134 FERC ¶ 61,210 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 40 

[Docket No. RM09-18-001; Order No. 743-A] 

Revision to Electric Reliability Organization Definition of Bulk Electric System 

(Issued March 17, 2011) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Order on Rehearing 

SUMMARY: The Commission denies rehearing and otherwise reaffirms its 

determinations in Order No. 743. In addition, the Commission clarifies certain 

provisions of the Final Rule. Order No. 743 directed the Electric Reliability Organization 

(ERO) to revise the definition of the term “bulk electric system” through the ERO’s 

Reliability Standards Development Process to address the Commission’s policy and 

technical concerns and ensure that the definition encompasses all facilities necessary for 

operating an interconnected electric transmission network pursuant to section 215 of the 

Federal Power Act. 

EFFECTIVE DATE: This order on rehearing and clarification will become effective 

upon publication in the FEDERAL REGISTER. 
Docket No. RM09-18-001 ii 

FOR FURTHER INFORMATION CONTACT: 

Robert V. Snow (Technical Information) 

Office of Electric Reliability, Division of Reliability Standards 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

Telephone: (202) 502-6716 

Patrick A. Boughan (Technical Information) 

Office of Electric Reliability, Division of Engineering, Planning and Operations 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

Telephone: (202) 502-8071 

Jonathan E. First (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

Telephone: (202) 502-8529 

Mindi Sauter (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

Telephone: (202) 502-6830 

SUPPLEMENTARY INFORMATION: 
134 FERC ¶ 61,210 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Jon Wellinghoff, Chairman; 

 Marc Spitzer, Philip D. Moeller, 

 John R. Norris, and Cheryl A. LaFleur. 

 

Revision to Electric Reliability Organization Definition 

of Bulk Electric System 

Docket No. RM09-18-001 

ORDER NO. 743-A 

ORDER ON REHEARING 

(Issued March 17, 2011) 

I. Introduction

1. On November 18, 2010, the Commission issued a Final Rule (Order No. 743)1

directing the Electric Reliability Organization (ERO), through the ERO’s Reliability 

Standards Development Process, to revise its definition of the term “bulk electric system” 

to address the Commission’s technical and policy concerns, including inconsistency in 

application, lack of oversight and exclusion of facilities that are required for the Reliable 

Operation of the interconnected transmission network, and ensure that the definition 

encompasses all facilities necessary for operating an interconnected electric transmission 

 1 Revision to Electric Reliability Organization Definition of Bulk Electric System, 

Order No. 743, 75 FR 72910 (Nov. 26, 2010), 133 FERC ¶ 61,150 (2010). 
Docket No. RM09-18-001 - 2 - 

network, pursuant to section 215 of the Federal Power Act (FPA).2

 The Commission 

stated that it believes the best way to accomplish these goals is to eliminate the regional 

discretion in the current definition, maintain a bright-line threshold that includes all 

facilities operated at or above 100 kV except defined radial facilities, and establish an 

exemption process and criteria for excluding facilities that are not necessary for operating 

the interconnected transmission network. However, the Final Rule allowed the ERO to 

develop an alternative proposal for addressing the Commission’s concerns with the 

present definition with the understanding that any such alternative must be equally 

efficient and effective3

 as the Commission’s suggested approach in addressing the 

identified technical and other concerns, and may not result in a reduction in reliability. 

2. In this order, we deny requests for rehearing of the Final Rule. Further, we grant 

in part, and deny in part, requests for clarification of the Final Rule, as discussed below. 

A. Summary of Order No. 743

3. In Order No. 693, the Commission approved, with reservations, the current 

North American Electric Reliability Corporation (NERC) definition of the term “bulk 

electric system.”4

 That definition provides: 

 2

 16 U.S.C. 824o (2006). 

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

FERC Stats. & Regs. ¶ 31,242, at P 31 (2007), order on reh’g, Order No. 693-A, 

120 FERC ¶ 61,053 (2007). 

4

 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 75. 
Docket No. RM09-18-001 - 3 - 

 

As defined by the Regional Reliability Organization, the electrical 

generation resources, transmission lines, interconnections with 

neighboring systems, and associated equipment, generally operated 

at voltages of 100 kV or higher. Radial transmission facilities 

serving only load with one transmission source are generally not 

included in this definition.5

 

4. However, the Commission noted its concern that the current “bulk electric system” 

definition has the potential for gaps in coverage of facilities, and indicated that it would 

revisit the issue.6

 In Order No. 743, the Commission returned to the issue. The 

Commission identified several concerns with the current definition that may compromise 

reliability. The Commission indicated that Order No. 743’s aim is to eliminate 

inconsistencies across regions, eliminate the ambiguity created by the current discretion 

in NERC’s definition of bulk electric system, provide a backstop review to ensure that 

any variations do not compromise reliability, and ensure that facilities that could 

significantly affect reliability are subject to mandatory rules.7

 Thus, Order No. 743 

directed the ERO to revise the definition of “bulk electric system” through the NERC 

Standards Development Process to address the Commission’s concerns.8

 Order No. 743 

also directed the ERO to develop an exemption process that includes clear, objective, 

5 Id. n.47 (quoting NERC’s definition of “bulk electric system”). 

6 Id. P 77. 

7

 Order No. 743, 133 FERC ¶ 61,150 at P 2. 

8 Id. P 16. 
Docket No. RM09-18-001 - 4 - 

transparent and uniformly applicable criteria for exempting facilities that are not 

necessary for operating the interconnected transmission grid.9

5. The Commission stated that it believes the best way to address the identified 

concerns is to eliminate the Regional Entities’ discretion to define “bulk electric system” 

without ERO or Commission review, maintain a bright-line threshold that includes all 

facilities operated at or above 100 kV except defined radial facilities, and adopt an 

exemption process and criteria for excluding facilities that are not necessary to operate an 

interconnected electric transmission network. However, the Commission specified that 

NERC may propose a different solution that is equally efficient and effective as the 

Commission’s suggested approach in addressing the Commission’s technical and other 

concerns so as to ensure that all necessary facilities are included within the scope of the 

definition.10 

B. Requests for Rehearing

6. The following entities have filed timely requests for rehearing or for clarification 

of Order No. 743: American Public Power Association (APPA); Consumers Energy 

Company (Consumers); Edison Electric Institute (EEI); Exelon Corporation (Exelon); 

National Rural Electric Cooperative Association (NRECA); New York State Public 

Service Commission (NYPSC); Portland General Electric Company (Portland General); 

Public Power Council; City of Redding, California (Redding); Public Utility District 

 9 Id. P 112-115. 

10 Id. 
Docket No. RM09-18-001 - 5 - 

No. 1 of Snohomish County, Washington (Snohomish); Transmission Access Policy 

study Group (TAPS); Western Petitioners;11 Wisconsin Electric Power Company 

(Wisconsin Electric); and Transmission Agency of Northern California (TANC).12 

II. Discussion

A. Scope of Order No. 743 and Commission Directive

7. Section 215(d)(5) of the FPA authorizes the Commission to direct the ERO to 

submit to the Commission a new or revised Reliability Standard that addresses a specific 

matter identified by the Commission.13 In Order No. 743, the Commission explained that 

this authority also includes the authority to direct the ERO to revise the definition of a 

term used in a Reliability Standard. 

 11 Blachly-Lane Electric Cooperative, Central Electric Cooperative, Inc., Central 

Lincoln People’s Utility District, Clearwater Power Company, Consumers Power Inc., 

Coos-Curry Electric Cooperative, Inc., Douglas Electric Cooperative, Fall River Rural 

Electric Cooperative, Inc., Lane Electric Cooperative, Inc., Lincoln Electric Cooperative, 

Inc., Lost River Electric Cooperative, Northern Lights, Inc., Mason Public Utility District 

No. 3, Northwest Public Power Association, Northwest Requirements Utilities, 

Okanogan County Electric Cooperative, Inc., Pacific Northwest Generating Cooperative, 

Public Utility District No. 1 of Clallam County, Public Utility District No. 1 of 

Snohomish County, Raft River Rural Electric Cooperative, Inc., Salem Electric 

Cooperative, Salmon River Electric Cooperative, Inc., Umatilla Electric Cooperative, 

Utah Associated Municipal Power Systems, Washington Rural Electric Cooperative 

Association, and West Oregon Electric Cooperative, Inc. 

12 The California Public Utilities Commission (CPUC) filed comments on 

January 25, 2011. The Commission rejects the CPUC’s comments as an untimely request 

for rehearing under Rule 713(b) of the Commission’s Rules of Practice and Procedure. 

13 Order No. 743, 133 FERC ¶ 61,150 at P 29. 
Docket No. RM09-18-001 - 6 - 

 

8. Pursuant to this authority, the Commission directed the ERO to modify the 

definition of “bulk electric system” in order to address certain technical and policy 

concerns identified by the Commission.14 Specifically, the Commission observed that 

Regional Entities currently have broad discretion to define the parameters of the bulk 

electric system in their regions, and that the exercise of this discretion has led to 

inconsistencies in how facilities are classified within and among regions, to the effect that 

some facilities necessary to reliably operate the interconnected transmission network 

have been excluded from the obligation to comply with mandatory Reliability Standards. 

The Commission stated that one means to address its concerns is to eliminate the regional 

discretion in the ERO’s current definition, maintain the bright-line threshold that includes 

all facilities operated at or above 100 kV except defined radial facilities, and establish an 

exemption process and criteria for excluding facilities the ERO determines are not 

necessary for operating the interconnected transmission network.15 However, the 

Final Rule made clear, the ERO may develop an alternative proposal for addressing the 

Commission’s concerns with the current definition and any such alternate proposal must 

be equally efficient and effective as the Commission’s suggested approach for addressing 

the identified concerns, may not result in a reduction in reliability, and must be supported 

with a technical analysis that demonstrates and explains, with a technical record 

14 Id. P 30. 

15 Id. 
Docket No. RM09-18-001 - 7 - 

sufficient for the Commission to make an informed decision, how it provides the same 

level of reliability as the Commission’s suggested solution.16 

1. Identifying the Specific Matter to be Addressed

9. NRECA requests clarification, or in the alternative rehearing, that the Commission 

seeks to resolve a narrow concern that ambiguity in the bulk electric system definition 

and lack of backstop review at NERC has permitted inconsistencies across regions, and 

that the Northeast Power Coordinating Council (NPCC) in particular has not made all 

facilities that could significantly affect reliability subject to the Reliability Standards. 

NRECA expresses concern that the Final Rule states in several places that NERC must 

address the Commission’s “technical and other concerns” without specifying those 

concerns.

17 NRECA asks that the Commission clarify the specific matter and present a 

clear list of technical and other concerns to assist NERC in developing appropriate and 

responsive solutions. 

10. NRECA further seeks clarification whether NERC, in exercising its technical 

expertise, may choose to address the specific concerns identified by the Commission 

through an alternative other than an amendment to the definition of bulk electric system. 

NRECA points out that, while Order No. 743 sets out a “preferred solution,” it also 

allows the ERO to develop an alternative proposal for addressing the Commission’s 

concerns. NRECA states that it is not clear from the Final Rule if the ERO has discretion 

 16 Id. P 31, 74. 

17 NRECA at 11; citing Order No. 743, 133 FERC ¶ 61,150 at P 16, 31 and 96. 
Docket No. RM09-18-001 - 8 - 

whether and how it amends the definition of bulk electric system, or only how to amend 

the definition. NRECA seeks clarification, or in the alternative rehearing, that the ERO 

can comply with the Final Rule by filing an alternative approach that does not amend the 

definition, provided that the alternative addresses the Commission’s concerns with 

inconsistency, lack of oversight and exclusion of facilities that are required for the 

reliable operation of the interconnected transmission network. According to NRECA, 

denying the ERO the ability to develop an alternative to amending the bulk electric 

system definition is tantamount to the Commission prescribing the text of a Reliability 

Standard and denies the ERO a full range of options in addressing the specific matter 

identified by the Commission. 

Commission Determination

11. We clarify that the specific issue the Commission directed the ERO to rectify is 

the discretion the Regional Entities have under the current bulk electric system definition 

to define the parameters of the bulk electric system in their regions without any oversight 

from the Commission or NERC.18 As we explained in the Final Rule, NPCC’s use of 

this discretion has resulted in an impact-based approach to defining the bulk electric 

system that allows significant subjectivity in application and thus creates anomalous 

results.19 While NPCC’s use of its discretion brought the problems with the current 

definition to our immediate attention, the Commission’s concern is potentially broader 

 18 Order No. 743, 133 FERC ¶ 61,150, at P 72. 

19 Id. P 77-78. 
Docket No. RM09-18-001 - 9 - 

hat 

sults. 

because any region could use its discretion to define the bulk electric system in a way t

leads to similar inconsistent and anomalous re

12. We decline to provide the clarification NRECA requests regarding NERC’s ability 

to address the specific matter through means other than revising the definition, and also 

deny rehearing on the issue. As noted above, our concern with the current bulk electric 

system definition is rooted in the unfettered discretion granted therein to Regional 

Entities to define the term. Contrary to NRECA’s claim, it is well within our section 

215(d)(5) authority to direct NERC to address the specific issue we have identified – the 

overly broad definition. We have not directed the ERO to revise the definition to 

incorporate a specified result; rather, we require that the change address our concerns. 

2. Standard of Review

13. NRECA requests clarification that the Commission is not imposing a higher 

standard of review in the Final Rule than permitted by section 215 of the FPA. NRECA 

explains that the Final Rule allows the ERO to develop an alternative to the 

Commission’s suggested approach provided that it is “as effective as, or more effective 

than, the Commission’s proposed approach” and must not “result in a reduction in 

reliability.”20 NRECA contends that this standard of review is not in the statute and, 

rather, that the Commission should clarify that it will judge by the statutory provision that 

the proposal provides for an “adequate level of reliability.” NRECA contends that this 

phrase connotes a range of possible solutions. NRECA claims that the Commission’s 

 20 NRECA at 38, quoting Order No. 743, 133 FERC ¶ 61,158 at P 141. 
Docket No. RM09-18-001 - 10 - 

approach, which allows the Commission’s suggested solution to serve as a benchmark for 

all subsequent proposals, suggests a different, higher standard than “adequate level of 

reliability.” 

Commission Determination

14. FPA section 215(d)(2) establishes the standard of review the Commission must 

apply to ERO submissions with respect to the content of Reliability Standards: 

The Commission may approve, by rule or order, a proposed reliability 

standard or modification to a reliability standard if it determines that the 

standard is just, reasonable, not unduly discriminatory or preferential, and 

in the public interest. The Commission shall give due weight to the 

technical expertise of the Electric Reliability Organization with respect to 

the content of a proposed standard or modification to a reliability standard 

and to the technical expertise of a regional entity organized on an 

Interconnection-wide basis with respect to a reliability standard to be 

applicable within that Interconnection, but shall not defer with respect to 

the effect of a standard on competition. A proposed standard or 

modification shall take effect upon approval by the Commission.21 

As the statute specifies, the standard of review the Commission must utilize is whether 

the proposed Reliability Standard or modification to a Reliability Standard is “just, 

reasonable, not unduly discriminatory or preferential, and in the public interest.” 

15. We disagree with NRECA’s assertion that section 215(c)(1) establishes a standard 

of review the Commission must apply to ERO submissions. Section 215(c) sets forth the 

criteria the Commission must consider in certifying an ERO, and section 215(c)(1) 

specifies that one of the considerations for certification is whether the ERO applicant 

 21 16 U.S.C. 824o(d)(2). 
Docket No. RM09-18-001 - 11 - 

“has the ability to develop and enforce ... reliability standards that provide for an 

adequate level of reliability of the bulk-power system.”22 

16. Certainly, whether a proposed Reliability Standard provides for an adequate level 

of reliability is included in the factors used in determining whether the proposal is just 

and reasonable, but it is not the standard of review.23 The Commission’s statement that 

any alternative proposal must be “as effective as, or more effective than, the 

Commission’s proposed approach” and must not “result in a reduction in reliability” 

provides guidance regarding the Commission’s view of what is necessary to produce not 

only an adequate level of reliability but also a result that accords with the section 

215(d)(2) review criterion.24 

B. Jurisdictional Issues

17. Entities claim that the Commission over-stepped its jurisdiction in three ways. 

First, they contend that the Commission exceeded its authority by requiring a bright-line 

100 kV threshold for determining which facilities are included in the bulk electric system. 

 22 16 U.S.C. 824o(c). 

23 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, at P 320-338, order on reh’g, 

Order No. 672-A, FERC Stats. & Regs. ¶ 31,212 (2006). 

24 See Transmission Relay Loadability Reliability Standard, Order No. 733-A, 

134 FERC ¶ 61,127, at P 24-27 (2011) (stating that the Commission’s detailed guidance 

on a possible approach to address its underlying concern, including a statement that any 

alternative approach must be “equally efficient and effective” does not establish a 

“rebuttable presumption” in favor of the Commission’s suggested approach). 
Docket No. RM09-18-001 - 12 - 

Second, entities argue that Order No. 743 fails to recognize the statutory exclusion of 

facilities used in local distribution of electric energy. Third, entities claim that the 

Commission fails to give due weight to the ERO’s technical expertise. Several requests 

for rehearing, such as the NYPSC, Public Power Council and Snohomish, merge these 

arguments together in more global claims that the Final Rule is in error and should be 

withdrawn. 

1. 100 kV Bright-Line Threshold

18. The NYPSC and Public Power Council argue that the Commission’s decision to 

“direct the ERO to define the bulk electric system as all facilities operated at 100 kV and 

above” is arbitrary and capricious.25 They state that section 215(a) of the FPA explicitly 

excludes facilities used in local distribution of electric energy. Thus, the NYPSC 

reasons, “by defining the bulk-power system as all facilities operating at above 100 kV, 

the Commission exceeded its jurisdiction by encompassing facilities that are clearly part 

of the non-bulk power system....”26 The NYPSC contends that the Commission 

incorrectly assumes that a facility is considered part of the bulk electric system simply 

because it is operated at or above 100 kV. The NYPSC recites evidence, presented in its 

Notice of Proposed Rulemaking (NOPR) comments, that facilities in New York City do 

not serve a bulk system function due to the high concentration of load served by those 

lines. While noting that the Final Rule dismissed this evidence, the NYPSC contends that 

 25 NYPSC at 12; see also Public Power Council at 8-9. 

26 NYPSC at 13. 
Docket No. RM09-18-001 - 13 - 

 

“it is invalid to conclude that all facilities rated at 100 kV and above support the 

bulk-power system based on a belief that ‘most’ of those facilities are not involved in 

local distribution.”27 Similarly, Public Power Council and Snohomish contend that the 

Final Rule, by mandating a 100 kV bright-line test, will improperly classify many 115 kV 

distribution facilities in the Western Interconnection as bulk electric system facilities. 

19. The NYPSC notes that the Final Rule explained that entities would have an 

opportunity to seek an exemption if they believe certain facilities should not be included 

in the bulk electric system. Based on this, the NYPSC claims that the Final Rule 

implicitly acknowledged that various non-jurisdictional facilities are included within the 

Commission’s “redefinition” of bulk electric system. It also claims that this approach is 

inappropriate, i.e., the Commission cannot assume it has jurisdiction over facilities 

operated above 100 kV unless and until an entity demonstrates otherwise. The NYPSC 

claims that the Commission also conceded that the 100 kV threshold is overly broad 

because “several 115 and 138 kV facilities that some entities term as ‘distribution’ may 

be needed to reliably operate the interconnected transmission system.”28 According to 

the NYPSC, by stating that these facilities “may” be needed for reliability of the 

interconnected system, the Commission acknowledges that they may not be needed. 

Similarly, Portland General argues that the Commission cannot claim jurisdiction over 

any local distribution facilities and expresses concern that the above language from the 

27 NYPSC at 15. 

28 NYPSC at 17, quoting Order No. 743, 133 FERC ¶ 61,150 at P 37. 
Docket No. RM09-18-001 - 14 - 

Final Rule wrongly suggests that some local distribution facilities are jurisdictional under 

section 215. 

Commission Determination

20. At the outset, the Commission emphasizes that Order No. 743 did not mandate or 

direct NERC to adopt a 100 kV bright-line threshold. Order No. 743 directed NERC to 

undertake the process of revising the bulk electric system definition to address the 

Commission’s concerns about the broad discretion the current definition grants to 

Regional Entities to modify the definition without Commission or ERO oversight, and 

provided a suggested solution. Specifically, the Order directed the ERO to revise the 

definition of bulk electric system “through the NERC Standards Development Process to 

address the Commission’s concerns.”29 The Commission stated its belief that one 

effective way to address those concerns would be to eliminate the regional discretion 

contained in the current definition, which allows Regional Entities to define the term 

without Commission or ERO oversight; maintain the threshold contained in the current 

definition, which includes all facilities operated at or above 100 kV except defined radial 

facilities; and adopt an exemption process and criteria for excluding facilities that the 

ERO determines are not necessary to operate an interconnected electric transmission 

network. The Final Rule, however, did not mandate this approach as it further provided 

 29 Order No. 743, 133 FERC ¶ 61,150 at P 16. 
Docket No. RM09-18-001 - 15 - 

that NERC “may propose a different solution that is as effective as, or superior to, the 

Commission’s proposed approach.”30 

21. Order No. 743’s approach is entirely within the Commission’s statutory authority 

and properly allows the ERO to develop the revised bulk electric system definition using 

its technical expertise. We, therefore, reject the requests for rehearing arising from the 

inaccurate premise that the Commission mandated a 100 kV bright-line threshold. 

Beyond the concerns related to the Commission’s authority, the substance of the 

arguments raised by the NYPSC, Public Power Council, Snohomish and Western 

Petitioners relate to the term “used in local distribution” and differentiating between local 

distribution and transmission, which we address below. 

22. Further, we disagree with the NYPSC’s claim that the Final Rule implicitly 

acknowledges that various non-jurisdictional facilities are included within the 

Commission’s “redefinition” of bulk electric system. As we clarify herein, regardless of 

the 100 kV threshold, facilities that are determined to be local distribution will be 

excluded from the bulk electric system. Further, NERC has yet to develop a modified 

definition, so the NYPSC’s claim is unfounded at this time. 

2. Facilities Used in Local Distribution

23. Western Petitioners, Portland General, Snohomish, and Redding point out that 

section 215(a) of the FPA expressly exempts facilities “used in the local distribution of 

electric energy” and, in section 215(i), provides that the ERO “shall have authority to 

 30 Id. 
Docket No. RM09-18-001 - 16 - 

develop and enforce compliance with reliability standards for only the bulk-power 

system.” On this basis, Western Petitioners and Redding argue that the Final Rule errs by 

not clearly stating that the revised definition of bulk electric system must exclude 

all facilities that are used in local distribution. Western Petitioners suggest that the 

Final Rule, by emphasizing that the revised definition must include “all facilities 

necessary for operating an interconnected electric transmission network,” including lower 

voltage facilities operated in parallel and in support of higher voltage facilities, “could 

sweep in numerous local distribution facilities.”31 

24. Similarly, Portland General claims that the Commission erred by failing to clearly 

and consistently acknowledge the statutory exclusion of facilities used in local 

distribution of energy. Portland General argues that the failure to clearly delineate this 

exclusion is inconsistent with Detroit Edison Co. v. FERC, 334 F.3d 48 (D.C. Cir. 2003), 

where the court rejected the Commission’s interpretation of the phrase “used in local 

distribution” in section 201 of the FPA as rewriting the statute to exclude from the 

Commission’s jurisdiction only facilities used exclusively in local distribution. 

Commission Determination

25. We disagree that the Final Rule is at odds with commenters’ view. In Order No. 

743, the Commission acknowledged that “Congress has specifically exempted ‘facilities 

used in the local distribution of electric energy’” from the Bulk-Power System 

 31 Western Petitioners at 10; see also Public Power Council at 16. 
Docket No. RM09-18-001 - 17 - 

definition.32 Since such facilities are exempted from the Bulk-Power System, they also 

are excluded from the bulk electric system. Therefore, the Commission agrees with 

Western Petitioners and others that facilities used in the local distribution of energy 

should be excluded from the revised bulk electric system definition. 

3. Due Weight to Expertise of the ERO 

26. As mentioned above, the NYPSC, Snohomish and Public Power Council 

characterize the Final Rule as mandating the ERO to develop a revised definition of bulk 

electric system that incorporates a nationally uniform, 100 kV bright-line test. Based on 

this understanding, they argue that the Final Rule’s directive exceeds the Commission’s 

authority under section 215(d)(5) of the FPA because it limits NERC’s and the Western 

Electric Coordinating Council’s (WECC) “substantial discretion” to develop Reliability 

Standards based upon their technical expertise. Public Power Council and Snohomish 

claim that the directive also denies the due weight to which the ERO or an 

Interconnection-wide Regional Entity is entitled pursuant to FPA sections 215(d)(2) 

and (3). 

27. Public Power Council and Snohomish argue that the elimination of regional 

discretion directed in the Final Rule based on a desire for uniformity is unsupported. 

They also claim that this is inconsistent with the intent of Congress to allow for regional 

variation as evidenced by the provisions of section 215 that require the ERO to rebuttably 

presume that a WECC-developed Reliability Standard satisfies the statutory criteria for 

 32 Order No. 743, 133 FERC ¶ 61,150 at P 37. 
Docket No. RM09-18-001 - 18 - 

 

approval and that the Commission give due weight to WECC’s expertise. Public Power 

Council and Snohomish also cite to the legislative history to support their claim that 

Congress recognized the need for regional differences and rejected a uniform, centralized 

approach. Further, they argue that “due weight” equates to “substantial deference” based 

on court precedent and statutory analysis.33 

28. The NYPSC, Snohomish and Public Power Council claim that, while the 

Commission has authority under section 215(d)(5) of the FPA to require the ERO to 

address a specific matter, the Commission went beyond its authority pursuant to that 

provision by prescribing the particular content of a Reliability Standard. They contend 

that the ERO, in the first instance, should decide how the Commission’s specific 

concerns are best addressed. The NYPSC acknowledges that the Commission indicated 

that the ERO has discretion to develop an alternative that is as effective as, or superior to, 

the Commission’s bright-line approach, but claims that the “narrowly tailored guidance” 

limits the ERO’s discretion and, thus, the Commission acted beyond its statutory 

authority. For all these reasons, according to the NYPSC and Public Power Council, the 

Commission abused its discretion in imposing a 100 kV bright-line rule, thereby denying 

NERC and WECC the opportunity to develop a different threshold or methodology based 

on their expertise. 

 

33 Snohomish at 18-19, citing, e.g., City of Oconto Falls v. FERC, 204 F.3d 1154 

(D.C. Cir. 2000); Public Power Council at 19-20. 
Docket No. RM09-18-001 - 19 - 

Commission Determination

29. As indicated previously, Order No. 743 did not mandate a specific result. Rather, 

the Commission determined that NERC should use its technical expertise to develop a 

definition that addresses the Commission’s concerns with regional discretion in the 

current definition. The present definition contains the 100 kV reference, and the 

Commission did not change it in Order No. 743, other than to suggest a solution that 

would remove “generally” from the current definition’s reference to a 100 kV threshold 

and eliminate unchecked regional discretion. The Commission’s suggestion of one way 

to address the enumerated concerns does not preclude NERC from proposing an alternate 

solution. 

30. Public Power Council and Snohomish argue that there is no evidence supporting 

the Commission’s decision to require NERC to develop a uniform national bulk electric 

system definition. However, uniformity, absent a showing that the alternative is more 

stringent or necessitated by a physical difference, has been a hallmark of the mandatory 

Reliability Standards construct since its inception. In establishing the framework for 

developing Reliability Standards, we adopted the principle that proposed Reliability 

Standards should “be designed to apply throughout the interconnected North American 

Bulk-Power System, to the maximum extent this is achievable with a single Reliability 
Docket No. RM09-18-001 - 20 - 

 

Standard.”34 The same principle holds true for definitions contained within the 

Reliability Standards. 

31. Moreover, we are not prohibiting the Interconnection-wide regional entities from 

arriving at their own regional differences. However, as we stated in Order No. 743, 

“[c]ommenters have not provided compelling evidence that the proposed definition 

should not apply to the United States portion of the Western Interconnection as a 

threshold matter.”35 Conversely, the Commission does have a compelling concern that 

the subjectivity and lack of ERO and Commission oversight embodied in the current 

definition could result in the problems we identified in the NPCC region occurring in 

other regions, further supporting adoption of a uniform national definition. As Order 

No. 743 indicated, establishing such a uniform national definition does not preclude a 

region from proposing a regional difference that is more stringent than the continent-wide 

definition, including a regional difference that addresses matters that the continent-wide 

definition does not, or a regional definition that is necessitated by a physical difference in 

the Bulk-Power System.36 

32. The Commission finds that the arguments by Public Power Council and 

Snohomish that the Commission has failed to give due weight to NERC or an 

Interconnection-wide Regional Entity as required under sections 215(d)(2) and (3) are 

34 Order No. 672, FERC Stats. & Regs. ¶ 31,204 at P 331. 

35 Order No. 743, 133 FERC ¶ 61,150 at P 141. 

36 Id.
Docket No. RM09-18-001 - 21 - 

premature. Once NERC has developed a proposed bulk electric system definition, the 

Commission will evaluate the proposal and all supporting evidence and documentation 

under section 215(d)(2). Similarly, should one of the two Regional Entities organized on 

an Interconnection-wide basis develop a proposal for a regional bulk electric system 

definition, the ERO must evaluate the proposal according to requirements of section 

215(d)(3). 

C. Challenges to Order No. 743’s Technical Rationale

1. 100 kV Bright-Line Threshold

33. The NYPSC, Public Power Council, and Snohomish request rehearing, claiming 

that the Commission erred in directing NERC to revise the bulk electric system definition 

to include facilities operated at 100 kV and above where the record lacks a technical 

justification for a bright-line test. The NYPSC contends that, because the bright-line 

100 kV threshold adopted by the Commission was not based on whether those facilities 

are necessary for operating the interconnected network, the Commission’s decision 

lacked a technical justification. The NYPSC claims that the Commission’s approach 

results in a “superficial consistency” and that Order No. 743 contains no factual analysis 

as to why 100 kV is the appropriate threshold. It contends that the examples identified by 

the Commission “that are purported to support the 100 kV bright-line were all 115 kV or 

higher.”37

 37 NYPSC at 19. 
Docket No. RM09-18-001 - 22 - 

34. Further, the NYPSC argues that the Commission incorrectly assumes that because 

a facility operates at 100 kV or above in one part of the country that all facilities operated 

at similar voltages across the country should be treated as part of the Bulk-Power System. 

It objects to the Commission’s reliance on events on facilities in other regions as rationale 

for determining that similar facilities in the NPCC region are part of the bulk electric 

system. According to the NYPSC, “that logic does not hold true, since there are various 

facilities operated at the same voltages across the country that perform different functions 

and interact to different degrees with the bulk system, depending on the regional 

differences.”38 The NYPSC reiterates that it presented evidence in its earlier comments 

that certain 138 kV facilities in New York City do not serve a bulk electric system 

function due to the high concentration of load served by those lines. The NYPSC 

contends that the Final Rule wrongfully dismissed this evidence by indicating that it does 

“not believe that most of these facilities are local distribution.”39 The NYPSC argues that 

it is invalid to conclude that all facilities rated 100 kV or above support the bulk electric 

system based on a belief that “most” of these facilities are not involved in local 

distribution. 

Commission Determination

35. As noted previously, contrary to the commenters’ assertions, the Commission did 

not direct or mandate that the bulk electric system definition include a bright-line 100 kV 

 38 Id. at 14. 

39 Id. at 15, quoting Order No. 743, 133 FERC ¶ 61,150 at P 39 (emphasis added). 
Docket No. RM09-18-001 - 23 - 

 

threshold. Instead, the Commission directed NERC to address the inconsistency, lack of 

oversight and exclusion of facilities that are required for the reliable operation of the 

interconnected transmission network, outlined by the Commission in Order No. 743 

using the technical expertise available to NERC. The Commission suggested that one 

means to address its concerns would be to, among other things, maintain the 100 kV 

threshold and radial exclusion contained in the current definition, but left it to NERC’s 

discretion and technical expertise to develop a revised definition. The Commission also 

supported its suggested solution.40

36. Nonetheless, we will reiterate and expand on that discussion here. The 

Commission’s suggested solution of a 100 kV threshold paired with an exemption 

process, in essence, merely clarifies the current NERC definition, which classifies 

facilities operating at 100 kV or above as part of the bulk electric system. 

37. As discussed in Order No. 743, the NPCC material impact assessment has resulted 

in inconsistent classification of some facilities along and within Regional Entity 

borders.41 Further, Order No. 743 pointed out the failure of the NPCC test to classify 

facilities associated with nuclear generation as part of the bulk electric system and thus 

subject to NERC Reliability Standards.42 The suggested 100 kV threshold would 

maintain the current assumption, under NERC’s current definition, that non-radial 

40 See, e.g., Order No. 743, 133 FERC ¶ 61,150 at P 72-73, 85. 

41 Order No. 743, 133 FERC ¶ 61,150, P 80. 

42 Id. P 84. 
Docket No. RM09-18-001 - 24 - 

100 kV transmission facilities (not local distribution) are part of the bulk electric system 

unless exempted through the process NERC develops. 

38. The Commission disagrees with the characterization that its suggested approach 

will only achieve superficial consistency – our suggested approach will require that 

facilities needed for the reliable operation of interconnected electrical network comply 

with the NERC Reliability Standards. Regardless of whether NERC adopts our 

suggested solution in whole or in part, or develops another approach, the bulk electric 

system definition and related processes that NERC ultimately produces, and the 

Commission approves, will significantly reduce or eliminate reliability problems arising 

from incomplete Reliability Standard coverage resulting from ineffective material impact 

assessments and inconsistent classification of facilities. The Final Rule eliminates these 

problems by directing the ERO to revise the definition of bulk electric system in a way 

that addresses the concerns outlined in the Final Rule. 

39. The NYPSC argues that the Commission did not provide any evidence supporting 

a 100 kV threshold since all three examples in Order No. 743 involved facilities 115 kV 

or higher. However, as indicated in Order No. 743, the current NERC bulk electric 

system definition contains a general 100 kV threshold. The Commission’s suggested 

solution simply would eliminate regional discretion that is not subject to review by the 

ERO or the Commission in the application of the current threshold. Additionally, the 

NYPSC’s argument presents a distinction without a difference, since nominal voltage 

levels are established in industry for use in power systems but no voltage classification 
Docket No. RM09-18-001 - 25 - 

 

exists at 100 kV.43 Therefore, a 100 kV threshold will effectively capture the same 

facilities as a 115 kV threshold. 

40. The Commission also disagrees with the NYPSC’s characterization of the 

suggested 100 kV threshold as treating all facilities operated at similar voltages across the 

country as part of the bulk electric system. As we have explained, the Commission views 

the suggested threshold as a first step or proxy in determining which facilities are 

included and which are excluded or exempted from the bulk electric system. The 

Commission provided considerable support in the Final Rule for its belief that facilities 

operated at or above 100 kV are sufficiently similar throughout the continental United 

States to be able to use a 100 kV threshold as an initial line of demarcation, which the 

ERO would further refine using exclusions (such as for radial facilities serving only load 

with one transmission source) and exemptions.44 Similarly, we are not persuaded by the 

NYPSC’s contention that Order No. 743’s reliance on events in several regions as 

support for taking action on a nationwide basis was misplaced. The facilities in the 

several regions are sufficiently similar to allow the Commission to draw technical 

justification for its actions from these events. The same configurations cited in the 

examples and the areas described in Order No. 743 can be found throughout the 

43 See, e.g., American National Standards Institute, Incorporated (ANSI) Standard 

C84.1, Electrical Power Systems and Equipment-Voltage Ratings (60Hz).

44 See, e.g., Order No. 743, 133 FERC ¶ 61,150 at P 73, 139-140. 
Docket No. RM09-18-001 - 26 - 

country.45 Facilities operated at 100-200 kV, in parallel with extra high voltage facilities, 

connect areas with generation to distant hubs and load centers.46 As discussed in Order 

No. 743, failure of 100-200 kV facilities has caused cascading outages that would have 

been minimized or prevented if entities were in compliance with the NERC Reliability 

Standards.47 For the reasons discussed above, the Commission denies the requests for 

rehearing. 

2. Impact-Based Methodology

41. The NYPSC requests rehearing on the Commission’s rejection of an impact-based 

test for identifying bulk electric system elements and asks that the Commission 

reconsider an impact-based test as a viable approach. The NYPSC asserts that “NERC 

and the NPCC have both determined that the NPCC’s impact-based definition, coupled 

with its regionally tailored reliability criteria, effectively and efficiently ensures 

reliability.”48 It contends that, because an impact-based test identifies “facilities and 

control system necessary for operating an interconnected electric energy transmission 

 45 The Commission reviewed transmission maps available in annual Form 715 

submissions (Form 715 submissions). (Form 715 is the “Annual Transmission Planning 

and Evaluation Report,” in which operators of integrated transmission at or above 100 kV 

submit to the Commission base case power flow and transmission system maps and 

diagrams. Submissions are considered Critical Energy Infrastructure Information (CEII) 

and are subject to the Commission’s CEII rules.) 

46 Id. 

47 Order No. 743, 133 FERC ¶ 61,150, at P 87. 

48 NYPSC at 28. 
Docket No. RM09-18-001 - 27 - 

 

network,” that test is consistent with section 215 of the FPA and obviates the 

Commission’s concern that a discrepancy in definitions could result in reliability gaps.49 

The NYPSC argues that the Commission dismissed the impact approach based on a 

single event and the stated need for a consistent and comprehensive test. In response, the 

NYPSC argues that Order No. 743 does not identify how inconsistencies have impacted 

or may impact the reliable operation of the bulk electric system. Finally, the NYPSC 

asserts that the Commission’s concerns may be capable of being addressed through 

modifications to the existing impact tests and the Commission should consider the 

validity of such an approach. 

42. Public Power Council also expresses concern that the Commission’s discussion 

about material impact analysis leaves no room for a meaningful test to distinguish 

between facilities that are necessary for the operation of the bulk electric system and 

those that are not. Public Power Council criticizes the Commission’s rationale, 

contending that if a material impact assessment indicates that the Bulk-Power System can 

function properly even if a fault or operational failure occurs on a particular facility, it is 

not clear why the Commission can claim that that facility is nonetheless “necessary” for 

bulk electric system operation. 

43. In a related vein, NRECA seeks clarification, or in the alternative rehearing, that 

the Commission’s determination regarding “material impact” does not intend for NERC 

to change the NERC Rules of Procedure (other than to establish a process for granting 

49 NYPSC at 28, quoting 16 U.S.C. 824o(a)(1)(A). 
Docket No. RM09-18-001 - 28 - 

exemptions) or the NERC Statement of Compliance Registry Criteria. While NRECA 

acknowledges that the Final Rule does not discuss such changes to the NERC rules or 

Registry Criteria, NRECA explains that it raises the concern because it is unclear whether 

Order No. 743 only rejects the NPCC impact-based methodology or every functional 

impact methodology. NRECA points to various provisions of the NERC rules and 

Registry Criteria indicating that NERC’s registry approach is based on identifying owner, 

operators and users of the Bulk-Power System that have a “material impact” on the 

Bulk-Power System.50 Accordingly, NRECA seeks assurance that the Final Rule is not 

intended to “undermine the core concepts” of the NERC Rules and Registry Criteria. 

Commission Determination

44. Order No. 743 did not reject all material impact assessments but, instead, took 

issue with particular tests and outlined general problems with the material impact tests 

used to determine the extent of the bulk electric system that we have seen to date. The 

NYPSC incorrectly states that the Commission rejected NPCC’s material impact 

assessment based on one event. Rather, as discussed extensively in the Final Rule and 

elsewhere herein, the Commission rejected NPCC’s material impact assessment due to its 

subjective language and failure to identify facilities necessary to reliably operate the 

interconnected transmission system.51 These flaws include use of the amorphous term 

 50 See NRECA at 14-15, quoting NERC Rules of Procedure, section 501; Registry 

Criteria at 1. 

51 Order No. 743, 133 FERC ¶ 61,150 at P 76-78. 
Docket No. RM09-18-001 - 29 - 

 

“local area,” which was not consistently applied throughout the NPCC region. The 

NYPSC does not clarify application of this term in its request for rehearing, and instead 

merely states that the local area is defined by “the Council members.”52 As Order 

No. 743 notes, the subjectivity of the “local area” definition, which ultimately determines 

whether or not a facility is classified as part of the bulk electric system, has led to varying 

results throughout the NPCC region.53 

45. The Commission does not agree that Order No. 743 did not address how 

inconsistencies in defining the facilities that are included in the bulk electric system may 

impact the operation of the interconnected transmission network. The Final Rule detailed 

several instances where the NERC Reliability Standards are less effective when they are 

not applied to all necessary facilities.54 

46. Public Power Council contends that it is not clear why the Commission can claim 

that a particular facility is nonetheless “necessary” for bulk electric system operation if a 

material impact assessment proves that the Bulk-Power System can function properly 

even if a fault or operational failure occurs on that facility. As we noted in Order 

No. 743, by this metric the facilities that caused the 2003 Blackout would not be viewed 

as critical since none of the individual facilities caused the outage.55 In defining 

52 NYPSC at 28. 

53 Order No. 743, 133 FERC ¶ 61,150 at P 80. 

54 See, e.g., Id. P 80, 83, 86, 90. 

55 Id. P 38. 
Docket No. RM09-18-001 - 30 - 

 

jurisdictional facilities, section 215(a)(1) focuses on whether facilities are necessary to 

operate the interconnected transmission system, not solely on the consequences of 

unreliable operation of those facilities.56 

47. The Commission clarifies that it was not our intent to disrupt the NERC Rules of 

Procedure or the Statement of Compliance Registry Criteria. Nor did the Commission 

intend to rule out using any form of a material impact test in the reliability context that 

can be shown to identify facilities needed for reliable operation. However, as Order 

No. 743 explained, the Commission has serious concerns about NPCC’s Document A-10 

methodology. The Commission stated that, as a threshold matter, the material impact 

tests proffered by commenters did not measure whether specific system elements were 

necessary for operating the system, but, rather, measure the impact of losing the 

element.57 The Commission’s extensive discussion of the NPCC test further noted that 

the NPCC methodology is unduly subjective, and results in an inconsistent process that 

excludes facilities necessary for operating the bulk electric system from the definition. 

Therefore, the Commission indicated, should NERC choose to define the bulk electric 

system using a method other than one employing the 100 kV bright line threshold the 

Commission suggested, such an alternative method must be consistent, repeatable and 

verifiable with supporting technical analysis.58 

56 16 U.S.C. 824o(a)(i). 

57 Order No. 743, 133 FERC ¶ 61,150 at P 76. 

58 Id. P 74, 85. 
Docket No. RM09-18-001 - 31 - 

3. Western Interconnection/Regional Variation

48. In Order No. 743, the Commission rejected arguments that 100-199 kV facilities 

in the Western Interconnection should be treated differently than facilities in the Eastern 

Interconnection.59 The Commission stated that commenters had not provided an 

adequate explanation, supported by data and analysis, why there is a physical difference 

that justifies different treatment of these facilities in the West. 

49. Snohomish and Public Power Council contend that, because 115 kV facilities 

commonly are used in the West for distribution, the Commission’s “inflexible” 100 kV 

threshold is “unworkable” in the West. Snohomish and Public Power Council claim that 

the Western Interconnection is materially different from the Eastern Interconnection 

because the long distances between load centers, and the vast areas commonly covered by 

distribution systems, result in a transmission system that is largely operated at voltages of 

230 kV or above, and distribution systems that are commonly operated at voltages of 

115 kV. They contend that this physical difference is documented in a study performed 

by WECC’s Bulk Electric System Definition Task Force.60 Snohomish contends that 

power flow base cases examined by the Bulk Electric System Definition Task Force 

support their assertion that facilities rated between 100 kV and 200 kV have a small 

impact on transmission in the West. 

 59 Id. P 139-140. 

60 See Public Power Council at 6, Snohomish at 9 quoting WECC Bulk Electric 

System Definition Task Force, Initial Proposal, attached as Exh. A to Snohomish’s 

NOPR comments. 
Docket No. RM09-18-001 - 32 - 

 

50. Further, Snohomish contends that Order No. 743, at most, demonstrates a problem 

in the NPCC region and does not provide justification for action in the West. Snohomish 

asserts that the Final Rule fails to identify a single reliability event in the Western 

Interconnection arising from the bulk electric system definition as currently applied. 

Snohomish argues that the Commission cannot use isolated and localized problems to 

justify nationwide action.61 According to Snohomish, the three disturbances discussed in 

the Final Rule cannot justify nationwide action or demonstrate that all facilities operated 

in the 100-200 kV range are part of the interconnected transmission grid. 

51. Snohomish also contends that the Commission implicitly accepted the evidence 

that most 115 kV facilities in the West operate as distribution by failing to assert that the 

evidence is flawed, but, instead, responding in the Final Rule that some facilities 

operating in the 100-200 kV range in the West are “operationally significant and needed 

for reliable operation as identified by certain WECC documents.”62 According to 

Snohomish, this demonstrates the irrationality of Order No. 743’s approach because it 

focuses on the operating voltage of electric facilities to the exclusion of more germane 

factors such as how those facilities are connected and interact with the grid. Snohomish 

claims that the threshold approach is inconsistent with previous statements from the 

Commission that acknowledge that the function of facilities and how they are 

61 Snohomish at 31-32, citing Associated Gas Distributors v. FERC, 824 F.2d 981, 

1019 (D.C. Cir. 1985). 

62 Snohomish at 11-12, quoting Order No. 743, 133 FERC ¶ 61,150 at P 139. 
Docket No. RM09-18-001 - 33 - 

 

interconnected determines their significance. Public Power Council explains that, 

currently, most Public Power Council members that operate 115 kV distribution facilities 

are not classified as transmission owners or operators. Thus, according to Snohomish 

and Public Power Council, by taking a superficial view of the matter, Order No. 743’s 

100 kV threshold would sweep in a large number of facilities, including hundreds or 

perhaps thousands of miles of local distribution facilities, in the West. 

52. Snohomish additionally raises a concern that the Final Rule could be read in a 

manner that would require an end to the work of the WECC Bulk Electric System 

Definition Task Force. Snohomish states that the Bulk Electric System Definition Task 

Force, which was created in 2008 partly in response to Order No. 693, has been working 

on developing a bulk electric system definition that is appropriate to the unique facts of 

the Western Interconnection.63 Snohomish argues that a Commission directive “to 

‘eliminate the regional discretion in the ERO’s current definition’ of BES” would mean 

“that the work of the [Bulk Electric System Definition Task Force] must be terminated 

because it would result in a regional variation to the BES definition that FERC has 

forbidden.”64 This result, according to Snohomish, would violate the FPA because 

“Section 215(d)(2) requires FERC to accord ‘due weight’ to the ‘technical expertise’ of 

both NERC and WECC, and Section 215(d)(3) requires NERC to ‘rebuttably presume’ 

that reliability standards developed and approved by WECC are consistent with the 

63 See Snohomish at 35. 

64 Snohomish at 40-41, quoting Order No. 743, 133 FERC ¶ 61,150 at P 30. 
Docket No. RM09-18-001 - 34 - 

 

FPA.”65 Therefore, Snohomish requests clarification, or in the alternative rehearing, that 

the Commission’s “findings concerning the material impact assessment methodology 

used in NPCC apply only to the NPCC” and do not apply to the Bulk Electric System 

Definition Task Force efforts currently under way.66 Snohomish further seeks 

clarification, or in the alternative rehearing, that the bulk electric system definition 

currently being developed for application in WECC “may incorporate any voltage 

threshold or other method of assessing the impact of lower-voltage facilities,” that the 

WECC bulk electric system definition “must exclude facilities used in the local 

distribution of electric energy,” and that the definition should distinguish between 

facilities that are or are not necessary for operating an interconnected energy transmission 

network.67 Finally, Snohomish argues that the Commission should clarify that the 

Final Rule is not intended to stop NERC’s review of the findings of the Ad Hoc 

Committee for Generator Requirements and the Transmission Interface (GOTO Task 

Force) because such an action would be arbitrary and capricious.68 

65 Id. at 41, citing 16 U.S.C. 824o(d)(2)-(3). 

66 Id. at 42. 

67 Id. at 43 (emphasis in original). 

68 As described in Order No. 743, NERC has undertaken an initiative (the GOTO 

task force) to address the special circumstances associated with generators and to 

determine which Reliability Standards might be inappropriate for such limited facilities. 

See Order No. 743, 133 FERC ¶ 61,150, at n.158. 
Docket No. RM09-18-001 - 35 - 

Commission Determination

53. The Commission denies rehearing on these issues. As stated elsewhere, Order 

No. 743 did not mandate a 100 kV threshold. Rather, the Commission directed NERC to 

develop a revised definition that addresses our concerns with the current definition, 

including inconsistency, lack of oversight and exclusion of facilities that are required for 

the reliable operation of the interconnected transmission network. We suggested that one 

means to address our concerns would be to maintain the 100 kV threshold contained in 

the current definition, while eliminating the discretion that allows Regional Entities to 

interpret and apply the definition without ERO or Commission oversight. 

54. Commenters contend that the majority of 115 kV facilities in the West are 

distribution facilities and therefore not significant to the transmission of power. First, as 

we have stated herein, to the extent any facility is a local distribution facility, it is 

exempted from the requirements of section 215.69 However, the Commission observes 

that numerous 115 kV and 138 kV transmission lines in the Western Interconnection 

often are the only pathway available between various load centers and networked 

points.70 Other network points are electrically and physically remote from each other and 

have the potential for parallel flows between two transmission paths, some at different 

voltage levels and others at the same voltage. Analyzing how the flows split during 

 69 16 U.S.C. 824o(a)(1). 

70 Form 715 submissions. 
Docket No. RM09-18-001 - 36 - 

normal, outage and emergency conditions, as well as implications to system constraint, 

could lead to a conclusion that such facilities are improperly labeled as local distribution. 

55. Snohomish argues that the Commission errs in focusing on voltage rather than the 

characteristics of the facilities. However, in the first instance, the Commission’s 

suggested approach uses NERC’s current definition, which includes a 100 kV threshold, 

as a baseline for determining which facilities are included in the bulk electric system. As 

discussed below, we view a voltage threshold as an initial proxy for determining where 

the line between local distribution and transmission lies. We agree with Snohomish that 

it is important to consider additional facility characteristics in order to make a final 

determination regarding which facilities are included in the bulk electric system. 

56. The Commission notes that while the events cited in Order No. 743 occurred in 

the Eastern Interconnection, the underlying concerns are applicable to the nation as a 

whole. Currently, NERC and the Commission do not have oversight of regional bulk 

electric system classification decisions. If all facilities necessary for reliable operation 

are not subject to the Reliability Standards, the effectiveness of the Reliability Standards 

is undermined. 

57. Snohomish’s concern that Order No. 743 would put an end to the WECC Bulk 

Electric System Definition Task Force is unfounded. The Commission clarifies that our 

intent in requiring the ERO to “eliminate the regional discretion” from the current 

definition was to prevent the regions from modifying the regional bulk electric system 

definition without Commission or ERO oversight. As noted elsewhere, WECC may 
Docket No. RM09-18-001 - 37 - 

petition for a regional variation, if justified, through the process outlined in Order 

No. 672.71 

58. In response to Snohomish’s question concerning local distribution, we reiterate 

that facilities used for local distribution are excluded from the Bulk-Power System 

definition under section 215, and thus are excluded from the bulk electric system. With 

respect to changing the 100 kV threshold in the approved definition, the Commission did 

not direct such a change. 

59. Similarly, we reiterate that Order No. 743 does not affect the GOTO Task Force’s 

activities; however, the task force members may submit their comments and report to 

NERC for its consideration as NERC develops an exemption process. 

60. We understand from the Public Power Council’s comments that most Public 

Power Council members owning or operating 115 kV facilities are not classified as 

transmission owners or operators due to the fact that their facilities are radial from one 

transmission supply and serving only load. Such facilities currently are excluded from 

registration and we believe would appropriately be excluded in an acceptable revised 

bulk electric system definition. 

D. Bulk-Power System v. Bulk Electric System

61. APPA and TANC request clarification that the Commission is not now making a 

determination as to whether the Bulk-Power System is broader than the bulk electric 

system and is preserving for future proceedings the rights of parties to challenge such a 

 71 See Order No. 672, FERC Stats. & Regs. ¶ 31,204 at P 291. 
Docket No. RM09-18-001 - 38 - 

 

determination. According to APPA, the Final Rule appears to track the statutory 

definition of Bulk-Power System, i.e., “all facilities necessary to operate the 

interconnected transmission network,” in framing its directive to NERC to revise the 

definition of bulk electric system. APPA also points to language in Order No. 743 that it 

believes suggests that the Commission considers that the statutory definition of BulkPower System may be broader than the bulk electric system.72 APPA states that, to 

preserve its legal rights on the matter, it seeks “limited clarification” that the Commission 

is not determining that the statutory Bulk-Power System definition extends beyond the 

bulk electric system definition as NERC is directed to revise it in this proceeding. In the 

alternative, if the Commission denies clarification, APPA seeks rehearing that “given the 

Final Rule’s directions to NERC to define [bulk electric system] in a manner that tracks, 

virtually word-for-word, the statutory [Bulk-Power System] definition, the Commission’s 

continued suggestion that the [Bulk-Power System] definition may reach further than the 

[bulk electric system] would be arbitrary and contrary to the express terms of the 

statute.”73 

62. Based on similar concerns, NRECA requests clarification, or in the alternative 

rehearing, that the statutory definition of Bulk-Power System and the definition of bulk 

electric system are synonymous. NRECA points to provisions of the NERC Rules of 

Procedure that reference the Bulk-Power System to demonstrate such convergence. 

72 APPA at 5, quoting Order No. 743133 FERC ¶ 61,150 at P 36, 41, and 100. 

73 APPA at 7-8. 
Docket No. RM09-18-001 - 39 - 

NRECA also contends that the language of section 215 and the statute’s legislative 

history, and prior usage of the two terms, supports its position. 

Commission Determination

63. The Commission grants APPA and TANC’s requests for clarification. We do not 

see any useful purpose that would be served by defining the term Bulk-Power System in 

this proceeding, and decline to do so. Accordingly, we dismiss as premature NRECA’s 

request for clarification, or in the alternative, rehearing. 

E. Identification of Facilities Used in Local Distribution

64. In Order No. 743, the Commission recognized that the ERO would need to 

establish whether a particular facility is local distribution or transmission, and directed 

the ERO to develop a means to make such a determination.74 

Comments 

65. Consumers Energy, Exelon and Portland General request clarification that 

NERC’s evaluation of how to classify facilities should consider prior distribution 

classifications. Consumers Energy and Portland General seek clarification on the role of 

the Order No. 888 Seven Factor Test in determining whether facilities are classified as 

“local distribution facilities” and the impact of a prior Seven Factor Test determination.75 

 

(continued...) 

74 Id. P 37. 

75 See Promoting Wholesale Competition Through Open Access NonDiscriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by 

Public Utilities and Transmitting Utilities, Order No. 888, FERC Stats. & Regs. ¶ 31,036 

(1996), order on reh’g, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048 (1997), order on 

reh’g, Order No. 888-B, 81 FERC ¶ 61,248, order on reh’g, Order No. 888-C, 82 FERC 
Docket No. RM09-18-001 - 40 - 

 

Consumers seeks clarification whether facilities in excess of 100 kV that have explicitly 

been found by the Commission to be local distribution under the Seven Factor Test will 

automatically be excluded from the bulk electric system or will they need to go through 

the exemption process. Consumers Energy further asks whether, if the owner of such 

facilities must apply for an exemption, the earlier Seven Factor finding provides a 

presumption that the facility should be excluded. Exelon insists that a facility can be 

classified as either local distribution or bulk transmission – but not both. 

66. EEI and Portland General request clarification that the term “used in local 

distribution” does not have different meanings under sections 201(b)76 and 215 of the 

FPA and that the Final Rule does not affect other determinations of what facilities are 

considered “used in local distribution” and thus outside of the Commission’s jurisdiction. 

EEI argues that since Congress used the same terminology in defining the Commission’s 

jurisdiction in both sections 201 and 215, it must have intended the words to have the 

same meaning. EEI seeks clarification that previous or future regulatory decisions 

regarding local distribution facilities can serve as an exemption criterion, and states that 

such clarification will better align jurisdictional determinations under the FPA. Portland 

General argues that the Commission does not have the flexibility to interpret “facilities 

used in local distribution” to mean two different things in two different parts of the FPA. 

¶ 61,046 (1998), aff’d in relevant part sub nom. Transmission Access Policy Study Group 

v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 535 U.S. 1 

(2002). 

76 16 U.S.C. 824. 
Docket No. RM09-18-001 - 41 - 

Specifically, Portland General argues that the Commission “must acknowledge and give 

effect to established FPA Section 201(b) precedent regarding the identification of ‘local 

distribution’ facilities, and must recognize that Congress intended the same ‘local 

distribution’ facilities to be exempt from Commission jurisdiction under Sections 201(b) 

and 215(a) of the FPA.”77 

Commission Determination

67. Although local distribution facilities are excluded from the definition, it still is 

necessary to determine which facilities are local distribution, and which are transmission. 

Whether facilities are used in local distribution will in certain instances raise a question 

of fact, which the Commission has jurisdiction to determine.78 The Commission 

envisioned that the process of identifying which facilities are local distribution and which 

are transmission likely would require more than one step. Under the methodology the 

Commission proffered, the 100 kV bright-line threshold would serve as the initial proxy 

for determining which facilities are local distribution, and which are transmission. The 

Final Rule provides ample support for the reasonableness of a 100 kV threshold, not the 

least of which is that the ERO’s definition of bulk electric system currently utilizes a 

 77 Portland General at 10. 

78 See, e.g., California Pacific Electric Company, LLC, 133 FERC ¶ 61,018 at 

n.59 (2010) (“The Supreme Court has determined that whether facilities are used in local 

distribution is a question of fact to be decided by the Commission.”), citing FPC v. 

Southern California Edison Co., 376 U.S. 205, 210 n.6 (1964). 
Docket No. RM09-18-001 - 42 - 

 

general 100 kV threshold.79 The Commission recognized, however, that it would be 

necessary to identify any local distribution that is improperly included, and conversely to 

identify any transmission that is improperly excluded, by the proxy. 

68. The Commission clarifies that the statement in Order No. 743, “determining where 

the line between ‘transmission’ and ‘local distribution’ lies ... should be part of the 

exemption process the ERO develops”80 was intended to grant discretion to the ERO, as 

the entity with technical expertise, to develop criteria to determine how to differentiate 

between local distribution and transmission facilities in an objective, consistent, and 

transparent manner. This mechanism will allow the ERO to maintain an inventory of the 

transmission facilities subject to the mandatory Reliability Standards, and to exclude 

local distribution facilities from the bulk electric system definition by applying the 

criteria. Once NERC develops and submits its proposal to the Commission, the 

Commission will, as part of its evaluation of the proposal, determine whether the process 

developed adequately differentiates between local distribution and transmission. 

69. We agree with Consumers Energy, Portland General and others that the Seven 

Factor Test could be relevant and possibly is a logical starting point for determining 

which facilities are local distribution for reliability purposes, while also allowing NERC 

flexibility in applying the test or developing an alternative approach as it deems 

necessary. 

79 See, e.g., Order No. 743, 133 FERC ¶ 61,150 at P 73, 85. 

80 Order No. 743, 133 FERC ¶ 61,150 at P 37. 
Docket No. RM09-18-001 - 43 - 

 

70. With respect to Consumers Energy’s request for clarification regarding prior 

Seven Factor Test determinations qualifying for automatic exclusion, the Commission 

reiterates that we have granted NERC discretion to develop a means to differentiate 

between local distribution and transmission facilities, which NERC will submit to the 

Commission for review and approval. Consequently, we leave to NERC in the first 

instance questions about if and how the Seven Factor Test should be considered in 

differentiating between local distribution and transmission facilities. 

71. Our purpose in moving away from the proposal in the NOPR was to provide 

NERC with the greatest amount of flexibility to utilize its technical expertise and 

processes in developing an appropriate exemption process to complement a revised 

definition of “bulk electric system.” Considerations regarding the Seven Factor Test and 

its usefulness in a NERC-designed exemption process are initially for NERC to decide in 

response to our directive in Order No. 743. As we said in Order No. 743, “allowing the 

ERO to develop an appropriate exemption process should provide interested stakeholders 

an opportunity to participate in the development of the process.”81 Consumers Energy, 

Portland General and others can raise any concerns with respect to use of the Seven 

Factor Test or any other concern during the development of the exemption process. 

Under the exemption process the Commission ultimately approves, once a facility is 

classified as local distribution, the facility will be excluded from the bulk electric system 

unless changes to the system warrant a review of the determination. 

81 Order No. 743, 133 FERC ¶ 61,150 at P 112. 
Docket No. RM09-18-001 - 44 - 

72. We decline to provide the clarification EEI and Portland General request regarding 

the use of the term “used in local distribution” in FPA sections 201(b) and 215, as we 

find the request premature. Order No. 743 tasked NERC, as the entity with technical 

expertise, with developing a process for differentiating between local distribution and 

transmission facilities to apply in the reliability context. Once NERC develops and 

submits a proposed methodology, we will evaluate whether the proposal results in any 

conflicts with the statutory language. 

F. Exemption Process 

73. Order No. 743 directed NERC to develop a process for exempting facilities 

operated at or above 100 kV that are not necessary for operating the transmission grid. 

The Final Rule declined to dictate the substance of the exemption process, leaving this 

task to the ERO. This would provide interested stakeholders an opportunity to participate 

in developing the process. The Final Rule did identify several matters or concerns to be 

addressed in an acceptable exemption process. The Commission asked the ERO to 

develop an exemption process that includes clear, objective, transparent, and uniformly 

applicable criteria for exemption of facilities that are not necessary for operating the grid 

and any related changes to its Rules of Procedures that may be required to implement the 

exemption process. Numerous petitioners seek rehearing and clarification regarding the 

exemption process discussed in the Final Rule.82

 

(continued...) 

82 As discussed further below, the Commission uses the term “exclusion” herein 

when discussing facilities expressly excluded by the statute (i.e., local distribution) and 

the term “exemption” when referring to the exemption process NERC will develop for 
Docket No. RM09-18-001 - 45 - 

1. Exclusion of Facilities Used in Local Distribution

74. Western Petitioners and Portland General seek rehearing that the exemption 

process developed by the ERO should not apply to facilities used in local distribution. 

Western Petitioners and Portland General state that facilities used in local distribution are 

not subject to section 215. Thus, they argue that the ERO lacks authority to subject local 

distribution facilities to an exemption process. According to Western Petitioners, 

subjecting such facilities to an exemption process developed by the ERO, and allowing 

the ERO to determine “jurisdictional exemptions” for facilities not subject to section 215 

would “eviscerate state jurisdiction over numerous local facilities, in direct contravention 

of Congress’ intent.”83 For its part, Portland General argues that, by directing NERC to 

review facilities over 100 kV currently designated as local distribution under the Seven 

Factor Test and “by pushing the ERO to recognize a bright-line presumption threshold 

that was expressly rejected in Order No. 888, the Commission is clearly departing from 

its existing precedent, under which these same facilities have been determined to be 

‘local distribution’ facilities exempt from regulation under Section 215.”84

 

use with facilities other than local distribution that may be exempted from compliance 

with the mandatory Reliability Standards for other reasons. 

83 Western Petitioners at 12, quoting Detroit Edison Co. v. FERC, 334 F.3d at 54. 

84 Portland General at 14. 
Docket No. RM09-18-001 - 46 - 

Commission Determination

75. As the Commission explained above, we agree that local distribution facilities are 

not subject to FPA section 215. However, we disagree with Western Petitioners and 

Portland General that it is outside our jurisdiction to determine which facilities are local 

distribution and therefore excluded from the bulk electric system. We have in the first 

instance the authority to determine the scope of our jurisdiction.85 

76. The Commission notes some confusion regarding “exclusions” versus 

“exemptions.” We understand that a facility that is excluded would not have to go 

through any process at NERC to determine applicability. On the other hand, where an 

entity applies to NERC to seek to exempt its facility from the bulk electric system, NERC 

would follow an exemption process. With that understanding, we clarify that, as 

discussed herein, we envision that the process for determining which facilities will be 

included under the bulk electric system will involve several steps. NERC will develop 

criteria for determining whether a facility that falls under the definition of bulk electric 

system may qualify for exclusion. If, for example, the application of the criteria clearly 

indicates that a facility is local distribution, the facility is excluded, and no process before 

 85 See, e.g., Nine Mile Point Nuclear Station LLC v. Niagara Mohawk Power 

Corp., 110 FERC ¶ 61,033, at P 30 & n.31 (2005), aff’d, 452 F.3d 822 (D.C. Cir. 2006); 

accord New York v. FERC, 535 U.S. 1, 22-23 (2002) (holding that the Commission was 

within its authority to establish a seven-factor test to determine which facilities are local 

distribution facilities that fall outside of the Commission’s jurisdiction pursuant to FPA 

section 201). Cf. Western Massachusetts Electric Co., 61 FERC ¶ 61,182, at 61,661 

(1992), aff'd, 165 F.3d 922, 926 (D.C. Cir. 1999) (concluding the Commission may 

examine contracts relating to transactions which may be subject to its jurisdiction prior to 

making its determination as to jurisdiction). 
Docket No. RM09-18-001 - 47 - 

the ERO is required. If application of the NERC criteria does not lead to a definitive 

result, the entity could apply for an exemption, invoking a factual inquiry before the ERO 

to determine the proper categorization of facilities. 

2. Maintaining a List of Excluded Facilities

77. Similarly, Western Petitioners challenge the suggestion in the Final Rule that the 

ERO maintain a list of excluded facilities, including local distribution facilities, arguing 

that the establishment of a rule to maintain such a list is beyond NERC’s statutory 

authority. They argue that nothing in FPA section 215 vests the ERO with oversight of 

facilities used in distribution, even for the purpose of maintaining a list of exempt 

facilities. 

Commission Determination

78. The Commission agrees with Western Petitioners that section 215 does not grant 

the ERO oversight of facilities used in local distribution. However, as the Commission 

has explained, we have jurisdiction to determine which facilities are local distribution, 

and which are transmission. In order to exercise such oversight, including the 

appropriate application of the ERO’s exemption determinations, it is important to have an 

inventory of facilities.86 

79. Once the ERO develops the inventory of facilities by applying the process the 

Commission ultimately approves, the Commission has authority, in its ERO oversight 

role, to review the determinations to ensure consistent application of the process and the 

 86 Order No. 743, 133 FERC ¶ 61,150 at P 117. 
Docket No. RM09-18-001 - 48 - 

accuracy of the resulting inventory. Such a review necessarily includes reviewing not 

only the inventory of facilities ultimately classified as transmission, but also those 

excluded as local distribution, particularly in instances where the decision was a close 

call. In performing such a review, the Commission is not inappropriately overseeing 

local distribution facilities but, rather, is reviewing the ERO’s application of the process 

for drawing the line between local distribution and transmission, which is within our 

authority under section 215 of the FPA. 

3. Exemption v. Exclusion of “Radials To Load” Facilities

80. In Order No. 743, the Commission reiterated that we do not seek to modify the 

second part of the current NERC bulk electric system definition, which states that 

“[r]adial transmission facilities serving only load with one transmission source are 

generally not included in this definition.”87 The Commission also suggested that the 

ERO could also track exemptions for radial facilities.88

Comments

81. APPA, TANC, NRECA and TAPS request clarification that radial transmission 

facilities serving only load, i.e., radials to load, with one transmission source may be 

excluded from the bulk electric system definition and entities with such facilities need not 

go through an exemption process. TAPS and APPA state that exclusion of radials to 

load, rather than inclusion subject to exemption, is consistent with section 215 of the 

 87 Order No. 743, 133 FERC ¶ 61,150, at P 55. 

88 Id. P 119. 
Docket No. RM09-18-001 - 49 - 

FPA. TAPS argues that the Final Rule makes no attempt to demonstrate that radials to 

load are among the “facilities necessary to operate an interconnected network” that the 

Commission directed NERC to include in the bulk electric system definition. APPA 

explains that a 20 MW distribution utility that owns a 115 kV radial to load is likely not 

to have any contact with NERC since the utility’s load is radial and below the threshold 

for NERC registration. APPA expresses concern that, pursuant to the Final Rule, such a 

utility could now have to incur the time and resources necessary to demonstrate that it 

falls within an exemption. TAPS and APPA contend that subjecting currently-excluded 

“radial to load” to an exemption process would create an unnecessary burden on industry, 

particularly small entities, as well as NERC and the Regional Entities. Likewise, 

NRECA seeks clarification that the Commission did not intend that the owner of every 

currently-excluded facility operated at above 100 kV re-apply for an exclusion or 

exemption and that the ERO conduct a de novo review of such facilities. NRECA 

contends that such an approach would unreasonably burden the resources of utilities, 

create a huge backlog that slows the exemption process, and denies the ERO the ability to 

exercise its judgment in the matter. 

82. For the same reasons, TAPS also seeks clarification that the Commission, in 

suggesting that the ERO establish a mechanism for reporting and tracking exempted 

radial facilities, did not intend to include excluded radial to load. TAPS contends that the 

Final Rule does not support the need for such reporting and tracking, and that the burden 

to industry and the ERO is not justified. TAPS states that it agrees that radial facilities 
Docket No. RM09-18-001 - 50 - 

outside the current bulk electric system definition, i.e., those that are not “radial 

transmission facilities serving only load with one transmission source,” that still warrant 

exclusion, would be appropriate for an exemption process and the suggested tracking. 

83. Consumers Energy, noting that the current definition of bulk electric system 

excludes “radial transmission facilities serving only load with one transmission source,” 

requests clarification whether the exclusion applies to a radial line with only one 

transmission source that is designed to serve load, but also serves “incidental small 

generation.” According to Consumers, such situations are becoming more common with 

the interconnection of small distributed renewable generation. Consumers Energy asks 

how much incidental generation a line could serve and continue to meet the bulk electric 

system radial line exclusion. 

Commission Determination

84. In Order No. 743, the Commission directed the ERO to develop an exemption 

process and made clear that “we will not dictate the substance or content of the 

exemption process....”89 Thus, while the Commission stated that the ERO should 

develop an exemption process that includes “clear, objective, transparent, and uniformly 

applicable criteria” for determining exemptions, the Commission otherwise left it to the 

ERO’s discretion to develop an appropriate exemption process, which the Commission 

will review. Any exemption of radial facilities is not based on a statutory requirement, 

unlike exclusion of local distribution. However, the Commission believes that certain 

 89 Id. P 114. 
Docket No. RM09-18-001 - 51 - 

categories of radial facilities may lend themselves to an “exclusion” process as described 

above (i.e., once identified as belonging in a certain radial category, the facilities could be 

excluded without further review). For example, should the revised bulk electric system 

definition maintain the exclusion of radial facilities serving only load from one 

transmission source, these types of facilities easily could be excluded without further 

analysis. 

85. We believe that, in general, the decision whether, and in what circumstances, to 

apply an exemption versus exclusion process for radial to load facilities is largely a 

matter of balancing between, on the one hand, administrative ease, e.g., NERC having to 

review thousands of exemptions for facilities outside the NPCC region that previously 

were excluded as radial and, on the other hand, assuring that facilities necessary for 

operation of an interconnected grid are not inadvertently excluded. That being said, we 

believe that the ERO should balance these matters when developing an appropriate 

process. Likewise, with regard to NRECA’s request to clarify that the Commission does 

not seek to require NERC or the regions to conduct a de novo review of all exemptions 

granted to date, we did not require a de novo review and leave an appropriate review 

process to the ERO. 

86. The Commission clarifies that Order No. 743 granted NERC discretion to make a 

determination regarding whether to exclude or exempt radial facilities. One 

consideration in this regard is whether an exclusion process will avoid NERC having to 
Docket No. RM09-18-001 - 52 - 

review thousands of exemptions for facilities outside the NPCC region that previously 

were excluded as radial. 

87. Additionally, as the Commission noted, commenters have many ideas about what 

types of facilities should be considered “radial.”90 NERC can consider whether these 

facilities should be candidates for exemption.91 Any expansion of the definition of radial 

facilities beyond the approved definition must be supported with a technical analysis. 

88. With respect to Consumers’ request for clarification regarding how much 

incidental generation a line could serve and continue to meet the bulk electric system 

radial line exclusion, this is an issue that should be raised with NERC as it develops 

criteria for determining what is considered radial. 

4. Development of Exemption Process through NERC Reliability

Standards Development Process

89. While agreeing with the Commission’s directive that NERC develop revisions to 

the bulk electric system definition through NERC’s Reliability Standards Development 

Process, NRECA requests clarification, or in the alternative rehearing, that NERC also 

must develop criteria for exemptions through the Standards Development Process. 

NRECA maintains that exemptions from the bulk electric system are as much a part of 

the Reliability Standards as the definition itself, as both determine the Standards’ scope 

and applicability. According to NRECA, the purely procedural aspects of an exemption 

 90 Order No. 743, 133 FERC ¶ 61,150 at P 55. 

91 Id. 
Docket No. RM09-18-001 - 53 - 

process can be developed by NERC and included in the Rules of Procedure. However, 

NRECA contends that the development of exemption criteria is a “core” technical task 

that requires use of the Reliability Standards Development Process. 

Commission Determination

90. Given that the decision as to how to proceed in response to Order No. 743 rests 

first with NERC, we decline to provide the clarification requested by NRECA at this 

time. We explained in Order No. 743 that the NERC Glossary (which includes the 

definition of bulk electric system) is part of the Reliability Standards, and thus changes to 

the Glossary should be developed through the Reliability Standards Development 

Process.92 However, although the exemption process certainly will play a role in 

determining which facilities are included in the bulk electric system, the process is not 

part of the definition, nor part of any Reliability Standard. Accordingly, the Commission 

leaves the decision as to how to proceed in response to its directive to NERC in the first 

instance. The Commission expects, as indicated in Order No. 743, that NERC will 

provide ample opportunity for stakeholder input into the exemption process regardless of 

whether NERC determines to proceed using the Reliability Standard Development 

Process or by amending the Rules of Procedure. Accordingly, the Commission denies 

NRECA’s rehearing request on this matter. 

 92 Id. P 29-30. 
Docket No. RM09-18-001 - 54 - 

5. Compliance While an Exemption Application is Pending

91. NRECA seeks clarification that currently unregistered entities that may be 

required to seek an exemption for facilities under the revised bulk electric system 

definition will not be required to register and thereafter comply with Reliability Standards 

until a final decision is made to deny the application for exemption. NRECA, noting that 

the Commission indicated that it did not expect the Final Rule to result in many 

additional facilities outside of the NPCC region becoming subject to Reliability 

Standards,93 states that this observation is particularly true for currently-exempt facilities 

in the other seven regions. NRECA contends that it is unreasonable to require an entity 

to expend the financial and staff resources needed to develop a compliance program 

when the ERO may ultimately determine that the facilities are exempt. 

92. In a related vein, NRECA requests clarification that the ERO should have the 

flexibility to propose a transition process that it deems feasible and appropriate, not 

necessarily a hard deadline of 18 months after Commission approval. 

Commission Determination

93. As the Commission indicated in the Final Rule, the transition period is intended to 

allow a reasonable period of time for the affected entities to achieve compliance with 

respect to facilities that are subject to the mandatory Reliability Standards for the first 

time.94 We agree with NRECA that affected entities should not be required to take costly 

 93 NRECA at 20-21, citing Order No. 743, 133 FERC ¶ 61,150 at P 131, 169. 

94 Order No. 743, 133 FERC ¶ 61,150 at P 131. 
Docket No. RM09-18-001 - 55 - 

 

steps to comply with the Reliability Standards prior to the ERO’s initial determination on 

an exemption request. However, as indicated in Order No. 743, “we expect that the 

transition periods will be long enough for exemption requests to be processed and to 

allow entities to bring newly-included facilities into compliance prior to the mandatory 

enforcement date.”95 We reiterate that we do not anticipate a large number of exemption 

requests arising outside NPCC.96 Thus, our expectation remains that NERC should be 

able to process any exemption requests in a timely manner, allowing any entity denied an 

exemption to come into compliance with the relevant Reliability Standards within the 

transition period. 

94. With respect to the length of the transition period, as discussed in the Final Rule, 

we based our determination to establish an 18-month transition period on 

ReliabilityFirst’s prior experience in adopting a revised bulk electric system definition in 

that region, and continue to believe it is a reasonable transition period.97 Additionally, 

we noted that the ERO may request a longer transition period based on a specific 

justification. This provides sufficient flexibility should the ERO determine that the 

18-month transition period is insufficient. 

95 Id. P 132. 

96 Id. P 131. 

97 Id.
Docket No. RM09-18-001 - 56 - 

6. Step-Down Transformers

95. The Final Rule, in response to a ReliabilityFirst request for clarification that 

facilities that operate at 100 kV or above should be considered bulk electric system 

facilities, even if, for example, one transformer winding operates below 100 kV, 

stated that “we agree with [ReliabilityFirst’s] developed delineation point with regard to 

‘step-down’ transformers, but note that these kinds of refinements can and should be 

addressed as part of the NERC exemption process.”98 

96. EEI, Consumers and Wisconsin Electric request clarification that this statement 

concerning the treatment of step-down transformers was offered to provide guidance and 

not intended to prejudge the exemption criteria to be developed by the ERO. EEI claims 

that many state commissions treat step-down transformers with a low-side winding below 

100 kV as under state rate jurisdiction. Wisconsin Electric contends that, while the 

suggested approach would simplify auditing, it would impose burdens on registered 

entities without a commensurate enhancement to reliability. 

97. Consumers Energy suggests that the characteristics of the “low side” of a facility 

be considered when determining whether an entire facility is considered part of the bulk 

electric system. Consumers states that it has facilities with a 138 kV high side voltage 

and a low side ranging from 46 kV to 2.5 kV, and contends that the low side provides 

service only for local distribution. 

 98 Id. P 148-149. 
Docket No. RM09-18-001 - 57 - 

Commission Determination

98. Order No. 743 directed the ERO to develop an exemption process, and specifically 

declined to “dictate the substance or content of the exemption process.”99 However, we 

provided guidance, stating that the process should include clear, objective, transparent 

and uniformly applicable criteria for exemption of facilities that are not necessary for 

operating the interconnected transmission system. Accordingly, the Commission grants 

EEI’s, Consumers Energy’s and Wisconsin Electric’s requests for clarification that the 

discussion regarding which facilities should or should not be included in the bulk electric 

system definition was intended to provide guidance, not to prejudge what should be 

included in the exemption criteria. Therefore, the Commission declines to provide the 

specific clarifications requested regarding treatment of various types of step down 

transformers. 

7. Process for Including Sub-100 kV Facilities

99. In the rulemaking, ERCOT commented that facilities operated below 100 kV 

generally are not considered part of the bulk electric system, but can be included if 

identified as a critical facility by a Regional Entity. ERCOT suggested that, similar to the 

development of an exemption process to consider applications for exemption of facilities 

above 100 kV, the Commission should consider imposing a process for inclusion of 

critical facilities below 100 kV. In Order No. 743, the Commission responded that it 

agrees with ERCOT’s suggestion and “it would be worthwhile for NERC to consider 

 99 Id. P 114. 
Docket No. RM09-18-001 - 58 - 

 

formalizing the criteria for inclusion of critical facilities operated below 100 kV in 

developing the exemption process.”100

100. Western Petitioners state that the Commission should clarify that all local 

distribution facilities, including those operated at below 100 kV which may be deemed 

“critical” by a Regional Entity, are expressly excluded under section 215 of the FPA. 

101. APPA and TANC request clarification that, in suggesting that NERC formalize the 

criteria for including critical facilities operated below 100 kV in developing the 

exemption process, the Commission was not seeking to alter NERC’s Statement of 

Registry Criteria (Registry Criteria) or shift the evidentiary burdens. APPA notes that the 

current Registry Criteria include a provision that allows the registry of entities that own 

critical facilities below the 100 kV threshold.101 APPA expresses concern that a parallel 

process developed in conjunction with the exemption process might be construed as a 

departure from the Registry Criteria, which places the burden on NERC and the Regional 

Entities to demonstrate the need to include facilities operated at below 100 kV as part of 

the bulk electric system. APPA supports a process that enhances consistency among 

Regional Entity determinations and ensures better due process to would-be registered 

entities with potentially critical facilities operated at below 100 kV facilities, and seeks 

clarification that this understanding of the Commission’s statement is correct. 

100 Id. P 121. 

101 APPA at 11, citing Registry Criteria, section II.D.2 (providing for registration 

of “[a]n entity that owns/operates a transmission element below 100 kV associated with a 

facility that is included on a critical facilities list that is defined by the Regional Entity”). 
Docket No. RM09-18-001 - 59 - 

Commission Determination

102. The Commission clarifies that Order No. 743 did not intend to alter the Registry 

Criteria, shift the evidentiary burden for registration, or otherwise address matters 

involving the Registry Criteria. Indeed, the Statement of Compliance Registry Criteria 

currently provides that the Regional Entities may propose registration of entities that do 

not meet the registry criteria if the Regional Entity believes and can reasonably 

demonstrate that the organization is a bulk power system owner, or operates, or uses bulk 

power system assets, and is material to the reliability of the bulk power system.102 

However, we note that while the Registry Criteria will not change, it is possible that 

additional facilities may come under the revised definition and some entities may be 

required to register for the first time. 

103. The Commission agrees with APPA that underlying our suggestion that NERC 

consider an inclusion process for critical facilities operated below 100 kV was a concern 

that Regional Entities make such determinations in an appropriate and consistent manner, 

according to developed criteria, which should better ensure due process. 

104. We agree with Western Petitioners that, as stated elsewhere herein, the 

Commission does not have jurisdiction over facilities that are determined to be local 

distribution through the process NERC develops and we approve. 

 102 Statement of Registry Criteria at 10 (Note 1 to Registry Criteria). 
Docket No. RM09-18-001 - 60 - 

G. Requests for Revised Regulatory Flexibility Act Analysis 

105. In Order No. 743, the Commission stated that the Final Rule will not have a 

significant economic impact on a substantial number of small entities since most 

transmission owners, transmission operators and transmission service providers do not 

fall within the definition of small entities. Further, the Commission suggested that the 

ERO create an appropriate exemption process and that this process will further ensure 

that the Final Rule minimally affects small entities. As we noted in the NOPR, the 

Commission estimated that approximately four of the 33 transmission owners, 

transmission operators and transmission services providers identified in the U.S. portion 

of the NPCC region may fall within the definition of small entities. 

Comments

106. APPA and NRECA request that the Commission clarify that it will perform a 

revised Regulatory Flexibility Act analysis once the exemption process has been 

developed by NERC and approved by the Commission in order to determine whether the 

Commission’s finding that the Final Rule will not have a significant economic impact on 

a substantial number of small entities is arbitrary. In particular, APPA and NRECA 

assert that the Commission erred by certifying that the Final Rule will not have a 

significant economic impact on a substantial number of small entities, particularly in light 

of the uncertainties of an as-yet-to-be-developed exemption process to mitigate the 

impact of the Final Rule on small entities. APPA and NRECA argue that the 

Commission’s reliance on the exemption process to be established by NERC to support 

its Regulatory Flexibility Act certification is not justified. They assert that the ability of 
Docket No. RM09-18-001 - 61 - 

the exemption process to minimize the impact on small entities cannot be assessed until 

the exemption process is developed by NERC and approved by the Commission. 

107. TANC requests clarification that the Commission has not yet finalized its 

Regulatory Flexibility Act analysis and will not do so until NERC has submitted a 

proposed exemption process. 

108. Public Power Council, NYPSC and Snohomish argue that implementing the 

100-kV threshold will be enormously costly. Public Power Council, for its part, argues 

that the Commission’s rejection of evidence of such increased compliance costs was 

arbitrary and capricious since, inter alia, Public Power Council did provide specific 

assertions as to how the Final Rule will have a significant economic impact on small 

entities. The NYPSC requests rehearing on whether the Commission’s decision to direct 

NERC to revise the bulk electric system definition to include facilities operated at 100 kV 

and above where the Commission failed to determine sufficient benefits in relation to the 

costs, resulting in the imposition of unnecessary costs without reliability benefits, was 

arbitrary, capricious, and an abuse of discretion. Snohomish states that it and many other 

entities operating in the Western Interconnection provided evidence demonstrating that 

imposition of the 100-kV threshold in the Western Interconnection will result of 

enormous compliance costs with no benefit to reliability since the 115-kV systems 

operated by these entities generally are used only for local distribution and their operation 

therefore has little or no effect on the interconnected bulk system. 
Docket No. RM09-18-001 - 62 - 

Commission Determination

109. The Commission does not agree with commenters that its Regulatory Flexibility 

Act analysis was deficient, and we continue to believe that our suggested approach in 

Order No. 743 will not have a significant economic impact on a substantial number of 

small entities.103 With respect to comments that we did not adequately consider the costs 

of implementing a 100 kV threshold, we note that the current bulk electric system 

definition contains a general 100 kV threshold. Thus, the burden of our suggested 

proposal to eliminate the regional discretion in the current definition and maintain a 

bright-line 100 kV threshold should be minimal in all regions except NPCC. Even within 

the U.S. portion of the NPCC region, the Commission estimated in the Final Rule that 

only four of the 33 transmission owners, transmission operators and transmission service 

providers may fall within the definition of small entities. We also believe that the 

exemption process will further ensure that the Final Rule minimally affects small entities. 

Finally, we have clarified on rehearing that NERC may develop criteria to identify local 

distribution facilities and certain categories of radial facilities that qualify for exclusion 

from the definition of the bulk electric system and therefore do not need to apply for 

exemption. For these reasons the Commission rejects the comments objecting to the 

Commission’s determinations regarding the cost of implementing a 100 kV threshold. 

110. However, the Commission will grant APPA’s and NRECA’s request for 

clarification in part. The Commission clarifies that it will perform a new Regulatory 

 103 Order No. 743, 133 FERC ¶ 61,150 at P 169. 
Docket No. RM09-18-001 - 63 - 

Flexibility Act analysis to determine whether the revised bulk electric system definition 

will have a significant economic impact on small entities when NERC submits its 

proposed definition, criteria for exclusion and the exemption process.104 We believe that 

the revisions NERC will propose will be sufficiently different from the initial NOPR 

proposal to warrant additional review to ensure that small entities are not unduly 

burdened. 

III. Document Availability

111. In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through FERC’s Home Page 

(http://www.ferc.gov) and in FERC’s Public Reference Room during normal business 

hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, 

Washington DC 20426. 

112. From FERC’s Home Page on the Internet, this information is available on 

eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft 

Word format for viewing, printing, and/or downloading. To access this document in 

eLibrary, type the docket number excluding the last three digits of this document in the 

docket number field. 

 104 This analysis will determine if an Initial Regulatory Flexibility Analysis is 

required or if the Commission can certify that the revised definition will not have a 

significant economic impact on a substantial number of small companies. 
Docket No. RM09-18-001 - 64 - 

113. User assistance is available for eLibrary and the FERC’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 (202) 502-8371, TTY (202) 502-8659. E-mail the Public Reference Room at 

public.referenceroom@ferc.gov. 

By the Commission. 

( S E A L ) 

Nathaniel J. Davis, Sr., 

Deputy Secretary.