response to the Interconnection. NERC’s glossary, which provides 

definitions of the relevant terms, defines ACE as “The instantaneous difference between 

a balancing authority’s net actual and scheduled interchange, taking into account the 

effects of frequency bias and correction for meter error.” 

14 NOPR, FERC Stats. & Regs. ¶ 32,639 at P 17; Order No. 693, FERC Stats. 

& Regs. ¶ 31,242 at P 370 (addressing the suggestion that Requirement R5 should be 

required in lieu of Requirement R2 for certain balancing authorities and finding that 

Requirements R2 and R5 do not conflict); BAL-003-0, Requirement R5. 
Docket No. RM08-16-000 - 7 - 

frequency response and frequency bias, with frequency bias to be as close as practical to, 

or greater than, the balancing authority’s frequency response. Requirements R5 and R5.1 

require balancing authorities to establish frequency bias settings based on one percent of 

peak demand or maximum generation level, based on individual circumstances.15 

12. The Commission proposed to approve the interpretation, since the BAL-003-0, 

Requirement R5 minimum bias setting establishes a consistent methodology for an ACE 

determination input, and ensures that an adequate level of generation is set aside to 

provide frequency response.16 The Commission declined to address the issue whether the 

ERCOT methodology, reported to result in “the best level of automatic generation control 

action to meet control performance metrics,” may be a preferable methodology, noting 

that such an issue is better resolved through a proceeding to review a proposal to permit 

ERCOT to depart from the requirement. The Commission noted that while ERCOT is a 

single-balancing-authority Interconnection and, therefore, does not need to allocate 

automatic generation control responsibility among multiple balancing authorities within 

the Interconnection, the other justifications for Requirement R5, supporting a consistent 

ACE calculation methodology and providing a minimum standard for reliability, remain 

valid justifications for the minimum setting.17 

 15 See id. P 362, 370. 

16 NOPR, FERC Stats. & Regs. ¶ 32,639 at P 16, 18. 

17 Id. P 18 n.19. 
Docket No. RM08-16-000 - 8 - 

2. Comments

13. No participant filed comments opposing the BAL-003-0 interpretation. 

3. Commission Determination

14. The ERO’s interpretation clarifies that the BAL-003-0 Requirements R2 and R5 

do not conflict with one another. In Order No. 693, the Commission made clear that a 

frequency bias setting based only on the value set forth in Requirement R5 is insufficient 

and that a balancing authority must also follow Requirement R2.18 ERCOT presents the 

reverse question, whether a balancing authority that follows the variable bias setting 

under Requirement R2 must also follow Requirement R5. In response, NERC’s 

interpretation affirms that a balancing authority that uses the variable bias option 

provided under Requirement R2 must also follow Requirement R5. In addition, no 

comments were filed opposing the Commission’s proposal to approve NERC’s 

BAL-003-0 interpretation. 

15. Accordingly, we approve NERC’s BAL-003-0 interpretation. The Commission 

finds that the ERO’s interpretation is just, reasonable, not unduly discriminatory or 

preferential, and in the public interest. 

 18 Order No. 693, FERC Stats. & Regs. ¶ 31, 242 at P 370 (emphasizing the need 

to follow both Requirements R2 and R5). 
Docket No. RM08-16-000 - 9 - 

C. VAR-001-1

1. NOPR Proposal

16. VAR-001-1, Requirement R4 directs each transmission operator to provide each 

generator with a voltage and reactive power output schedule, within a tolerance band. A 

second Reliability Standard, VAR-002-1, Requirement R2, requires that each generator 

must meet the schedule (typically via automatic control) or provide an explanation why it 

cannot do so. The Requirements state: 

VAR-001-1 – Voltage and Reactive Control. 

Requirement R4. Each Transmission Operator shall specify a voltage or 

Reactive Power schedule19 at the interconnection between the generator 

facility and the Transmission Owner's facilities to be maintained by each 

generator. The Transmission Operator shall provide the voltage or 

Reactive Power schedule to the associated Generator Operator and direct 

the Generator Operator to comply with the schedule in automatic voltage 

control mode (AVR [automatic voltage regulation] in service and 

controlling voltage). . . . 

VAR-002-1 – Generator Operation for Maintaining Network Voltage 

Schedules. 

Requirement R2. Unless exempted by the Transmission Operator, each 

Generator Operator shall maintain the generator voltage or Reactive Power 

output (within applicable Facility Ratings)20 as directed by the 

Transmission Operator. 

R2.1. When a generator’s automatic voltage regulator is out of service, the 

Generator Operator shall use an alternative method to control the generator 

 19 The voltage schedule is a target voltage to be maintained within a tolerance 

band during a specified period. [Footnote in original.] 

20 When a Generator is operating in manual control, reactive power capability may 

change based on stability considerations and this will lead to a change in the associated 

Facility Ratings. [Footnote in original.] 
Docket No. RM08-16-000 - 10 - 

voltage and reactive output to meet the voltage or Reactive Power schedule 

directed by the Transmission Operator. 

R2.2. When directed to modify voltage, the Generator Operator shall 

comply or provide an explanation of why the schedule cannot be met. 

17. Dynegy requested clarification whether there are implicit requirements that the 

voltage schedule and associated tolerance band to be provided by the transmission 

operator under VAR-001-1, Requirement R4 be technically based, reasonable and 

practical for a generator to maintain. In response, NERC proposed the following 

interpretation: 

NERC Reliability Standard VAR-001-1 is only comprised of stated 

requirements and associated compliance elements. The requirements have 

been developed in a fair and open process, balloted and accepted by FERC 

for compliance review. Any “implicit” requirement would be based on 

subjective interpretation and viewpoint and therefore cannot be objectively 

measured and enforced. Any attempt at “interpreting an implicit 

requirement” would effectively be adding a new requirement to the 

standard. 

This can only be done through the [Standards Authorization Request] 

process. 

Since there are no requirements in VAR-001-1 to issue a “technically 

based, reasonable and practical to maintain voltage or reactive power 

schedule and associated tolerance band,” there are no measures or 

associated compliance elements in the standard. 

The standard only requires that “Each Transmission Operator shall specify 

a voltage or Reactive Power schedule ....” and that “The Transmission 

Operator shall provide the voltage or Reactive Power schedule to the 

associated Generator Operator and direct the Generator Operator to comply 

with the schedule....” Also, Measure 1 and the associated compliance 

elements follow accordingly by stating that “The Transmission Operator 

shall have evidence it provided a voltage or Reactive Power schedule ...” 

* * * 
Docket No. RM08-16-000 - 11 - 

Requirement 2 and Requirement 2.2 of VAR-002-1 relate somewhat to 

questions #2 and 3. R2 states that “Unless exempted by the Transmission 

Operator, each Generator Operator shall maintain the generator voltage or 

Reactive Power output (within applicable Facility Ratings) as directed by 

the Transmission Operator.” R2.2 goes on to state “When directed to 

modify voltage, the Generator Operator shall comply or provide an 

explanation of why the schedule cannot be met.” [footnotes omitted.] 

18. NERC provided additional information in its transmittal letter accompanying the 

interpretation, noting that VAR-001-1, Requirement R2 states, “Each Transmission 

Operator shall acquire sufficient reactive resources within its area to protect the voltage 

levels under normal and Contingency conditions.” NERC explained that, in order to 

fulfill Requirement R2, the transmission operator must perform a valid analysis of the 

system, using models that accurately represent equipment capabilities. Therefore, while 

NERC supported its interpretation of Requirement R4, including the finding that a 

requirement cannot establish implicit obligations, it stated that the issue that Dynegy 

raised for clarification is better resolved through an examination of Requirement R2.21

19. In response, the Commission proposed to remand NERC’s interpretation of VAR001-1, Requirement R4, because the interpretation suggested that there is no requirement 

that a voltage schedule have a sound technical basis. The Commission noted that Order 

No. 693 stated that all Reliability Standards must be designed to achieve a specified 

 21 NERC Petition at 14. 
Docket No. RM08-16-000 - 12 - 

eliability goal and must contain a technically sound means to achieve this goal.22 The 

Commission thus disagreed with NERC’s proposed interpretation because it suggested 

that a transmission operator could deliver a voltage schedule that lacked any technical 

basis. The Commission, citing the NERC Rules of Procedure, section 302.5, concluded 

that a voltage schedule should reflect technical analysis, i.e., sound engineering, as well 

as operating judgment and experience.23 

20. The NOPR also highlighted the Commission’s review in Order No. 693 of each 

Reliability Standard and approval of those containing Requirements that are sufficiently 

clear as to be enforceable and that do not create due process concerns.24 The 

 22 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 5 (“[A] Reliability Standard 

must provide for the Reliable Operation of Bulk-Power System facilities and may impose 

a requirement on any user, owner or operator of such facilities. It must be designed to 

achieve a specified reliability goal and must contain a technically sound means to achieve 

this goal. The Reliability Standard should be clear and unambiguous regarding what is 

required and who is required to comply. The possible consequences for violating a 

Reliability Standard should be clear and understandable to those who must comply. 

There should be clear criteria for whether an entity is in compliance with a Reliability 

Standard. While a Reliability Standard does not necessarily need to reflect the optimal 

method for achieving its reliability goal, a Reliability Standard should achieve its 

reliability goal effectively and efficiently.”); see also Order No. 672, FERC Stats. 

& Regs. ¶ 31,204 at P 324. 

23 NOPR, FERC Stats. & Regs. ¶ 32,639 at P 30 (citing Order No. 693 at P 5). 

24 See Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 274. In reviewing 

specific Reliability Standards, the Commission identified for certain Reliability Standards 

implicit obligations that should be incorporated into those Reliability Standards and 

directed NERC to revise the standards to explicitly incorporate the obligations; see

Mandatory Reliability Standards for Critical Infrastructure Protection, Order No. 706, 

122 FERC ¶ 61,040, at P 75 (2008) (directing the ERO to modify the CIP Reliability 

Standards to incorporate an obligation to implement plans, policies and procedures); 

Order No. 693 at P 1787 (“In the NOPR, the Commission identified an implicit 

(continued) 
Docket No. RM08-16-000 - 13 - 

Commission noted that its approval in Order No. 693 of VAR-001-1 meant that VAR001-1 is sufficiently clear to inform transmission operators what is required of them.25 

The Commission acknowledged that it has elsewhere declined to specify in detail how a 

registered entity should implement a Reliability Standard, but countered that such actions 

do not mean that an entity seeking to comply with a Reliability Standard may act in a 

manner that is not technically sound, i.e., in a manner that is not grounded in sound 

engineering, and thus, not reasonable and practical.26 The Commission objected to 

NERC’s proposed interpretation as implying that the voltage schedules provided under 

VAR-001-1, Requirement R4 need not have any technical basis, and thus need not be 

reasonable and practical. 

21. The Commission proposed in the NOPR to remand NERC’s proposed 

interpretation of VAR-001-1, Requirement R4 for reconsideration consistent with this 

rulemaking. In addition, the Commission rejected an additional proposal from Dynegy, 

asserting that NERC needs to develop evaluation measures to review the technical basis 

 

assumption in the TPL Reliability Standards that all generators are required to ride 

through the same types of voltage disturbances and remain in service after the fault is 

cleared. This implicit assumption should be made explicit.”); Facilities Design, 

Connections and Maintenance Reliability Standards, Order No. 705, 121 FERC ¶ 61,296, 

at P 54 (2007) (“although the TPL Reliability Standards implicitly require the loss of a 

shunt device to be addressed, they do not do so explicitly”). 

25 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 275. 

26 As noted above, Reliability Standards should reflect sound engineering 

principles. See id. P 5; Order No. 672, FERC Stats. & Regs. ¶ 31,204 at P 324; accord

NERC Rules of Procedure, section 302.5. 
Docket No. RM08-16-000 - 14 - 

for voltage schedules, as beyond the scope of the interpretation process. The 

Commission proposed that such an effort would be better discussed pursuant to a 

Standards Authorization Request under the NERC Reliability Standards Development 

Procedures. 

2. Comments

a. VAR-001-1, Requirement R4 Technical Basis

22. No participant contests the Commission’s determination that all Reliability 

Standards must be designed to achieve a specified reliability goal and must contain a 

technically sound means to achieve this goal.27 The parties, as discussed below, also 

largely agree or acknowledge that voltage schedules must have a technical basis.28 

23. FirstEnergy supports the Commission’s proposal to remand NERC’s interpretation 

for further consideration because NERC’s proposed interpretation suggests that voltage 

schedules could lack a technical basis. However, FirstEnergy interprets the 

 27 See, e.g., IESO comments at 5 (“The IESO agrees with the Commission that 

standards should be technically sound”). 

28 See NERC comments at 5 (each requirement contributes to meeting a Reliability 

Standard objective; other Reliability Standards require the technical basis to be 

established for voltage schedules); Ameren comments at 5 (users, owners and operators 

must act in a technically sound manner in compliance with VAR-001-1, Requirement 

R4); EEI comments at 2 (however, EEI states that a transmission operator cannot be 

audited on the “subjective interpretation” that a voltage schedule be technically sound, 

because there are no associated compliance measures); FirstEnergy comments at 6 

(noting that VAR-001-1 avoids overly prescriptive language defining the correct 

technical basis). IESO argues that other Reliability Standards require sound engineering 

principals and technical expertise, in order to meet reliability objectives and obligations, 

and that these Reliability Standards “supplement” the VAR-001-1 Reliability Standard. 

IESO comments at 5-6. 
Docket No. RM08-16-000 - 15 - 

Commission’s proposal in the NOPR as finding that there are “implicit” obligations in 

VAR-001-1, Requirement R4 that instead should be explicitly incorporated in the 

Reliability Standards. Therefore, FirstEnergy supports a remand, but states that the 

remand should incorporate a directive to consider evaluation measures and review the 

technical basis for voltage schedules pursuant to a Standards Authorization Request 

under the NERC Reliability Standards development process.29 

24. According to FirstEnergy, Requirement R4 is correctly written to avoid overly 

prescriptive language as to what constitutes the correct technical basis, since the 

determination of voltage schedules is unique to individual transmission systems.30 

25. Despite acknowledging that the voltage schedules must have a technical basis, 

some participants object to the Commission’s proposal to remand the interpretation in 

order that NERC may reflect that fact in the interpretation, solely because the 

requirement is not explicit, that is, not stated directly in the Reliability Standard and 

supported by compliance measures.31 EEI supports remand for the limited purpose to 

incorporate supporting material from NERC’s pleadings and a reference to the Order 

 29 FirstEnergy comments at 5. See also Ameren comments at 9 (comparing 

current proposal to directives in Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 1880, 

to address clarifying changes through the Reliability Standards development process); 

IESO comments at 5 (perceived deficiencies in the Reliability Standard should be 

addressed in the Reliability Standards development process). 

30 FirstEnergy comments at 6. 

31 See NERC comments at 5, 9; Ameren comments at 6-9; IESO comments at 1-

2, 3. 
Docket No. RM08-16-000 - 16 - 

No. 693 discussion that prompted the Commission’s concern.32 However, EEI states that 

this material would not reflect an auditable requirement that voltage schedules be 

technically sound, due to the lack of measures and compliance elements.33 According to 

EEI, the issue raised in Dynegy’s interpretation request was resolved in Order No. 693 

when the Commission addressed requests that the Commission direct NERC to modify 

VAR-001-1 to include detailed and definitive requirements on established limits and 

sufficient reactive resources and identify acceptable voltage margins.34 Therefore, EEI 

views Dynegy’s request as an attempt to circumvent the Reliability Standard 

development process. 

26. Ameren characterizes the Commission’s proposed remand as effectively creating a 

new requirement outside the approved procedures, and suggests that the appropriate 

procedure is to initiate a Standards Authorization Request. Ameren cites the 

Commission’s rejecting Dynegy’s proposed evaluation measures as supporting its 

position.35 Ameren characterizes the Commission’s proposal as resulting in an 

interpretation that would implement a requirement that is not understood to be part of the 

 32 EEI comments at 3-4. 

33 Id. at 2. 

34 Id. at 3 (citing Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 1868). 

35 Ameren comments at 10 (citing NOPR, FERC Stats. & Regs. ¶ 32,639 at P 32). 
Docket No. RM08-16-000 - 17 - 

Reliability Standard, and cites the NERC balloting as evidence that the industry does not 

agree with the position that there is an implicit requirement.36

b. Technical Basis in Other Reliability Standard 

Requirements

27. Several participants claim that, while the scope of VAR-001-1, Requirement R4 is 

limited, other requirements create obligations which lead to technically sound voltage 

schedules or compliance with VAR-001-1. According to NERC, each of the 

requirements in VAR-001-1 contributes to meeting the stated objective of the Reliability 

Standard, and it is the combination of requirements that provides a technically sound 

method to achieve the purpose of VAR-001-1. NERC states that, although Requirement 

R4 does not explicitly require a voltage schedule that is technically based, reasonable and 

practical, “other requirements in VAR-001-1 do require the technical basis to be 

established.”37 NERC concludes that “as a whole” VAR-001-1 is technically sound. 

28. NERC cites Requirements R2 and R8 through R12 as requiring a transmission 

operator to have a defensible technical basis to achieve the purpose of VAR-001-1.38 

 36 Id. at 7, 10. 

37 NERC comments at 5-6. 

38 Id. at 6-7. NERC lists Requirement R2 (discussing reactive sufficiency), 

Requirement R8 (requiring a transmission operator to operate reactive resources to 

maintain system voltage limits), Requirement R9 (requiring transmission operators to 

address reactive support under first contingency conditions), Requirement R10 

(addressing system operating limit (SOL) and interconnection reliability operating limit 

(IROL) violations), Requirement R11 (providing for transformer tap settings) and 

Requirement R12 (directing a transmission operator to take preemptive action to prevent 

voltage collapse). 
Docket No. RM08-16-000 - 18 - 

NERC states that these requirements direct a transmission operator to understand system 

dynamics to maintain voltage sufficiency and stability under normal and contingency 

conditions. According to NERC, to maintain the system within limits in real-time and to 

avoid voltage collapse in the operating time horizon, a transmission operator must study 

the system on a first contingency basis and must “position the voltage and reactive profile 

of the system appropriately, including the voltage [schedules] provided to generator 

operators.”39 NERC continues, indicating that a transmission operator possesses valuable 

insight into reactive “weak spots” where additional reactive support would be beneficial 

to help it achieve the performance expectations outlined in VAR-001-1.40 

29. NERC also summarizes various planning actions that a transmission operator must 

take with respect to voltage support. NERC states that, to meet the planning obligations 

embodied in VAR-001-1, Requirements R2, R9.1 and R11, a transmission operator must 

rely on long-range and seasonal studies provided by the transmission planner. According 

to NERC, a combination of planning and operations analysis and feedback provides the 

technical foundation for voltage schedules to be maintained at buses across the 

transmission system, including generator buses. NERC concludes that “there must be a 

technical basis for” the voltage schedule provided for in Requirement R4.41

 39 Id. at 7 

40 Id. at 7-8. 

41 Id. at 9-10. 
Docket No. RM08-16-000 - 19 - 

30. To remedy the perceived disconnect, NERC suggests that the interpretation could 

be improved by stating that it is VAR-001-1, Requirement R4 that lacks an explicit 

requirement for a technically-based, reasonable, and practical voltage schedule, and “not 

the entire VAR-001-1 standard.”42 

31. EEI also indicates that, even though not part of the interpretation, the additional 

information in NERC’s filing demonstrates that the requirements in VAR-001 are based 

on sound engineering principles, but because it is not in NERC’s official interpretation, a 

remand may be warranted.43 

32. Ameren states that review of VAR-002-1a can answer Dynegy’s concerns 

regarding the “reasonable and practical” generator voltage schedule. According to 

Ameren, the interpretation would not permit unsound practices or practices that threaten 

system reliability, but instead points to VAR-002-1, Requirement R2 as establishing 

procedures that accommodate “actual generator capabilities” and “the transmission 

operator’s need to maintain voltage schedules.”44 Ameren states that the interpretation 

addresses concerns whether a voltage schedule must accommodate “reasonable” and 

 42 Id. at 9. 

43 EEI comments at 2. 

44 Ameren comments at 6 (citing NERC Petition, Exhibit B-1 at 2; NOPR, FERC 

Stats. & Regs. ¶ 32,639 at P 31 (proposing remand and rejecting Dynegy request for the 

development of compliance measures as beyond the scope of an interpretation 

proceeding)). 
Docket No. RM08-16-000 - 20 - 

“practical” generator capabilities by reference to VAR-002-1a, the Reliability Standard 

that addresses the generators’ obligations.45 

33. Ameren states that Reliability Standards VAR-001 and VAR-002, taken together, 

support a technically sound purpose of providing for safe and reliable Reactive Power 

and voltage control, as required by Order No. 693. Ameren asserts that these Reliability 

Standards as written and interpreted are sufficient to protect electric reliability.46 

34. According to FirstEnergy, both transmission operators and generator operators are 

responsible to confirm the technical basis for a voltage schedule. FirstEnergy continues, 

explaining that the stated purpose of VAR-001-1 provides the basis for Requirement R4, 

which requires a transmission operator to provide a technically sound voltage schedule 

that provides sufficient reactive support and respects bulk electric system facility ratings. 

Failure to do so, FirstEnergy submits, could adversely affect generator equipment and 

bulk electric system reliability. FirstEnergy states that VAR-002-1 requires generators to 

provide reactive support to meet this obligation; FirstEnergy suggests that a generator 

that cannot fulfill that purpose based on the voltage schedule received must coordinate an 

 45 Id. at 6 (citing NERC Petition, Transmittal Letter at 12-13 and VAR-001-1a as 

providing that “each Generator Operator shall maintain the generator voltage or Reactive 

Power output (within applicable Facility Ratings[]) as directed by the Transmission 

Operator” and Requirement R2.2 as providing that “the Generator Operator shall comply 

or provide an explanation of why the schedule cannot be met”). 

46 Id. at 7 (citing Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 5, as 

explaining that “a Reliability Standard does not necessarily need to reflect the optimal 

method for achieving its reliability goal, [but] a Reliability Standard should achieve its 

reliability goal effectively and efficiently,” and should be “sufficient to adequately 

protect Bulk-Power System reliability”). 
Docket No. RM08-16-000 - 21 - 

acceptable voltage schedule with the transmission operator in order to meet the explicit 

requirements of VAR-002-1. 

35. FirstEnergy agrees with the Commission’s proposal rejecting Dynegy’s request for 

more detailed specification of the technical requirements of the VAR-001-1 Reliability 

Standard, as beyond the scope of an interpretation proceeding. FirstEnergy claims that 

Dynegy’s suggestions are already being considered in Project 2008-01, pursuant to 

NERC’s 2009-11.47 Finally, FirstEnergy suggests that the addition of reliability 

coordinators as applicable entities would aid in mediating disputes between transmission 

operators and generator operators. 

36. According to IESO, numerous Reliability Standards supplement VAR-001-1 and 

ensure that transmission operators develop plans and procedures that provide for 

reliability.48 IESO states that transmission operators would not be able to provide for 

system reliability, prevent system operating limit or interconnection reliability operating 

limit violations, or prevent cascading outages if they do not employ sound engineering 

principles and technical expertise during the development of plans and procedures. 

37. IESO lists several Reliability Standards as supplementing VAR-001-1, including 

TOP-002-2, Requirement R2 (requiring operations plans); TOP-004-2, Requirement R6 

(requiring transmission operators to develop policies for transmission reliability, 

including controlling voltage levels); TOP-008-1, Requirement R2 (requiring 

 47 FirstEnergy comments at 8. 

48 IESO comments at 5. 
Docket No. RM08-16-000 - 22 - 

transmission operator to limit potential for IROL or SOL violations). In addition, IESO 

objects to the Commission’s view that NERC’s interpretation fails to recognize that a 

voltage schedule issued under VAR-001-1 should reflect technical analysis, including 

sound engineering and operating judgment and experience, by noting that planners are 

required to include system operating personnel in the planning process under TOP-002-2, 

Requirement R2.49

c. Enforceability

38. EEI agrees with NERC that VAR-001-1 lacks an explicit requirement to issue a 

technically based, reasonable and practical voltage and reactive schedule and also lacks 

measures or associate compliance elements in the standard. Therefore, EEI concludes 

that a transmission operator cannot be audited on what EEI terms the “subjective 

interpretation” that a voltage schedule must have a sound technical basis.50 

39. According to Ameren, NERC’s proposal correctly recognizes that a Reliability 

Standard cannot establish obligations implicitly, but instead must have stated obligations 

that can be objectively measured. Ameren states that nothing in VAR-001-1 specifies a 

technical basis for the transmission operator’s voltage schedule and tolerance band or 

requires a transmission operator to issue its supporting methodology, as Dynegy 

 49 Id. at 6 (citing NOPR, FERC Stats. & Regs. ¶ 32,639 at P 30). 

50 EEI comments at 2. 
Docket No. RM08-16-000 - 23 - 

proposed.51 IESO agrees with NERC that an implied requirement is not a stated 

requirement that can be objectively measured. 

40. Ameren states that, since there are no implicit requirements, there are no 

measurements of compliance. According to Ameren, the Reliability Standard and 

interpretations drafting teams explained that any implicit requirement is subjective, and 

could not be objectively measured and enforced.52

41. Ameren cites the Order No. 672 factors for approving a Reliability Standard as 

mandatory and enforceable under the FPA.53 According to Ameren, an implied 

 51 Ameren comments at 5-6 (citing NERC Petition, Exhibit B-1 and Dynegy Oct. 

11, 2007 request for interpretation as stating: “Requirement 4 does not impose any 

explicit obligations on the Transmission Operator other than to provide the Generator 

Operator with a voltage or reactive power output schedule and an associated tolerance 

band.”). 

52 Ameren comments at 8 (citing NERC Petition at 11; NERC proposed VAR-001-

1 interpretation at 1). 

53 Id. at 7 (citing Order No. 672, FERC Stats. & Regs. ¶ 31,204 at P 324, 327: 

The proposed Reliability Standard must be designed to achieve a specified 

reliability goal and must contain a technically sound means to achieve this 

goal. Although any person may propose a topic for a Reliability Standard 

to the ERO, in the ERO’s process, the specific proposed Reliability 

Standard should be developed initially by persons within the electric power 

industry and community with a high level of technical expertise and be 

based on sound technical and engineering criteria. It should be based on 

actual data and lessons learned from past operating incidents, where 

appropriate. The process for ERO approval of a proposed Reliability 

Standard should be fair and open to all interested persons. 

* * * 

There should be a clear criterion or measure of whether an entity is in 

compliance with a proposed Reliability Standard. It should contain or be 

accompanied by an objective measure of compliance so that it can be 

(continued) 
Docket No. RM08-16-000 - 24 - 

requirement, not contained in the language of the Reliability Standard itself, is ambiguous 

both as to what is required and what measurements will be used to determine compliance. 

Ameren concludes that such a requirement cannot be enforced fairly, and should not be 

made part of a mandatory Reliability Standard. 

42. Ameren states that disagreements may arise between transmission operators, 

NERC, generator operators and auditors over reasonableness of a technical basis or 

methodology or the practicality of a schedule.54 Ameren criticizes the proposed remand 

because it contains no instructions for how transmission operators could implement an 

implicit requirement.55 Ameren concludes that an implicit requirement is unacceptable 

and simply unworkable in the context of mandatory and enforceable electric Reliability 

Standards. 

d. Miscellaneous 

43. Some participants are concerned that this interpretation could circumvent NERC’s 

Standard development process or otherwise lacks due process.56 Ameren agrees with the 

Commission’s acknowledgement in the NOPR upholding NERC's rejection of Dynegy’s 

proposed evaluation measures. Ameren states that NERC’s interpretation should be 

 

enforced and so that enforcement can be applied in a consistent and nonpreferential manner. 

54 Ameren comments at 8. 

55 Id. at 9. 

56 Ameren comments at 10 (suggesting that remand may circumvent the Reliability 

Standards development procedure by adding new requirements to the standard violating 

the principles of due process and deference); FirstEnergy comments at 5. 
Docket No. RM08-16-000 - 25 - 

approved based on the results of the NERC ballot process. EEI states that the 

Commission provided an appropriate response in Order No. 693 by directing NERC to 

develop specific requirements for the issues addressed in the Final Rule through the 

NERC Reliability Standards development process, and questions whether Dynegy’s 

request concerning voltage schedules is an attempt to circumvent the Reliability 

Standards development process.57 These participants claim that interpretations that put 

new measures in place or would implement new requirements are beyond the scope of the 

interpretation process. 

44. Finally, participants reason that the Commission must rely on the judgment of the 

ERO in areas involving technical expertise relating to the content of the Reliability 

Standard and that, if Dynegy wishes to seek new material or measures to be added to the 

Reliability Standards, it must be handled through a Standards Authorization Request 

under the NERC Reliability Standards development process.58 Ameren states that the 

technical content of the interpretation is entitled to deference. Ameren claims that a 

remand of VAR-00l-l, Requirement R4 would add a new requirement to the Reliability 

Standard where the technical experts have acknowledged that one does not exist, without 

 57 EEI comments at 3. 

58 Ameren comments at 2; EEI comments at 2; FirstEnergy comments at 5; IESO 

comments at 4. 
Docket No. RM08-16-000 - 26 - 

going through the required standards authorization process.59 Ameren states that such a 

revision would violate due process and demonstrate a lack of deference to the Reliability 

Standards development process. 

45. On a similar note, FirstEnergy and EEI both suggest that this interpretation request 

would add requirements to the VAR-001-1 Reliability Standard that are not otherwise 

required, and the proposed clarification would be more appropriately considered in the 

ongoing standards development proceedings. FirstEnergy states that changes to 

Reliability Standards to add more detail, such as the specific technical details sought by 

Dynegy, should be addressed in the ongoing Reliability Standards development process. 

46. EEI points out that Dynegy’s request raises several process issues. EEI claims that 

NERC’s narrow interpretation, that there are no implicit requirements with regard to the 

Reliability Standard’s technical validity, could suggest that the Reliability Standard itself 

is useless. On the other hand, EEI claims that if NERC indicated that there was an 

implicit requirement, such a requirement must be made explicit in this and every other 

Reliability Standard, potentially necessitating an overhaul of the entire collection of 

Reliability Standards.60 EEI also warns that the Commission and NERC should be 

 59 Ameren comments at 10 (citing NERC Petition at Exhibit B-3 (results of the 

ballot body vote) and stating “Indeed, several members of the ballot pool for the VAR001-1 interpretation indicated their belief that Dynegy's request for an interpretation 

should have been filed as a Standards Authorization Request because the proposed 

change is so obviously beyond the scope of the current content of the Reliability 

Standard”). 

60 EEI comments at 4-5. 
Docket No. RM08-16-000 - 27 - 

careful not to allow a single entity to change a Reliability Standard via interpretations and 

that any such “backdoor” device should be avoided. 

3. Commission Determination

47. The Commission remands to the ERO the proposed interpretation of VAR-001-1, 

Requirement R4 and directs the ERO to revise the interpretation consistent with the 

Commission’s discussion below. 

a. Voltage Schedules Provided under VAR-001-1, 

Requirement R4 Must Have a Sound Technical Basis. 

48. Order No. 693 held that all Reliability Standards must be designed to achieve a 

specified reliability goal and must contain a technically sound means to achieve the 

goal.61 No participant disagrees with this assessment.62 Furthermore, no participant 

challenges the Commission’s objection that the Reliability Standards should not permit 

delivery of a voltage schedule that lacks any technical basis.63 Instead, the participants 

suggest various ways in which other Reliability Standards requirements provide that 

technical basis or at least do not permit transmission operators to engage in unsound 

practices with respect to voltage schedules.64 

 61 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 5; see NOPR, FERC Stats. 

& Regs. ¶ 32,639 at P 30. 

62 See NERC comments at 5; Ameren comments at 5; EEI comments at 2; 

FirstEnergy comments at 3-4; IESO comments at 2-3. 

63 NOPR, FERC Stats. & Regs. ¶ 32,639 at P 30. 

64 NERC comments at 5-6; EEI comments at 2 (citing NERC petition at 12-14); 

FirstEnergy comments at 5-7; IESO comments at 5. See also Ameren comments at 6 

(continued) 
Docket No. RM08-16-000 - 28 - 

49. VAR-001-1, Requirement R4 requires each transmission operator to specify a 

voltage schedule to be maintained by each generator and explains that the voltage 

schedule is a target voltage to be maintained within a tolerance band during a specified 

period. Requirement R4 is part of the means by which a transmission operator achieves 

the goal of VAR-001-1, “to ensure that voltage levels, reactive flows, and reactive 

resources are monitored, controlled, and maintained within limits in real time to protect 

equipment and the reliable operation of the Interconnection.” Because Requirement R4 

requires transmission owners to specify target voltages at each generator’s 

interconnection with the system, while taking into account specific periods of use and 

facility tolerance bands, the Requirement is not merely a ministerial requirement, but, 

rather, presupposes the exercise of engineering judgment. These determinations are 

technical in nature, and, since they represent one of the means by which the VAR-001-1 

Reliability Standard achieves its goal, they must be technically sound, that is, based on 

sound engineering. Actions that do not reflect sound engineering would not be 

technically sound.65 Therefore, the Commission adopts its NOPR proposal, and finds 

that a voltage schedule should reflect sound engineering, as well as operating judgment 

 

(suggesting that procedures in VAR-002-1 would accommodate actual generator 

capabilities and not permit unsound practices under VAR-001-1, Requirement R4). 

65 NOPR, FERC Stats. & Regs. ¶ 32,639 at P 31. 
Docket No. RM08-16-000 - 29 - 

and experience.66 The Commission remands NERC’s proposed VAR-001-1, 

Requirement R4 interpretation, in order that NERC may reconsider its interpretation 

consistent with this order. 

b. Whether Support for a Sound Technical Basis is Found in 

Other Reliability Standards and Requirements

50. Several participants, including NERC and Ameren, claim that, in the broader 

context of the Reliability Standards, there is already an obligation to use technically 

sound means to comply with VAR-001-1, Requirement R4.67 The Commission 

recognizes and appreciates, as part of the NERC filing, the additional information 

included to allay concerns that generator operators may receive a voltage schedule that is 

either unsafe or not technically feasible. However, if analysis of other Reliability 

 66 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 5 (“a Reliability Standard 

must provide for the Reliable Operation of Bulk-Power System facilities and may impose 

a requirement on any user, owner or operator of such facilities. It must be designed to 

achieve a specified reliability goal and must contain a technically sound means to achieve 

this goal. The Reliability Standard should be clear and unambiguous regarding what is 

required and who is required to comply. The possible consequences for violating a 

Reliability Standard should be clear and understandable to those who must comply. 

There should be clear criteria for whether an entity is in compliance with a Reliability 

Standard. While a Reliability Standard does not necessarily need to reflect the optimal 

method for achieving its reliability goal, a Reliability Standard should achieve its 

reliability goal effectively and efficiently.”); see also Order No. 672, FERC Stats. 

& Regs. ¶ 31,204 at P 324; accord NERC Rules of Procedure, section 302.5. 

67 NERC comments at 8-9 (discussing VAR-001-1, Requirements R2, R9.1 and 

R11); Ameren comments at 6 (discussing VAR-002-1a, Requirement R2). See also EEI 

comments at 2 (supporting NERC conclusion); IESO comments at 6 (discussing 

transmission operations Reliability Standards, TOP-002-2, et al.). However, participants 

also suggest that a failure to meet that obligation would not constitute an enforceable 

violation of VAR-001-1, Requirement R4. See EEI comments at 2. 
Docket No. RM08-16-000 - 30 - 

Standard requirements provides the necessary clarification, such analysis should be made 

part of the formal interpretation. Thus, in this case, if the actions performed pursuant to 

other Reliability Standard requirements cited in the participants’ comments describe 

actions that form the basis for development of voltage schedules, then the interpretation 

should reflect that fact. 

51. Some petitioners suggest that other Reliability Standard requirements may 

mitigate any negative impact of a voltage schedule that lacks a sound technical basis, and 

thus imply that Requirement R4 need not reflect a sound technical basis, or they suggest 

that the clarification sought by the Commission is not necessary. The Commission does 

not agree. As discussed above, voltage schedules developed pursuant to VAR-001-1, 

Requirement R4 must have a sound technical basis, and failure to properly perform the 

task would constitute an independent violation of the Reliability Standard. 

c. The Commission Is Not Imposing Implicit Requirements. 

52. The Commission disagrees with participants claiming that the Commission’s 

understanding of Requirement R4 would impermissibly create a new “implicit” 

requirement, or that such requirements would introduce an unworkable subjective 

analysis into Reliability Standard enforcement. As the NOPR stated, the Commission 

reviewed each Reliability Standard and, in Order No. 693, approved those containing 

Requirements that are sufficiently clear as to be enforceable and that do not create due 

process concerns.68 The Commission included VAR-001-1 as among the Reliability 

 68 See Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 274. 
Docket No. RM08-16-000 - 31 - 

Standards that are sufficiently clear to inform transmission operators what is required of 

them.69 Order No. 693 declined to order more specificity on the technical basis in the 

current version of VAR-001-1, but instead found that the development of more detailed 

requirements to address such concerns are best addressed by the ERO through the 

Reliability Standards development process.70 However, that finding does not suggest that 

existing requirements may be performed without any technical basis. 

53. FirstEnergy interprets the Commission’s proposal as finding that there are 

“implicit” obligations in Requirement R4 that should be explicitly incorporated into the 

Reliability Standard. To the contrary, as noted in the NOPR, the Commission has 

elsewhere declined to specify in detail how a registered entity should implement a 

Reliability Standard,71 and so we do not direct NERC to modify VAR-001-1, 

Requirement R4, at this time.72 The Commission affirms its approval in Order No. 693 

 69 Id. P 275. 

70 Id. P 1869. 

71 NOPR, FERC Stats. & Regs. ¶ 32,639 at P 31; see also Order No. 672, FERC 

Stats. & Regs. ¶ 31,204 at P 260 (stating that implementation procedures should be 

included when inextricably linked to the Reliability Standard or when leaving out 

implementation features could: (1) sacrifice necessary uniformity in implementation of 

the Reliability Standard; (2) create uncertainty for the entity that has to follow the 

Reliability Standard; (3) make enforcement difficult; and (4) increase the complexity of 

the Commission's oversight and review process). 

72 Requirement R4 does not prescribe any one particular method of achieving 

compliance, but instead permits transmission operators to implement Reliability 

Standards through a variety of technically sound means. 
Docket No. RM08-16-000 - 32 - 

of VAR-001-1, Requirement R4, and its finding that Requirement R4 is, as written, 

sufficiently clear to inform entities of what is required of them. 

d. Requirement R4 is Mandatory and Enforceable 

54. Several participants claim that any requirement under VAR-001-1 to issue a 

technically based voltage schedule cannot be audited or enforced because VAR-001-1 

lacks measures or compliance elements associated with such a requirement.73 We do not 

agree. In Order No. 693, the Commission approved Reliability Standards without 

associated measures, stating that it disagreed with comments that a Reliability Standard 

cannot reasonably be enforced, or is otherwise not just and reasonable, solely because it 

does not include enforcement measures and compliance elements. The Commission 

reasoned that while such compliance elements and enforcement measures provided useful 

guidance, “compliance will in all cases be measured by determining whether a party met 

or failed to meet the Requirement given the specific facts and circumstances of its use, 

ownership or operation of the Bulk-Power System.”74 

55. Ameren complains that a remand of the interpretation lacks specific instructions 

for transmission operators to implement an implicit Requirement. In addition, Ameren 

speculates that disagreements as to the sufficiency of a particular voltage schedule may 

arise between parties involved in implementation and enforcement. Again, the 

Commission affirms its finding in Order No. 693 that Requirement R4 is sufficiently 

 73 Ameren comments at 8; EEI comments at 2; IESO comments at 3. 

74 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 253. 
Docket No. RM08-16-000 - 33 - 

clear; to be enforceable, Reliability Standards need not “spell out in minute detail all 

factual scenarios that might violate a Requirement and the precise consequences of that 

violation.”75 

e. Procedural Issues 

56. Several participants such as Ameren, FirstEnergy, and EEI are concerned that this 

interpretation could circumvent the Reliability Standards development process. In this 

remand, the Commission is not approving new Reliability Standards or Requirements. 

Such action would be better handled via the Reliability Standards development process. 

In remanding this interpretation, we are simply instructing NERC to provide a revised 

interpretation reflecting appropriate consideration of the Commission’s ruling that a 

Reliability Standard “must be designed to achieve a specified reliability goal and must 

contain a technically sound means to achieve this goal.”76 Furthermore, the Commission, 

in considering the arguments and comments, has given due weight to the technical 

expertise of the ERO in deciding how to proceed; the ERO is directed to develop 

revisions to the Reliability Standard interpretation, consistent with this Final Rule, to 

address the Commission’s concerns.77 

 75 Id. P 274-75 (“the Commission finds that none of the Reliability Standards that 

we approve today contains an ambiguity that renders it unenforceable or otherwise unjust 

and unreasonable”). 

76 Order No. 672, FERC Stats. & Regs. ¶ 31,204 at P 324. 

77 See Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 165, 167 (“NERC states 

that the requirement that a Reliability Standard be “in the public interest” provides the 

Commission with broad discretion to review and approve a Reliability Standard. 

(continued) 
Docket No. RM08-16-000 - 34 - 

57. EEI warns the Commission that Dynegy’s request raises several process issues and 

cautions the Commission not to allow a single entity to change a Reliability Standard via 

an interpretation or any other “backdoor” device. The Commission is mindful of EEI’s 

concern, but we do not believe that we have decided the issues here in a way that allows 

an entity to change a standard through a “backdoor” effort. 

III. Information Collection Statement

58. The Office of Management and Budget (OMB) regulations require that OMB 

approve certain reporting and recordkeeping (collections of information) requirements 

imposed by an agency.78 The information contained here is also subject to review under 

section 3507(d) of the Paperwork Reduction Act of 1995.79 

 

According to NERC, implicit in the “public interest” test is that a Reliability Standard is 

technically sound and ensures an adequate level of reliability, and that the Reliability 

Standards provides a comprehensive and complete set of technically sound requirements 

that establish an acceptable threshold of performance necessary to ensure reliability of the 

Bulk-Power System.”). 

The Commission agrees with NERC that an open and transparent process is important in 

implementing section 215 of the FPA and developing proposed mandatory Reliability 

Standards. However, in Order No. 672, the Commission rejected the presumption that a 

proposed Reliability Standard developed through an ANSI-certified process 

automatically satisfies the statutory standard of review. Order No. 672, FERC Stats. 

& Regs. ¶ 31,204 at P 338. The Commission reiterates that simply because a proposed 

Reliability Standard has been developed through an adequate process does not mean that 

it is adequate as a substantive matter in protecting reliability. We, therefore, review each 

Reliability Standard to ensure that the Reliability Standard is just, reasonable, not unduly 

discriminatory or preferential, and in the public interest. 

78 5 CFR 1320.11. 

79 44 U.S.C. 3507(d). 
Docket No. RM08-16-000 - 35 - 

59. As stated above, the Commission previously approved, in Order No. 693, each of 

the Reliability Standards that are the subject of the current rulemaking. This Final Rule 

approves one interpretation to a previously approved Reliability Standard developed by 

NERC as the ERO, and remands another interpretation. The proffered interpretations 

relate to existing Reliability Standards and do not change these standards; therefore, they 

do not add to or otherwise increase entities’ current reporting burden. Thus, the Final 

Rule does not materially and adversely affect the burden estimates relating to the 

currently effective version of the Reliability Standards presented in Order No. 693. 

60. The BAL-003-0 Reliability Standard that is the subject of the approved 

interpretation was approved in Order No. 693, and the related information collection 

requirements were reviewed and approved, accordingly.80 The approved interpretation of 

BAL-003-0 does not modify or otherwise affect the collection of information already in 

place. With respect to BAL-003-0, the interpretation clarifies that the minimum 

frequency bias setting applies to systems that employ a variable bias methodology. 

Incorporating a minimum frequency bias setting into the determination of frequency 

response under automatic generation control does not change the information that a 

balancing authority reports because the same logs, data, or measurements would be 

maintained. 

 80 See Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 1901-07. 
Docket No. RM08-16-000 - 36 - 

61. The Commission is remanding the interpretation of VAR-001-1. As a result, 

information collection requirements for that Reliability Standard will not change at this 

time. 

62. Thus, the interpretations of the current Reliability Standards at issue in this 

rulemaking will not increase the reporting burden nor impose any additional information 

collection requirements. 

63. However, we will submit this Final Rule to OMB for informational purposes. 

Title: Electric Reliability Organization Interpretations of Specific Requirements of 

Frequency Response and Bias and Voltage and Reactive Control Reliability Standards. 

Action: Final Rule 

OMB Control No.: 1902-0244 

Respondents: Businesses or other for-profit institutions; not-for-profit institutions 

Frequency of Responses: On Occasion 

Necessity of the Information: This Final Rule approves an interpretation of the specific 

requirements of one Commission-approved Reliability Standard. The Final Rule finds 

the interpretation just, reasonable, not unduly discriminatory or preferential, and in the 

public interest. In addition, this rule remands an additional proposed interpretation for 

further consideration. 

Internal Review: The Commission has reviewed the proposed Reliability Standard 

interpretations and made a determination that the proposed BAL-003-1 interpretation is 

necessary to implement section 215 of the FPA. The interpretation conforms to the 
Docket No. RM08-16-000 - 37 - 

Commission’s policy for frequency response and bias within the energy industry as 

reflected in BAL-003-1. 

64. Interested persons may obtain information on the reporting requirements by 

contacting the following: Federal Energy Regulatory Commission, 888 First Street, N.E. 

Washington, D.C. 20426 [Attention: Michael Miller, Office of the Executive Director, 

Phone: (202) 502-8415, fax: (202) 273-0873, e-mail: michael.miller@ferc.gov]. 

65. For submitting comments concerning the collection(s) of information and the 

associated burden estimate(s), please send your comments to the contact listed above and 

to the Office of Information and Regulatory Affairs, Office of Information and 

Regulatory Affairs, Washington, D.C. 20503 [Attention: Desk Officer for the Federal 

Energy Regulatory Commission, phone: (202) 395-4638, fax: (202) 395-7285, e-mail: 

oira_submission@omb.eop.gov]. 

IV. Environmental Analysis

66. 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.81 The Commission has categorically excluded certain 

actions from this requirement as not having a significant effect on the human 

environment. Included in the exclusion are rules that are clarifying, corrective, or 

procedural or that do not substantially change the effect of the regulations being 

 81 Regulations Implementing the National Environmental Policy Act, 

Order No. 486, FERC Stats. & Regs. ¶ 30,783 (1987). 
Docket No. RM08-16-000 - 38 - 

amended.82 The actions proposed herein fall within this categorical exclusion in the

Commission’s regulations.

V. Regulatory Flexibility Act Analysis

67. The Regulatory Flexibility Act of 1980 (RFA)83 generally requires a description 

and analysis of final rules that will have significant economic impact on a substantial 

number of small entities. The RFA mandates consideration of regulatory alternatives that 

accomplish the stated objectives of a proposed rule and that minimize any significant 

economic impact on a substantial number of small entities. The Small Business 

Administration’s Office of Size Standards develops the numerical definition of a small 

business.84 For electric utilities, a firm is small if, including its affiliates, it is primarily 

engaged in the transmission, generation and/or distribution of electric energy for sale and 

its total electric output for the preceding twelve months did not exceed four million 

megawatt hours. The RFA is not implicated by this Final Rule because the 

interpretations discussed herein will not have a significant economic impact on a 

substantial number of small entities. 

68. In Order No. 693, the Commission adopted policies to minimize the burden on 

small entities, including approving the ERO compliance registry process to identify those 

entities responsible for complying with mandatory and enforceable Reliability Standards. 

 82 18 CFR 380.4(a)(2)(ii). 

83 5 U.S.C. 601-12. 

84 See 13 CFR 121.201. 
Docket No. RM08-16-000 - 39 - 

The ERO registers only those distribution providers or load serving entities that have a 

peak load of 25 MW or greater and are directly connected to the bulk electric system or 

are designated as a responsible entity as part of a required under-frequency load shedding 

program or a required under-voltage load shedding program. Similarly, for generators, 

the ERO registers only individual units of 20 MVA or greater that are directly connected 

to the bulk electric system, generating plants with an aggregate rating of 75 MVA or 

greater, any blackstart unit material to a restoration plan, or any generator that is material 

to the reliability of the Bulk-Power System. Further, the ERO will not register an entity 

that meets the above criteria if it has transferred responsibility for compliance with 

mandatory Reliability Standards to a joint action agency or other organization. The 

Commission estimated that the Reliability Standards approved in Order No. 693 would 

apply to approximately 682 small entities (excluding entities in Alaska and Hawaii), but 

also pointed out that the ERO’s Compliance Registry Criteria allow for a joint action 

agency, generation and transmission (G&T) cooperative or similar organization to accept 

compliance responsibility on behalf of its members. Once these organizations register 

with the ERO, the number of small entities registered with the ERO will diminish and, 

thus, significantly reduce the impact on small entities.85 

 85 To be included in the compliance registry, the ERO determines whether a 

specific small entity has a material impact on the Bulk-Power System. If these small 

entities should have such an impact then their compliance is justifiable as necessary for 

Bulk-Power System reliability. 
Docket No. RM08-16-000 - 40 - 

69. Finally, as noted above, this Final Rule addresses an interpretation of the 

BAL-003-0 Reliability Standard, which was already approved in Order No. 693, and, 

therefore, does not create an additional regulatory impact on small entities.86

VI. Document Availability

70. 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, N.E., Room 2A, 

Washington, D.C. 20426. 

71. 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 last three digits of this 

document in the docket number field. 

72. User assistance is available for eLibrary and the Commission’s website during 

normal business hours from FERC Online Support at (202) 502-6652 (toll free at 1-866-

208-3676) or e-mail at ferconlinesupport@ferc.gov, or the Public Reference Room at 

 86 The Commission remands the interpretation of the VAR-001-1 Reliability 

Standard. 
Docket No. RM08-16-000 - 41 - 

(202) 502-8371, TTY (202) 502-8659. E-mail the Public Reference Room at 

public.referenceroom@ferc.gov. 

VII. Effective Date and Congressional Notification

73. These regulations are effective [insert date 30 days from publication in 

FEDERAL REGISTER]. The Commission has determined, with the concurrence of the 

Administrator of the Office of Information and Regulatory Affairs of OMB, that this rule 

is not a “major rule” as defined in section 351 of the Small Business Regulatory 

Enforcement Fairness Act of 1996. 

List of subjects in 18 CFR Part 40 

Electric power, Electric utilities, Reporting and recordkeeping requirements. 

By the Commission. 

( S E A L ) 

Nathaniel J. Davis, Sr., 

Deputy Secretary.