158 FERC ¶ 61,030

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

18 CFR Part 40

[Docket No. RM16-7-000; Order No. 835]

Disturbance Control Standard—Contingency Reserve for Recovery from a Balancing 

Contingency Event Reliability Standard

(Issued January 19, 2017)

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

SUMMARY: The Commission approves Reliability Standard BAL-002-2 (Disturbance 

Control Standard—Contingency Reserve for Recovery from a Balancing Contingency 

Event) submitted by the North American Electric Reliability Corporation (NERC). 

Reliability Standard BAL-002-2 is designed to ensure that balancing authorities and 

reserve sharing groups balance resources and demand and return their Area Control Error 

to defined values following a Reportable Balancing Contingency Event. In addition, the 

Commission directs NERC to develop modifications to Reliability Standard BAL-002-2 

to address concerns regarding extensions of the 15-minute period for Area Control Error 

recovery and contingency reserve restoration. The Commission also directs NERC: 

(1) to collect and report on data regarding additional megawatt losses following 

Reportable Balancing Contingency Events during the Contingency Reserve Restoration 

Period; and (2) to study and report on the reliability risks associated with megawatt losses 

above the most severe single contingency that do not cause energy emergencies. 
Docket No. RM16-7-000 ii

EFFECTIVE DATE: This rule will become effective [INSERT DATE 60 days after 

publication in the FEDERAL REGISTER].

FOR FURTHER INFORMATION CONTACT:

Enakpodia Agbedia (Technical Information)

Office of Electric Reliability, Division of Reliability Standards 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

Telephone: (202) 502-6750

Enakpodia.Agbedia@ferc.gov

Mark Bennett (Legal Information)

Office of the General Counsel

Federal Energy Regulatory Commission

888 First Street, NE 

Washington, DC 20426

Telephone: (202) 502-8524

Mark.Bennett@ferc.gov

SUPPLEMENTARY INFORMATION: 
158 FERC ¶ 61,030

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Norman C. Bay, Chairman;

 Cheryl A. LaFleur, and Colette D. Honorable.

Disturbance Control Standard—Contingency Reserve

for Recovery from a Balancing Contingency Event

Reliability Standard

Docket No. RM16-7-000

ORDER NO. 835

FINAL RULE

(Issued January 19, 2017)

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

approves Reliability Standard BAL-002-2 (Disturbance Control Standard—Contingency 

Reserve for Recovery from a Balancing Contingency Event). The North American 

Electric Reliability Corporation (NERC), the Commission-certified Electric Reliability 

Organization (ERO), developed and submitted Reliability Standard BAL-002-2 for 

Commission approval. Reliability Standard BAL-002-2 is intended to ensure that 

balancing authorities and reserve sharing groups are able to recover from system 

contingencies by deploying adequate reserves to return their Area Control Error (ACE) 

to defined values and by replacing the capacity and energy lost due to generation or 

 1 16 U.S.C. 824(o). 
Docket No. RM16-7-000 - 2 -

transmission equipment outages.2 In addition, the Commission approves eight new and 

revised definitions proposed by NERC for inclusion in the NERC Glossary and the

retirement of currently-effective Reliability Standard BAL-002-1 immediately prior to

the effective date of Reliability Standard BAL-002-2. The Commission also approves, 

with one modification, Reliability Standard BAL-002-2’s associated violation risk factors 

and violation severity levels, and implementation plan. 

2. Pursuant to section 215(d)(5) of the FPA,3 the Commission directs NERC to 

develop modifications to Reliability Standard BAL-002-2, Requirement R1 to address

concerns related to the potential reliability impact of repeated extensions of the period for 

ACE recovery. To address the concerns, the Notice of Proposed Rulemaking (NOPR) 

proposed directing that NERC modify the Reliability Standard to require reliability 

coordinator approval of extensions of the ACE recovery period. Numerous commenters 

opposed the proposal, arguing that the proposal has the potential to complicate an already 

challenging situation. Thus, to address the underlying concern while cognizant of the 

NOPR comments, the final rule adopts a different approach of directing NERC to 

develop modifications to Reliability Standard BAL-002-2 that would require an entity to 

 2 ACE is the instantaneous difference between a balancing authority’s Net Actual 

and Scheduled Interchange, taking into account the effects of Frequency Bias, correction 

for meter error, and Automatic Time Error Correction (ATEC), if operating in ATEC

mode. ATEC is only applicable to balancing authorities in the Western Interconnection.

NERC Glossary of Terms Used in NERC Reliability Standards (NERC Glossary) at 7 

(updated September 29, 2016).

3 16 U.S.C. 824o(d)(5).
Docket No. RM16-7-000 - 3 -

provide certain information to the reliability coordinator when the entity does not timely 

recover ACE due to an intervening disturbance. As discussed below, the Commission 

also directs NERC: (1) to collect and report on data related to resets of the contingency 

reserve restoration period; and (2) to study and report on the reliability risks associated 

with megawatt losses above an applicable entity’s most severe single contingency 

(MSSC) that do not cause energy emergencies. 

I. Background

3. Section 215 of the FPA requires a Commission-certified ERO to develop 

mandatory and enforceable Reliability Standards that are subject to Commission review 

and approval. The Commission may approve, by rule or order, a proposed Reliability 

Standard or modification to a Reliability Standard if it determines that the Reliability 

Standard is just, reasonable, not unduly discriminatory or preferential and in the public 

interest.4

 Once approved, the Reliability Standards may be enforced by NERC, subject to 

Commission oversight, or by the Commission independently.5

 Pursuant to section 215 of 

 4 Id. 824o(d)(2).

5 Id. 824o(e).
Docket No. RM16-7-000 - 4 -

the FPA, the Commission established a process to select and certify an ERO,6 and 

subsequently certified NERC.7

 

4. On March 16, 2007, the Commission issued Order No. 693, approving 83 of the 

107 Reliability Standards filed by NERC, including Reliability Standard BAL-002-0.8

 In 

addition, pursuant to section 215(d)(5) of the FPA, the Commission directed the ERO to 

develop modifications to Reliability Standard BAL-002-0: (1) to include a requirement 

that explicitly provides that demand side management may be used as a resource for 

contingency reserves; (2) to develop a continent-wide contingency reserve policy; and 

(3) to refer to the ERO rather than the NERC Operating Committee in Requirements R4.2 

and R6.2.9 On January 10, 2011, the Commission approved Reliability Standard 

BAL-002-1, which addressed the third directive described above.10 

 6 Rules Concerning Certification of the Electric Reliability Organization; and 

Procedures for the Establishment, Approval, and Enforcement of Electric Reliability 

Standards, Order No. 672, FERC Stats. & Regs. ¶ 31,204, order on reh’g, Order 

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

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

and compliance, 117 FERC ¶ 61,126 (2006), aff’d sub nom. Alcoa, Inc. v. FERC, 

564 F.3d 1342 (D.C. Cir. 2009).

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

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

(2007). 

9 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 356.

10 North American Electric Reliability Corp., 134 FERC ¶ 61,015 (2011).
Docket No. RM16-7-000 - 5 -

II. NERC Petition and Reliability Standard BAL-002-2

5. On January 29, 2016, NERC filed a petition seeking approval of Reliability 

Standard BAL-002-2;

11 eight new or revised definitions to be added to the NERC 

Glossary; and Reliability Standard BAL-002-2’s associated violation risk factors and 

violation severity levels, effective date, and implementation plan.12 NERC stated that 

Reliability Standard BAL-002-2 is just, reasonable, not unduly discriminatory or 

preferential, and in the public interest because it satisfies the factors set forth in Order 

No. 672, which the Commission applies when reviewing a proposed Reliability 

Standard.13 NERC also asserted that Reliability Standard BAL-002-2 addresses the 

outstanding directives from Order No. 693 regarding the use of demand side management 

as a resource for contingency reserve and the development of a continent-wide 

contingency reserve policy. 

6. Reliability Standard BAL-002-2 consolidates six requirements in currentlyeffective Reliability Standard BAL-002-1 into three requirements and is applicable to 

 11 Reliability Standard BAL-002-2 is available on the Commission’s eLibrary 

document retrieval system in Docket No. RM16-7-000 and on the NERC website, 

www.nerc.com. 

12 The eight proposed new and revised definitions for inclusion in the NERC 

Glossary are for the following terms: Balancing Contingency Event, Most Severe Single 

Contingency, Reportable Balancing Contingency Event, Contingency Event Recovery 

Period, Contingency Reserve Restoration Period, Pre-Reporting Contingency Event ACE 

Value, Reserve Sharing Group Reporting ACE, and Contingency Reserve. NERC 

Petition at 28-34.

13 NERC Petition at 13 and Ex. F (Order No. 672 Criteria).
Docket No. RM16-7-000 - 6 -

balancing authorities and reserve sharing groups. NERC stated that Reliability Standard 

BAL-002-2 improves upon existing Reliability Standard BAL-002-1 because “it clarifies 

obligations associated with achieving the objective of BAL-002 by streamlining and 

organizing the responsibilities required therein, enhancing the obligation to maintain 

reserves, and further defining events that predicate action under the standard.”14 NERC 

also stated that Reliability Standard BAL-002-2 “address[es] and supersede[s]” the 

proposed interpretation previously submitted by NERC (i.e., of Reliability Standard 

BAL-002-1a) and pending in Docket No. RM13-6-000.15

7. Requirement R1 of BAL-002-2 requires a balancing authority or reserve sharing 

group experiencing a Reportable Balancing Contingency Event to deploy its contingency 

reserves to recover its ACE to certain prescribed values within the Contingency Event 

 14 Id. at 13.

15 Id. at 1. On February 12, 2013, NERC filed a proposed interpretation of 

Reliability Standard BAL-002-1 that construed the Reliability Standard so that the 

15-minute ACE recovery period would not apply to events of a magnitude exceeding an 

entity’s most severe single contingency. In a NOPR issued on May 16, 2013, the 

Commission proposed to remand the proposed interpretation on procedural grounds. 

Electric Reliability Organization Interpretation of Specific Requirements of the 

Disturbance Control Performance Standard, 143 FERC ¶ 61,138 (2013). The 

rulemaking on the proposed interpretation is pending. In the petition in the immediate 

proceeding, NERC states that, upon approval of Reliability Standard 

BAL-002-2, NERC will file a notice of withdrawal of the proposed interpretation. NERC 

Petition at 1. 
Docket No. RM16-7-000 - 7 -

Recovery Period of 15 minutes.16 However, under certain circumstances, Reliability 

Standard BAL-002-2 relieves responsible entities from strict compliance with the existing 

time periods for ACE recovery and contingency reserve restoration “to ensure 

responsible entities retain flexibility to maintain service to Demand, while managing 

reliability, and to avoid duplication with other Reliability Standards.”17

8. Specifically, Requirement R1, Part 1.3.1 provides that a balancing authority or 

reserve sharing group is not subject to Requirement R1, Part 1.1 if it: (1) is experiencing 

a Reliability Coordinator declared Energy Emergency Alert Level; (2) is utilizing its 

contingency reserve to mitigate an operating emergency in accordance with its 

emergency Operating Plan, and (3) has depleted its contingency reserve to a level below 

its most severe single contingency. 

9. In addition, under Requirement R1, Part 1.3.2, a balancing authority or reserve 

sharing group is not subject to Requirement R1, Part 1.1 if the balancing authority or 

 16 NERC proposes to define Reportable Balancing Contingency Event as: “Any 

Balancing Contingency Event occurring within a one-minute interval of an initial sudden 

decline in ACE based on EMS scan rate data that results in a loss of MW output less than 

or equal to the Most Severe Single Contingency, and greater than or equal to the lesser 

amount of: (i) 80% of the Most Severe Single Contingency, or (ii) the amount listed 

below for the applicable Interconnection. Prior to any given calendar quarter, the 80% 

threshold may be reduced by the responsible entity upon written notification to the 

Regional Entity.” NERC Petition at 30. Contingency Event Recovery Period, as 

proposed by NERC, means: “A period that begins at the time that the resource output 

begins to decline within the first one-minute interval of a Reportable Balancing

Contingency Event, and extends for fifteen minutes thereafter.” Id. at 32.

17 Id. at 4.
Docket No. RM16-7-000 - 8 -

reserve sharing group experiences: (1) multiple Contingencies where the combined 

megawatt (MW) loss exceeds its most severe single contingency and that are defined as 

a single Balancing Contingency Event or (2) multiple Balancing Contingency Events 

within the sum of the time periods defined by the Contingency Event Recovery Period 

and Contingency Reserve Restoration Period whose combined magnitude exceeds the 

Responsible Entity’s most severe single contingency. 

10. Requirement R2 provides that each responsible entity:

shall develop, review and maintain annually, and implement an 

Operating Process as part of its Operating Plan to determine its Most 

Severe Single Contingency and to make preparations to have 

Contingency Reserve equal to, or greater than the Responsible 

Entity’s Most Severe Single Contingency available for maintaining 

system reliability.

NERC explained that Requirement R2 requires responsible entities to demonstrate 

that their process for calculating their most severe single contingency “surveys all 

contingencies, including single points of failure, to identify the event that would cause 

the greatest loss of resource output used by the [reserve sharing group or balancing 

authority] to meet Firm Demand.”18 NERC further stated that Requirement R2 supports 

Requirements R1 and R3 in Reliability Standard BAL-002-2 “as these requirements rely 

on proper calculation of [most severe single contingency].”19

 18 Id. at 25.

19 Id. NERC provides examples of how responsible entities may calculate the most 

severe single contingency in the petition. See NERC Petition, Ex. B (Calculating Most 

Severe Single Contingency).
Docket No. RM16-7-000 - 9 -

11. Requirement R3 provides that “each Responsible Entity, following a Reportable 

Balancing Contingency Event, shall restore its Contingency Reserve to at least its Most 

Severe Single Contingency, before the end of the Contingency Reserve Restoration 

Period [90 minutes], but any Balancing Contingency Event that occurs before the end of 

a Contingency Reserve Restoration Period resets the beginning of the Contingency Event 

Recovery Period.”

12. NERC explained that the revised language in the consolidated requirements in 

Reliability Standard BAL-002-2 will improve efficiency and clarity by removing 

“unnecessary entities from compliance to capture only those entities that are vital for 

reliability.”20 NERC stated that the new definitions for Balancing Contingency Event 

and Reportable Balancing Contingency Event more clearly identify the types of events 

that cause frequency deviations necessitating action under Reliability Standard BAL-002-

2 and provide additional detail regarding the types of resources that may be identified as 

contingency reserves. Furthermore, NERC stated that Reliability Standard BAL-002-2 

“ensures objectivity of the reserve measurement process by guaranteeing a Commissionsanctioned continent-wide reserve policy,” and therefore satisfies an outstanding Order 

No. 693 directive for uniform elements, definitions and requirements for a continent-wide 

contingency reserve policy.21 Finally, NERC asserted that the revised definition of 

 20 NERC Petition at 14.

21 Id. 
Docket No. RM16-7-000 - 10 -

Contingency Reserves “improves the existing definition by addressing a Commission 

directive in Order No. 693 to allow demand side management to be used as a resource for 

contingency reserve when necessary.”22

13. NERC submitted proposed violation risk factors and violation severity levels for 

each requirement of Reliability Standard BAL-002-2 and an implementation plan and 

effective dates. NERC stated that these proposals were developed and reviewed for 

consistency with NERC and Commission guidelines. NERC proposed an effective date 

for Reliability Standard BAL-002-2 that is the first day of the first calendar quarter that is 

six months after the date of Commission approval. NERC explained that this

implementation date will allow entities to make necessary modifications to existing 

software programs to ensure compliance.23 

14. On February 12, 2016, NERC submitted a supplemental filing to clarify a 

statement in the petition that Reliability Standard BAL-002-2 would operate in 

conjunction with Reliability Standard TOP-007-0 to control system frequency by 

addressing transmission line loading in the event of a transmission overload. NERC 

explained that, while Reliability Standard TOP-007-0 will be retired on April 1, 2017, 

“the obligations related to [transmission line loading] under TOP-007-0 will be covered 

by Commission-approved TOP-001-3, EOP-003-2, IRO-009-2, and IRO-008-2 . . . by 

 22 Id. at 33.

23 NERC Petition, Ex. D (Implementation Plan) at 3.
Docket No. RM16-7-000 - 11 -

requiring relevant functional entities to communicate [Interconnection Reliability 

Operating Limits (IROL)] and [System Operating Limits (SOL)] exceedances so that the 

[reliability coordinator] can direct appropriate corrective action to mitigate or prevent 

those events.”24 

15. On March 31, 2016, NERC submitted a second supplemental filing to “further 

clarify the extent to which BAL-002-2 interacts with other Commission-approved 

Reliability Standards to promote Bulk Power System reliability...[and support] the 

overarching policy objective reflected in the stated purpose of Reliability Standard 

BAL-002-2.”25 In its filing, NERC expanded upon the explanation in the petition 

regarding how an “integrated” and “coordinated suite of Reliability Standards” 

(BAL-001-2, BAL-003-1, TOP-007-0, EOP-002-3, EOP-011-1, IRO-008-2, and 

IRO-009-2) will apply to events causing MW losses above a responsible entity’s most 

severe single contingency, and how those other Reliability Standards are better designed 

to manage the greater risks created by such events.26

III. Notice of Proposed Rulemaking

16. On May 19, 2016, the Commission issued a NOPR proposing to approve 

Reliability Standard BAL-002-2 as just, reasonable, not unduly discriminatory or 

 24 NERC February 12, 2016 Supplemental Filing at 2-3.

25 NERC March 31, 2016 Supplemental Filing at 1, 5.

26 Id. at 2-5.
Docket No. RM16-7-000 - 12 -

preferential and in the public interest.27 The Commission also proposed to approve 

NERC’s eight proposed new and revised definitions and the retirement of currentlyeffective Reliability Standard BAL-002-1. Further, the Commission proposed to direct 

NERC to change the proposed violation risk factor from “medium” to “high” for 

Reliability Standard BAL-002-2, Requirements R1 and R2. 

17. In the NOPR, the Commission recognized that it is essential for grid reliability 

that responsible entities balance resources and demand and restore system frequency to 

recover from a system event, and that they maintain reserves necessary to replace 

capacity and energy lost due to generation or transmission outages. The Commission 

also stated that Reliability Standard BAL-002-2 improves upon currently-effective 

Reliability Standard BAL-002-1 by consolidating requirements to streamline and clarify 

the obligations related to achieving these goals. However, the Commission raised 

concerns regarding possible extensions of the 15-minute ACE recovery period and the 

90-minute Contingency Reserve Restoration Period, as well as NERC’s proposal to limit 

the scope of Reliability Standard BAL-002-2 to a responsible entity’s most severe single 

contingency. 

18. In the NOPR, the Commission sought comment on the following issues: 

(1) reliability coordinator authorization of extensions of the 15-minute ACE recovery 

period; (2) resets or credits during the 90-minute Contingency Reserve Restoration 

 27 Disturbance Control Standard—Contingency Reserve for Recovery from a 

Balancing Contingency Event Reliability Standard, Notice of Proposed Rulemaking, 

81 FR 33,441 (May 26, 2016), 155 FERC ¶ 61,180 (2016) (NOPR).
Docket No. RM16-7-000 - 13 -

Period; (3) the exclusion of megawatt losses above the most severe single contingency 

in the proposed definition of Reportable Balancing Contingency Event; and (4) NERC’s 

proposal to reduce from “high” to “medium” the violation risk factor for proposed 

Requirements R1 and R2. The Commission also sought comment on whether NERC’s 

proposed definition of contingency reserve should include the NERC-defined term 

Demand-side Management.

19. In response to the NOPR, the Commission received 11 sets of comments. We 

address below the issues raised in the NOPR and comments. The Appendix to this final 

rule lists the entities that filed comments in response to the NOPR.

IV. Discussion

20. Pursuant to FPA section 215(d)(2), we approve Reliability Standard BAL-002-2 as 

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

also approve NERC’s eight new and revised proposed definitions and, with one 

exception, the proposed violation risk factor and violation severity level assignments. In 

addition, we approve NERC’s implementation plan establishing an effective date of the 

first day of the first calendar quarter, six months after the date of Commission approval, 

and the retirement of currently-effective BAL-002-1 immediately before that date.28 

21. The purpose of Reliability Standard BAL-002-2 is to ensure that balancing 

authorities and reserve sharing groups balance resources and demand and return their 

 28 NERC Petition, Ex. D (Implementation Plan) at 3.
Docket No. RM16-7-000 - 14 -

ACE to defined values following a Reportable Balancing Contingency Event. We 

determine that Reliability Standard BAL-002-2 improves upon currently-effective 

Reliability Standard BAL-002-1 by consolidating the number of requirements to 

streamline and clarify the obligations for responsible entities to deploy contingency 

reserves to stabilize system frequency in response to system contingencies.

22. We conclude that BAL-002-2 satisfies the Order No. 693 directive that NERC 

develop a continent-wide contingency reserve policy.

29 Also, we accept NERC’s 

explanation in response to the NOPR that demand side resources that are technically 

capable can be included as contingency reserves, and therefore determine that Reliability 

Standard BAL-002-2 satisfies the Order No. 693 directive that demand side management 

may be used as a resource for contingency reserves.30 

23. In addition, pursuant to section 215(d)(5) of the FPA, we direct NERC to develop 

modifications to Reliability Standard BAL-002-2 to address our concerns, discussed 

below, regarding the 15-minute ACE recovery period set forth in Requirement R1. We 

also direct NERC to collect and report on data pertaining to the occurrence of Balancing 

Contingency Events that trigger resets of the 90-minute Contingency Reserve Restoration 

 29 Order No. 693, FERC Stats. & Regs ¶ 31,242 at PP 340, 341 and 356. 

30 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at PP 330, 335 and 356. In its 

comments NERC explained that “[t]he proposed definition balances the need for 

flexibility to include a variety of demand side resources in measurements of Contingency 

Reserve with the need to define the types of demand side resources that are ‘technically 

capable’ to serve as contingency reserve.” NERC Comments at 30.
Docket No. RM16-7-000 - 15 -

Period under Requirement R3. We further direct NERC to study and submit a report to 

the Commission with findings regarding reliability risks associated with most severe 

single contingency exceedances that do not result in energy emergencies. 

24. We discuss below the following issues raised in the NOPR and addressed in the 

comments: (A) whether a reliability coordinator must expressly authorize extensions of

the 15-minute ACE recovery period; (B) whether BAL-002-2 should be modified to 

require all contingency reserves to be restored within the 90-minute Contingency Reserve 

Restoration Period; (C) whether a reasonable obligation should be imposed for balancing 

authorities and reserve sharing groups to address scenarios involving megawatt losses 

above the most severe single contingency that do not cause energy emergencies; and 

(D) NERC’s proposal to reduce from “high” to “medium” the violation risk factor for 

Requirements R1 and R2. 

A. The 15-Minute ACE Recovery Period

NERC Petition

25. In its petition, NERC stated that the “exemption” from the 15-minute ACE 

recovery period in Requirement R1, Part 1.3.1 “eliminates the existing conflict with 

EOP-011-1, as it removes undefined auditor discretion when assessing compliance and 

allows the responsible entity flexibility to maintain service to load while managing 

reliability.”31 NERC explained that this exemption does not eliminate an entity’s 

 31 NERC Petition at 22.
Docket No. RM16-7-000 - 16 -

obligation to respond to a Reportable Balancing Contingency Event, but rather it will 

“simply allow more time to return the Reporting ACE to the defined limits than would 

otherwise be allowed.”32

NOPR

26. In the NOPR, the Commission noted that Reliability Standard BAL-002-2, 

Requirement R1 obligates a responsible entity that experiences a Reportable Balancing 

Contingency Event to return its Reporting ACE to pre-defined values within the 

15-minute Contingency Event Recovery Period. Further, the Reliability Standard does 

not expressly provide a definitive and enforceable deadline for ACE recovery during a 

reliability coordinator-declared Energy Emergency Alert accompanied by the depletion 

of the entity’s contingency reserves to below its most severe single contingency.

27. The Commission stated that NERC’s explanation for relief from the 15-minute 

ACE recovery period in Reliability Standard BAL-002-2 raises concerns, because it is 

unclear how or when an entity will prepare for a second contingency during the 

indeterminate extension of the 15-minute ACE recovery period that Requirement R1, 

Part 1.3 permits. The Commission observed that a balancing authority that is operating 

out-of-balance for an extended period of time is “leaning on the system” by relying on 

external resources to meet its obligations. That could affect other entities within an 

Interconnection, particularly if another entity is reacting to a grid event while unaware 

 32 Id. at 24.
Docket No. RM16-7-000 - 17 -

that the first entity has not restored its ACE.33 While an extension of the 15-minute ACE 

recovery period may be appropriate under certain emergency conditions, the NOPR 

explained that, with a wide-area view and superior information and objectivity, the 

reliability coordinator is in a better position to decide whether to extend the ACE 

recovery period after an entity has met the criteria described in Requirement R1, 

Part 1.3.1. 

28. Further, while Reliability Standard EOP-011-1, Requirement R3, requires the 

reliability coordinator to review balancing authority Operating Plans and notify a 

balancing authority of any “reliability risks” the reliability coordinator may identify with 

a time frame for the resubmittal of revised Operating Plans, the NOPR explained that the 

Reliability Standard does not require reliability coordinator approval of Operating Plans.

29. Therefore, the NOPR proposed to direct NERC to develop modifications to 

Reliability Standard BAL-002-2 that would require Reporting ACE recovery within the 

15-minute Contingency Event Recovery Period unless the relevant reliability coordinator 

expressly authorizes an extension of the 15-minute ACE recovery period after the 

balancing authority has met the criteria described in Requirement R1, Part 1.3.1. The 

Commission’s proposal included modifying Reliability Standard BAL-002-2 to identify 

the reliability coordinator as an Applicable Entity. 

 33 NOPR, 155 FERC ¶ 61,180 at P 22.
Docket No. RM16-7-000 - 18 -

Comments

30. NERC, EEI, NRECA, TVA, CEA, Joint Commenters, IESO and APS oppose the 

proposed directive. NERC asserts that the proposed directive is unnecessary because the 

Balancing Authority ACE Limit (BAAL) and a balancing authority’s resource obligations 

under Reliability Standard BAL-001-2 discourage balancing authorities from leaning on 

the system during extensions of the Contingency Event Recovery Period. NERC 

explains that the BAAL:

is a unique limit on a [balancing authority’s] Reporting ACE based on 

Real-time interconnection frequency levels ... since the loss of a resource 

would influence the Interconnection’s frequency, the BAAL would adjust 

(or ‘tighten’) to assure that the Interconnection frequency remains in a safe 

range. The [balancing authority] must return its operations to within the 

‘tightened’ BAAL within 30 minutes and thus would not be able to ‘lean’ 

on the Interconnection for any prolonged period.34 

31. Further, NERC contends that the proposed role for reliability coordinators is 

unnecessary—in both emergency and non-emergency situations—because the reliability 

coordinator “must maintain constant oversight of reliability within its [reliability 

coordinator] area and direct other responsible entities to take actions necessary to 

maintain reliability.”35 

32. EEI and Joint Commenters assert that the NOPR proposal “would result in 

unnecessary duplication of requirements adding no tangible benefit to reliability while 

 34 NERC Comments at 10.

35 Id. at 11 (citing Reliability Standards EOP-0011-1, EOP-003-2, IRO-001-4, 

IRO-002-4, IRO-008-2, and IRO-009-2).
Docket No. RM16-7-000 - 19 -

needlessly increasing the compliance burden.”36 Joint Commenters also note the 

infrequent nature of multiple-contingency events and Energy Emergency Alerts (EEAs), 

describing them as “exceptional circumstances appropriate for an exemption from the 

typical measured requirements.”37 Joint Commenters state that in 2015 there were ten 

EEA Level 2 and Level 3 events, and that “most [balancing authorities] experience no 

EEA events in a given year ... allowing recovery exceptions during these exceptional 

circumstances would not create significant risk with respect to ACE recovery 

responsibilities.”38 Joint Commenters also contend that in a “multiple-contingency event 

or during an EEA, there are likely scores of activities occupying the [reliability 

coordinator’s] attention. Requiring the [balancing authority] and [reliability coordinator] 

to conduct a conference call during an EEA to discuss the merits of requests for 

additional ACE recovery time only complicates these already-challenging conditions.”39

33. While supporting the notification and involvement of reliability coordinators, APS 

shares Joint Commenters’ concern that requiring reliability coordinators to expressly 

authorize extensions of the 15-minute ACE recovery period could distract responsible 

entities from focusing on “maintaining and recovering the reliability of the [bulk electric 

 36 EEI Comments at 7; see also Joint Commenters Comments at 2-4.

37 Joint Commenters Comments at 4.

38 Id. (citing NERC’s 2016 State of Reliability Report at 38).

39 Id. at 3.
Docket No. RM16-7-000 - 20 -

system].”40 Therefore, as an alternative to the NOPR proposal, APS proposes that 

balancing authorities obtain extensions of the 15-minute ACE recovery period under the 

extenuating circumstances described in Requirement R1, Part 1.3.1 by notifying the 

reliability coordinator of the conditions within its area and providing the reliability 

coordinator with an ACE recovery plan and target time period, but without obtaining 

express approval from the reliability coordinator.

41

34. Idaho Power and BPA support the Commission’s proposal to expressly require 

reliability coordinator authorization for extensions of the 15-minute Reporting ACE 

recovery period. Idaho power agrees with “shifting more oversight to the Reliability 

Coordinator” as the entity with the system-wide view.42

Commission Determination

35. We are persuaded by the commenters not to adopt the NOPR proposal that would 

require reliability coordinator authorization to extend the 15-minute ACE recovery 

period. As commenters explain, seeking the proposed reliability coordinator 

authorization while recovering from a disturbance has the potential to complicate an 

already-challenging situation. However, we continue to see a need to address the 

underlying concern expressed in the NOPR that a balancing authority that is operating 

 40 APS Comments at 4-5.

41 Id. at 5.

42 Idaho Power Comments at 2; see also BPA Comments at 3.
Docket No. RM16-7-000 - 21 -

out-of-balance for an extended period of time is “leaning on the system” by relying on 

external resources to meet its obligations. That scenario could affect other entities within 

an Interconnection, particularly if another entity is reacting to a grid event while unaware 

that the first entity has not restored its ACE. Accordingly, to address our concern without 

requiring reliability coordinator authorization, we adopt APS’s proposed alternative that 

would require a balancing authority or reserve sharing group experiencing a depletion of 

contingency reserves below its most severe single contingency level during an Energy 

Emergency Alert to obtain an extension of the 15-minute ACE recovery period by 

informing the reliability coordinator of the circumstances and providing it with an ACE 

recovery plan and target time period. 

36. We are persuaded that APS’s approach is reasonable and adequately addresses 

concerns with extensions of the 15-minute ACE recovery period. By requiring 

notification of reliability coordinators and providing the reliability coordinator with an 

ACE recovery plan and target time period, we agree that the APS proposal “would allow 

appropriate flexibility to [balancing authorities] when extenuating circumstances are 

present while providing [reliability coordinators] with the necessary data, 

communication, and coordination to fulfill their oversight responsibilities to the 

Interconnection.”43

 43 APS Comments at 8.
Docket No. RM16-7-000 - 22 -

37. Accordingly, we direct NERC to develop modifications to Reliability Standard 

BAL-002-2, Requirement R1 to require balancing authorities or reserve sharing groups: 

(1) to notify the reliability coordinator of the conditions set forth in Requirement R1, 

Part 1.3.1 preventing it from complying with the 15-minute ACE recovery period; and 

(2) to provide the reliability coordinator with its ACE recovery plan, including a target 

recovery time. NERC may also propose an equally efficient and effective alternative.

B. The 90-Minute Contingency Reserve Restoration Period

NERC Petition

38. Reliability Standard BAL-002-2, Requirement R3 requires a balancing authority 

or reserve sharing group to restore its contingency reserves to at least its most severe 

single contingency before the end of the 90-minute Contingency Reserve Restoration 

Period.44 Requirement R3 also provides for an automatic “reset” of the 90-minute

restoration period based upon any Balancing Contingency Event that occurs during the 

restoration period.45 

 44 NERC Petition, Ex. D (Implementation Plan). The 90-minute contingency 

reserve restoration period begins after the end of the 15-minute ACE restoration period 

under Requirement R1. Accordingly, responsible entities must restore contingency 

reserves within 105 minutes of the occurrence of a Reportable Balancing Contingency 

Event to comply with Requirement R3.

45 Balancing Contingency Event means: “Any single event described in 

Subsections (A), (B), or (C) below, or any series of such otherwise single events, with 

each separated from the next by one minute or less.

(continued...)
Docket No. RM16-7-000 - 23 -

NOPR

39. In the NOPR, the Commission proposed to direct NERC to modify Reliability 

Standard BAL-002-2 to “eliminate the potential for unlimited resets and ensure that 

contingency reserves must be restored within the 90-minute Contingency Reserve 

Restoration Period.”46 The Commission sought comment on a possible alternative that 

would give a balancing authority or reserve sharing group “credits” for megawatt losses 

resulting from Balancing Contingency Events during the 90-minute restoration period, 

and allow an additional 90 minutes to restore reserves related to those megawatt losses.47

Comments

40. NERC, EEI, NRECA, CEA, Joint Commenters, IESO and APS support approval 

of Requirement R3 as filed. NERC asserts that, because of resource limitations and the 

 

A. Sudden loss of generation: 

a. Due to 

i. unit tripping, 

ii. loss of generator Facility resulting in isolation of the generator 

from the Bulk Electric System or from the responsible entity’s 

System, or 

iii. sudden unplanned outage of transmission Facility; 

b. And, that causes an unexpected change to the responsible entity’s ACE; 

B. Sudden loss of an import, due to unplanned outage of transmission equipment 

that causes an unexpected imbalance between generation and Demand on the 

Interconnection. 

C. Sudden restoration of a Demand that was used as a resource that causes an 

unexpected change to the responsible entity’s ACE.” NERC Petition Ex. D.

46 NOPR, 155 FERC ¶ 61,180 at P 29.

47 Id. PP 27-29.
Docket No. RM16-7-000 - 24 -

potential compliance exposure to other Reliability Standards, including the Reporting 

ACE recovery requirements in Reliability Standard BAL-001-2, entities will not 

experience unlimited resets of the 90-minute restoration period.48 NERC explains that 

“[i]f an entity continues to trip units before full recovery of other units, the responsible 

entity would eventually fail to meet obligations under other Reliability Standards 

(including the requirement to recover ACE within 15 minutes under proposed BAL-002-

2) and may eventually enter into an Emergency situation under [reliability coordinator] 

oversight...”49 NERC states that balancing authorities and reserve sharing groups would 

still be required to actively restore contingency reserves even after experiencing a 

Balancing Contingency Event during the 90-minute restoration period. Such events, 

according to NERC, “would merely extend the Contingency Reserve Restoration Period 

to ensure that the responsible entity has adequate time to recover from consecutive 

losses.”50 NERC asserts that the Commission’s proposed credit approach “would be 

confusing and burdensome, and it may attract attention away from full and final 

restoration of the Contingency Reserve.”51 EEI agrees, adding that, “in light of existing 

 48 NERC Comments at 17-18.

49 Id. at 17.

50 Id. at 16.

51 Id. at 18-19.
Docket No. RM16-7-000 - 25 -

standards, this concern does not pose a sufficient risk to system reliability to merit NERC 

developing modifications to the standard.”52

41. IESO and CEA claim that modifications to Reliability Standard BAL-002-2, 

Requirement R1 to eliminate the potential for unlimited resets are unnecessary. IESO

questions the concern about unlimited resets of the Contingency Reserve Restoration 

Period, stating that it “would suggest that multiple resource loss events could somehow 

benefit or unburden a [balancing authority’s] obligation to restore the reserve level ...

[rather] the infrequent event of a reset occurrence is more appropriately viewed as simply 

not applying double jeopardy to a [balancing authority] that is already in a troubled 

situation.”53 IESO further states that a reset of the contingency reserve restoration period 

“will simply provide the opportunity for the involved balancing authority to reassess the 

situation and act accordingly to replenish the contingency reserve” to comply with 

BAL-002-2.54 Both IESO and CEA assert that balancing authorities “have a strong track 

record of acting in good faith.”55 CEA also notes that “since a [balancing authority] does 

 52 EEI Comments at 8.

53 IESO Comments at 4-5.

54 Id. at 5; see also CEA Comments at 5.

55 CEA Comments at 5; see also IESO Comments at 5.
Docket No. RM16-7-000 - 26 -

not own any resources, it cannot trigger or otherwise intentionally cause an additional 

loss of resource during the 90-minute period in order to reset the recovery period.”56

42. Joint Commenters also oppose the Commission’s proposal, explaining that

“following a unit trip that results in a [Balancing Contingency Event], the generator’s 

telemetry is often invalid or suspect for some time, and if the [balancing authority] is 

unable to accurately quantify the actual MW loss, it may be required to take extreme 

actions, including shedding firm load, simply to meet the 90-minute contingency 

recovery requirement.”57 Joint Commenters claim that the “likelihood of such an 

occurrence of multiple independent generation losses absent a catastrophic transmission 

failure is also very low.”58 Joint Commenters state that on average, one generator is lost 

in the Eastern Interconnection every 7 to 8 days, and “the probability of four random 

large generator trips in the Eastern Interconnection in a two hour period was one in 

350 years.”59

43. BPA and Idaho Power support the Commission’s proposal to require balancing 

authorities to restore contingency reserves within the 90-minute Contingency Event 

 56 CEA Comments at 4; see also IESO Comments at 5. 

57 Joint Commenters Comments at 5.

58 Id. 

59 Joint Commenters Comments at 6 (citing a probability analysis performed 

during the Reliability Standard BAL-003-1 development process using frequency event 

data for January 2006 to September 2012).
Docket No. RM16-7-000 - 27 -

Recovery Period and receive “credits” for megawatt losses during the Contingency Event 

Recovery Period. TVA believes the potential for unlimited resets of the 90-minute 

restoration period is “extremely remote,” but TVA supports the credit proposal as a 

“reasonable approach” for managing multiple events during a contingency restoration 

period. 

Commission Determination

44. The Commission determines not to adopt the NOPR proposal that NERC modify 

Reliability Standard BAL-002-2 to establish a firm requirement that responsible entities 

must restore contingency reserves within the 90-minute Contingency Reserve Restoration 

Period. Based on the comments, we are satisfied that occurrences of multiple Balancing 

Contingency Events during the 90-minute restoration period are rare and would be 

temporally bounded by the Reporting ACE recovery requirements in Reliability Standard 

BAL-001-2. We also acknowledge NERC’s comment that intervening Balancing 

Contingency Events do not relieve balancing authorities and reserve sharing groups of 

their obligation to restore contingency reserves by the end of the reset period. Further, 

we acknowledge Joint Commenters’ concern that determining the amount of megawatt 

losses to “credit” could be a distraction from the contingency reserve restoration effort, 

and the benefits from the proposed “credit” approach could be offset by unnecessary load 

shedding caused by potential confusion and uncertainties associated with its 

implementation. 

45. While, as stated in the NOPR, under some circumstances, extensions of the 

90-minute Contingency Reserve Restoration Period may be appropriate, the comments do 
Docket No. RM16-7-000 - 28 -

not fully address the concern expressed in the NOPR with resets resulting from additional

megawatt losses following a Reportable Balancing Contingency Event. Therefore, 

although we determine not to direct modifications to the Reliability Standard, we 

conclude that the automatic reset provision of Reliability Standard BAL-002-2, 

Requirement R3 should be monitored for potential problems. 

46. Accordingly, the Commission directs NERC to collect and report data pertaining 

to: (1) additional megawatt losses following Reportable Balancing Contingency Events 

during the Contingency Reserve Restoration Period; and (2) the time periods for 

contingency reserve restoration under Requirement R3 and the number of resets of the 

90-minute restoration period, and submit a report to the Commission two years following 

the first day of implementation of Requirement R3. After NERC reports on the data in a

compliance filing, the Commission will consider what further action, if any, to take.

C. Exclusion of Megawatt Losses Above the Most Severe Single 

Contingency

NERC Petition

47. NERC’s definition of Reportable Balancing Contingency Event limits balancing 

authority and reserve sharing group responsibility to megawatt losses between 80 percent 

and 100 percent of their most severe single contingency that occur within a one minute 

interval.60 In its petition, NERC asserted that an “integrated and coordinated” suite of set 

of Reliability Standards (BAL-001-2, BAL-003-1, TOP-007-0, EOP-002-3, EOP-011-1, 

 60 See NERC Petition, Ex. D (Implementation Plan) at 2.
Docket No. RM16-7-000 - 29 -

IRO-008-2, and IRO-009-2) will address the “complex issues” resulting from 

exceedances of the most severe single contingency.61 

NOPR

48. In the NOPR, the Commission expressed concern about the exclusion of megawatt 

losses above a responsible entity’s most severe single contingency from the scope of 

Reliability Standard BAL-002-2. The Commission questioned the assumption that all 

such megawatt losses, however small, warrant the proposed limitation on Reliability 

Standard BAL-002-2.62 Further, while recognizing the protections that the related set of 

Reliability Standards may provide in extreme circumstances, the Commission noted that 

megawatt exceedances of the most severe single contingency that do not cause energy 

emergencies or otherwise implicate the set of Reliability Standards cited by NERC could 

result in a reliability gap; they also could create the potential for balancing authorities to 

lean on the Interconnection by indefinitely relying on neighboring balancing authorities’ 

resources.63

49. In the NOPR, the Commission did not propose a specific approach but, rather, 

sought comment on how to address this possible reliability gap and whether to impose 

a reasonable obligation for balancing authorities and reserve sharing groups to address 

 61 NERC Petition at 15.

62 NOPR, 155 FERC ¶ 61,180 at P 33.

63 Id. 
Docket No. RM16-7-000 - 30 -

scenarios involving megawatt losses above the most severe single contingency that do not 

cause energy emergencies. The NOPR stated that, based on the comments, the 

Commission may direct that NERC develop a new or modified Reliability Standard to 

address that reliability gap.64 

Comments

50. NERC, EEI, NRECA, TVA, BPA, CEA, Joint Commenters, IESO, and APS assert 

that concerns about a possible reliability gap are unfounded and urge the Commission to 

approve Reliability Standard BAL-002-2 as filed. NERC maintains that the limitation on 

the scope of Reliability Standard BAL-002-2 will not create a reliability gap and reasserts 

its view that an integrated, coordinated suite of Reliability Standards “will address 

important reliability issues and prohibit entities from being able to ‘lean’ on the 

Interconnection when contingency events cause MW losses greater than an entity’s 

MSSC.”65 NERC states that in situations involving megawatt losses above the most 

severe single contingency, reliability issues associated with ACE recovery and 

contingency reserve restoration become less important and other reliability issues “such 

as transmission line-loading issues or frequency deviations” create more immediate 

reliability threats and warrant priority status.66 

 64 Id. at 34.

65 NERC Comments at 20 (citing Reliability Standards BAL-001-2, BAL-003-1, 

EOP-002-3, EOP-011-1, IRO-001-4, TOP-001-3, IRO-008-2, and IRO-009-2).

66 Id.
Docket No. RM16-7-000 - 31 -

51. EEI agrees with NERC, and also notes that exceedances of the most severe single 

contingency that do not create energy emergencies generally raise commercial, not 

reliability, issues. Further, EEI asserts that tightening Reliability Standard BAL-002-2 by 

requiring balancing authorities to address megawatt losses above the most severe single 

contingency “could have unintended consequences that limit the flexibility of the 

[reliability coordinators] and [balancing authorities] to work together under the existing 

suite of standards to address such complex situations...”67 

52. Joint Commenters consider requiring balancing authorities and reserve sharing 

groups to address megawatt losses above the most severe single contingency as

tantamount to requiring entities to operate to “N-2” or greater conditions. Joint 

Commenters assert that this would not only be expensive, estimating that doubling 

current contingency reserves across North America could cost $150-200 million/year 

based on average monthly cost of spinning reserves, it could adversely impact reliability. 

Joint Commenters state that N-2 events typically result from severe transmission events 

involving weather, major equipment or protection system failures. According to Joint 

Commenters, “[i]n these situations, transmission security takes priority over maintaining 

ACE to zero. Excessive generation dispatch by [balancing authorities] could interfere 

 67 EEI Comments at 11-12.
Docket No. RM16-7-000 - 32 -

with actions taken simultaneously by Transmission Operators and remote [balancing 

authorities] to resolve problems on the transmission system.”68 

53. Joint Commenters explain that the available data reflecting experience with 

megawatt losses subject to currently-effective Reliability Standard BAL-002-1 indicates 

that concerns about a reliability gap are overstated. According to Joint Commenters, of 

the 95 events involving most severe single contingency exceedances from 2012 to 2015, 

91 were recovered in less than 15 minutes, and there were no Interconnected Reliability 

Operating Limit (IROL) exceedances of over 30 minutes in 2015, “which demonstrates 

that the grid was secure even while zero ACE was not achieved within 15 minutes.”69 

54. CEA and IESO also oppose requiring balancing authorities or reserve sharing 

groups to address megawatt losses exceeding the most severe single contingency, which 

they describe as an “open-ended requirement.”70 CEA explains that it “can severely 

affect a [balancing authority’s] ability to suitably plan for potential contingency events. 

At an increased cost and at the expense of reduced market efficiency (more capacity is 

put aside for reserve as opposed to bidding into the energy market), a [balancing 

authority] could, in theory, design and operate to N-2, N-3 or greater events. However, 

this is simply not feasible.”71

 68 Joint Commenters Comments at 9.

69 Id. at 8 (citing NERC’s 2016 State of Reliability Report).

70 CEA Comments at 5; IESO Comments at 7.

71 CEA Comments at 5-6.
Docket No. RM16-7-000 - 33 -

Commission Determination

55. The Commission remains concerned with relying on a “coordinated suite of 

standards,” as NERC maintains, to address reliability issues associated with megawatt 

losses above the most severe single contingency, considering that these other Reliability 

Standards do not specifically address restoration of ACE and Contingency Reserves. 

Further, the requirements for emergency Operating Plans in Reliability Standard EOP011-1 do not specify any obligation for a balancing authority, transmission system 

operator, and/or reliability coordinator to take action to return ACE to zero for all 

operating conditions. 

56. Additionally, Reliability Standards TOP-001-3, EOP-003-2, IRO-008-2, and IRO009-2 pertain to actions needed to prevent or mitigate SOLs/IROLs caused by 

transmission line loading and other responsibilities of the transmission system operator 

and reliability coordinator. These Reliability Standards do not specifically address the 

balancing authority’s responsibility to recover ACE by balancing load and generation, the 

purpose of Reliability Standard BAL-002-2. 

57. The Commission finds the arguments and historical data provided by commenters

to be helpful regarding whether there is a need to expand the requirements of Reliability 

Standard BAL-002-2 to address most severe single contingency exceedances that do not 

cause energy emergencies, as contemplated in the NOPR. Nonetheless, we believe the 

comments do not fully resolve open questions regarding the potential reliability impact of 

suspending the focus on the balancing of demand and load and ACE recovery—the 

purpose of Reliability Standard BAL-002-2—in exceedance scenarios. 
Docket No. RM16-7-000 - 34 -

58. The Commission determines that it is important to better understand the potential 

impacts of the approach taken in Reliability Standard BAL-002-2 when megawatt losses 

exceed the most severe single contingency without causing an energy emergency. 

Accordingly, we direct NERC to study the reliability risks associated with most severe 

single contingency exceedances that do not cause energy emergencies and submit a report 

with findings to the Commission two years from Reliability Standard BAL-002-2 

implementation.

D. Violation Risk Factor for Requirements R1 and R2

NERC Petition

59. NERC proposed a “medium” violation risk factor for each requirement of 

Reliability Standard BAL-002-2. 

NOPR

60. In the NOPR, the Commission expressed concern that NERC did not adequately 

justify lowering the assignment of the violation risk factor for Requirements R1 and R2 

and proposed to direct that NERC assign a “high” violation risk factor to Reliability 

Standard BAL-002-2, Requirements R1 and R2. 

61. Requirement R1 requires a balancing authority or reserve sharing group to deploy 

contingency reserves in response to all Reportable Balancing Contingency Events as the 

means for recovering Reporting ACE. Requirement R2 requires a balancing authority or 

reserve sharing group to develop, review and maintain a process within its Operating 

Plans for determining its most severe single contingency and to prepare to have 

contingency reserves equal to, or greater than, its most severe single contingency. 
Docket No. RM16-7-000 - 35 -

Currently-effective Reliability Standard BAL-002-1 assigns a “high” violation risk factor 

for its Requirements R3 and R3.1, which NERC explained are analogous to proposed 

Requirements R1 and R2 in Reliability Standard BAL-002-2.

72

62. In the NOPR, the Commission stated that NERC provided insufficient support 

for the proposed violation risk factor for Requirements R1 and R2. In justifying the 

assignment of a “medium” violation risk factor NERC asserted, without explanation, that 

a “medium” violation risk factor is “consistent with other reliability standards (i.e., BAL001-2, BAL-003-1).”73 NERC also contended, without explanation, that Requirement R3 

is similar in concept to the current enforceable BAL-001-0.1a standard Requirements R1 

and R2, which have an approved medium violation risk factor, and approved reliability 

standards BAL-001-1 and BAL-003-1.74 The conclusory statements in NERC’s petition 

regarding the alleged similarities between Requirements R1 and R2 and other Reliability 

Standards, the NOPR stated, do not adequately explain the alleged bases for reducing the 

violation risk factor for Requirements R1 and R2 from the analogous Requirement R3 in 

the currently-effective Reliability Standard. 

 72 NERC Petition, Ex. I (Mapping Document for BAL-002-2).

73 NERC Petition, Ex. G (Analysis of Violation Risk Factors and Violation 

Severity Levels) at 4.

74 Id.
Docket No. RM16-7-000 - 36 -

Comments

63. NERC, EEI and APS oppose raising the violation risk factor for Reliability 

Standard BAL-002-2 to “high” as proposed in the NOPR. NERC asserts that a failure to 

perform Requirements R1 and R2 “in real time would produce results consistent with the 

Commission approved guidelines for a ‘Medium’ [violation risk factor] VRF ... [that is] 

unlikely to lead to Bulk Electric System instability, separation, or cascading failures.”75 

With regard to Requirement R1, NERC states that Reporting ACE “is not an immediate 

measure of reliability, and the risk resulting from failure to meet Requirement R1” is not 

likely to lead to instability, separation or cascading failures, the criteria for a high 

violation risk factor.76 Likewise, NERC asserts that a “medium” violation risk factor is 

appropriate for Requirement R2, because the process responsible entities use for 

developing and reviewing their most severe single contingency “does not directly 

contribute to reliability.”77 EEI agrees, adding that it “also believes the medium VRF is 

justified because in most instances ACE is more reflective of commercial issues, 

particularly if frequency remains normal.”78

64. APS also disagrees with the NOPR proposal because the Commission “utilizes 

previous versions of reliability standards as a benchmark for the acceptability of VRFs 

 75 NERC Comments at 28.

76 Id. at 29.

77 Id. at 30.

78 EEI at 13.
Docket No. RM16-7-000 - 37 -

[violation risk factors].”79 APS states that it is “concerned that the assignment of a VRF 

based solely on the previous VRF assignments may contravene the current NERC Rules 

of Procedure and associated processes.”80 APS recommends that the Commission direct 

NERC to reevaluate the VRFs for Reliability Standard BAL-002-2 “against existing 

guidance.”81

Commission Determination

65. We adopt the NOPR proposal regarding the violation risk factor for Reliability 

Standard BAL-002-2, Requirements R1 and R2. According to the Commission-approved 

criteria, a “high” violation risk factor should be assigned to a Reliability Standard 

requirement if violating the requirement could “directly cause or contribute to the Bulk 

Electric System instability, separation, or a cascading sequence of failures, or could place 

the Bulk Electric System at an unacceptable risk of instability, separation or cascading 

failures.” Reliability Standard BAL-002-2, Requirement R1 requires responsible entities 

to recover Reporting ACE following the occurrence of a Reportable Balancing 

Contingency Event, which supports Interconnection frequency in real-time. 

66. We disagree with NERC that significant real-time differences between actual and 

scheduled interchange, the imbalance that Requirement R1 is intended to address, do not 

 79 APS Comments at 11.

80 Id.

81 Id.
Docket No. RM16-7-000 - 38 -

fall within the scope of the criterion for a “high” violation risk factor. The need for the 

bulk electric system to stabilize after changes in system frequency is critical for real-time 

system operations. NERC asserts that the status of Reporting ACE “is not indicative of 

an immediate vulnerability.”82 We disagree. A violation of Requirement R1 jeopardizes 

system frequency, because it places the bulk electric system in a weakened operating 

condition with heightened risks of instability, separation, or cascading failures that could 

result from a second contingency.

67. With regard to Requirement R2, NERC acknowledges that actions under 

Requirement R2 “support Requirement R1 by requiring responsible entities to develop, 

review, and maintain a process to determine the MSSC and to maintain, for deployment 

under Requirement R1, at least enough Contingency Reserve to cover the 

MSSC...[Requirement R2] is critical to the implementation of proposed Reliability 

Standard BAL-002-2.”83 Nonetheless, NERC asserts that Requirement R2 “does not 

directly contribute to reliability.”84 We disagree, and conclude that the fundamental 

connection between Requirements R1 and R2 creates a significant role in maintaining 

reliability.

68. Accordingly, we direct NERC to assign a “high” violation risk factor to 

Reliability Standard BAL-002-2, Requirements R1 and R2.

 82 NERC Comments at 29.

83 Id. at 29.

84 Id. at 30.
Docket No. RM16-7-000 - 39 -

V. Information Collection Statement 

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

approve certain reporting and recordkeeping (collections of information) imposed by an 

agency.85 Upon approval of a collection(s) of information, OMB will assign an OMB 

control number and expiration date. Respondents subject to the filing requirements of 

this rule will not be penalized for failing to respond to these collections of information 

unless the collections of information display a valid OMB control number.

70. The Commission is submitting these reporting and recordkeeping requirements to 

OMB for its review and approval under section 3507(d) of the Paperwork Reduction Act 

of 1995, 44 U.S.C. § 3507(d) (2012). The NOPR solicited comments on the 

Commission’s need for this information, whether the information will have practical 

utility, the accuracy of the provided burden estimate, ways to enhance the quality, utility, 

and clarity of the information to be collected, and any suggested methods for minimizing 

the respondent’s burden, including the use of automated information techniques. No 

comments were received.

71. This final rule approves revisions to Reliability Standard BAL-002-1. NERC 

states in its petition that the Reliability Standard applies to balancing authorities and 

reserve sharing groups, and is designed to ensure that these entities are able to recover 

from system contingencies by deploying adequate reserves to return their ACE to defined 

values and by replacing the capacity and energy lost due to generation or transmission 

 85 5 CFR 1320.11.
Docket No. RM16-7-000 - 40 -

equipment outages. The Commission also approves NERC’s seven new definitions and 

one proposed revised definition, and the retirement of currently-effective Reliability 

Standard BAL-002-1 immediately prior to the effective date of BAL-002-2. 

72. Public Reporting Burden: Our estimate below regarding the number of 

respondents is based on the NERC Compliance Registry as of April 15, 2016. According 

to the NERC Compliance Registry, there are 70 balancing authorities in the Eastern 

Interconnection, 34 balancing authorities in the Western Interconnection and 

one balancing authority in the Electric Reliability Council of Texas (ERCOT). The 

Commission bases individual burden estimates on the time needed for balancing 

authorities and reserve sharing groups to maintain, annually, the operating process and 

operating plan that are required in the Reliability Standard. These burden estimates are 

consistent with estimates for similar tasks in other Commission-approved Reliability 

Standards. The following estimates relate to the requirements for this final rule in Docket 

No. RM16-7-000.
Docket No. RM16-7-000 - 41 -

RM16-7-000 (BAL-002-2: Disturbance Control Standard—Contingency Reserve for Recovery 

from a Balancing Contingency Event) 86

Number of 

Respondents

(1)

Annual 

Number of 

Responses 

per 

Respondent

(2)

Total 

Number of 

Responses 

(1)*(2)=(3)

Average 

Burden 

Hours & 

Cost Per 

Response

87

(4)

Total 

Annual 

Burden 

Hours & 

Total 

Annual 

Cost

(3)*(4)=(5)

Cost per 

Respondent

($)

(5)÷(1)

BA/RSG:88

Develop 

and 

Maintain 

annually, 

Operating 

Process and 

Operating 

Plans

105 1 105 8

$774

840

$81,262

$774

BA/RSG:

Record 

Retention89

105 1 105 4

$112

420

$11,760

$112

TOTAL 210 1,260

$93,022

$886

Title: FERC-725R, Mandatory Reliability Standard BAL-002-2.

 86 Reliability Standard BAL-002-2 applies to balancing authorities and reserve 

sharing groups. However, the burden associated with the balancing authorities

complying with Requirements R1and R3 is not included within this table because the 

Commission accounted for it under Commission-approved Reliability Standard BAL002-1.

87 The estimated hourly cost (salary plus benefits) of $96.71 is an average

based on Bureau of Labor Statistics (BLS) information 

(http://www.bls.gov/oes/current/naics2_22.htm) for an electrical engineer ($64.29/hour) 

and a lawyer ($129.12). 

88 BA=Balancing Authority; RSG=Reserve Sharing Group.

89 $28/hour, based on a Commission staff study of record retention burden cost.
Docket No. RM16-7-000 - 42 -

Action: Collection of Information.

OMB Control No.: 1902-0268.

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

Frequency of Responses: On Occasion.

Necessity of the Information: This final rule approves Reliability Standard BAL-002-2, 

which is designed to ensure that a responsible entity, either a balancing authority or 

reserve sharing group, is able to recover from system contingencies by deploying 

adequate reserves to return its ACE to defined values and replacing the capacity and 

energy lost due to generation or transmission equipment outages. Reliability Standard 

BAL-002-2, Requirement R1 requires a responsible entity, either a balancing authority or 

reserve sharing group, experiencing a Reportable Balancing Contingency Event to deploy 

its contingency reserves to recover its ACE to certain prescribed values within the 

Contingency Event Recovery Period of 15 minutes. Requirement R2 requires a 

balancing authority or reserve sharing group to develop, review and maintain a process 

within its Operating Plans for determining its most severe single contingency and prepare 

to have contingency reserves equal to, or greater than, its most severe single contingency. 

Requirement R3 provides that, following a Reportable Balancing Contingency Event, the 

responsible entity shall restore its Contingency Reserve to at least its most severe single 

contingency, before the end of the Contingency Reserve Restoration Period of 

90 minutes.

Internal Review: The Commission reviewed the Reliability Standard and has determined 

that it is necessary to implement section 215 of the FPA. The requirements of Reliability 
Docket No. RM16-7-000 - 43 -

Standard BAL-002-2 should conform to the Commission’s expectation for generation and 

demand balance throughout the Eastern and Western Interconnections as well as within 

the ERCOT Region.

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

contacting the following: Federal Energy Regulatory Commission, 888 First Street, NE 

Washington, DC 20426 [Attention: Ellen Brown, Office of the Executive Director, 

e-mail: DataClearance@ferc.gov, phone: (202) 502-8663, fax: (202) 273-0873].

VI. Environmental Analysis

74. The Commission is required to prepare an Environmental Assessment or an 

Environmental Impact Statement for any action that may have a significant adverse effect 

on the human environment.90 The Commission has categorically excluded certain actions 

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

Included in the exclusion are rules that are clarifying, corrective, or procedural or that 

do not substantially change the effect of the regulations being amended.91 The actions 

proposed here fall within this categorical exclusion in the Commission’s regulations.

 90 Regulations Implementing the National Environmental Policy Act of 1969, 

Order No. 486, FERC Stats. & Regs. ¶ 30,783 (1987).

91 18 CFR 380.4(a)(2)(ii).
Docket No. RM16-7-000 - 44 -

VII. Regulatory Flexibility Act 

75. The Regulatory Flexibility Act of 1980 (RFA)92 generally requires a description 

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

number of small entities. As shown in the information collection section, the Reliability 

Standard applies to 105 entities. Comparison of the applicable entities with the 

Commission’s small business data indicates that approximately 2393 are small business 

entities.94 Of these, the Commission estimates that approximately five percent, or one of 

these 23 small entities, will be affected by the new requirements of the Reliability 

Standard. 

76. The Commission estimates that the small entities affected by Reliability Standard 

BAL-002-2 will incur an annual compliance cost of up to $20,355 (i.e., the cost of 

developing, and maintaining annually operating process and operating plans), resulting in 

a cost of approximately $885 per balancing authority and/or reserve sharing group. 

These costs represent an estimate of the costs a small entity could incur if the entity is 

identified as an applicable entity. The Commission does not consider the estimated cost 

per small entity to have a significant economic impact on a substantial number of small 

 92 5 U.S.C. 601-612.

93 21.73 percent of the total number of affected entities.

94 The Small Business Administration sets the threshold for what constitutes a 

small business. Public utilities may fall under one of several different categories, each 

with a size threshold based on the company’s number of employees, including affiliates, 

the parent company, and subsidiaries. For the analysis in this final rule, we are using a 

500 employee threshold for each affected entity. Each entity is classified as Electric Bulk 

Power Transmission and Control (NAICS code 221121).
Docket No. RM16-7-000 - 45 -

entities. Accordingly, the Commission certifies that this final rule will not have a 

significant economic impact on a substantial number of small entities. 

VIII. Document Availability

77. In addition to publishing the full text of this document in the Federal Register, 

the Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through the Commission's Home Page 

(http://www.ferc.gov) and in the Commission's Public Reference Room during normal 

business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, 

Washington, DC 20426.

78. From the Commission's Home Page on the Internet, this information is available 

on eLibrary. The full text of this document is available on eLibrary in PDF and 

Microsoft Word format for viewing, printing, and/or downloading. To access this 

document in eLibrary, type the docket number of this document, excluding the last 

three digits, in the docket number field.

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

normal business hours from the Commission’s 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.

IX. Effective Date and Congressional Notification

80. These regulations are effective [INSERT DATE 60 days after publication in the

FEDERAL REGISTER]. The Commission has determined, with the concurrence of the
Docket No. RM16-7-000 - 46 -

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

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

Enforcement Fairness Act of 1996.

By the Commission.

( S E A L )

Nathaniel J. Davis, Sr.,

Deputy Secretary.
Docket No. RM16-7-000 - 47 -

APPENDIX

Commenters

Abbreviation Commenter

APS Arizona Public Service Company 

BPA Bonneville Power Administration

CEA Canadian Electricity Association

EEI Edison Electric Institute

Idaho Power Idaho Power

IESO Independent Electricity System Operator 

Joint Commenters Alberta Electric System Operator, California 

Independent System Operator, Electric Reliability 

Council of Texas, Inc., Midcontinent Independent 

System Operator, Inc., PJM Interconnection, L.L.C., 

Southwest Power Pool, Inc., and IESO 

Naturener Naturener USA, LLC

NERC North American Electric Reliability Corporation

NRECA National Rural Electric Cooperative Association

TVA Tennessee Valley Authority