141 FERC ¶ 61,236

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

18 CFR Part 40

[Docket Nos. RM12-6-000 and RM12-7-000; Order No. 773]

Revisions to Electric Reliability Organization Definition of Bulk Electric System and 

Rules of Procedure

(Issued December 20, 2012)

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final Rule.

SUMMARY: In this Final Rule, pursuant to section 215 of the Federal Power Act, the 

Federal Energy Regulatory Commission (Commission) approves modifications to the 

currently-effective definition of “bulk electric system” developed by the North American 

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

Organization. The Commission finds that the modified definition of “bulk electric 

system” removes language allowing for regional discretion in the currently-effective bulk 

electric system definition and establishes a bright-line threshold that includes all facilities 

operated at or above 100 kV. The modified definition also identifies specific categories 

of facilities and configurations as inclusions and exclusions to provide clarity in the 

definition of “bulk electric system.” 

In this Final Rule, the Commission also approves: (1) NERC’s revisions to its 

Rules of Procedure, which create an exception process to add elements to, or remove 
Docket Nos. RM12-6-000 and RM12-7-000 - 2 -

elements from, the definition of “bulk electric system” on a case-by-case basis; 

(2) NERC’s form entitled “Detailed Information to Support an Exception Request” that 

entities will use to support requests for exception from the “bulk electric system” 

definition; and (3) NERC’s implementation plan for the revised “bulk electric system” 

definition. 

EFFECTIVE DATE: This Final Rule will become effective [INSERT DATE 60 days 

after publication in the FEDERAL REGISTER]

FOR FURTHER INFORMATION CONTACT:

Susan Morris (Technical Information)

Office of Electric Reliability, Division of Reliability Standards 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

Telephone: (202) 502-6803

Nicholas Snyder (Technical Information)

Office of Energy Market Regulation, Division of Electric Power Regulation-Central

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

Telephone: (202) 502-6408

Robert Stroh (Legal Information)

Office of the General Counsel

Federal Energy Regulatory Commission

888 First Street, NE 

Washington, DC 20426

Telephone: (202) 502-8473

SUPPLEMENTARY INFORMATION:
141 FERC ¶ 61,236

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Jon Wellinghoff, Chairman;

 Philip D. Moeller, John R. Norris,

and Cheryl A. LaFleur.

Revisions to Electric Reliability Organization Definition 

of Bulk Electric System and Rules of Procedure

Docket Nos. RM12-6-000

RM12-7-000

ORDER NO. 773 

FINAL RULE 

(Issued December 20, 2012)

TABLE OF CONTENTS

I. Background ............................................................................................................................5.

A. Section 215 of the FPA ....................................................................................................5.

B. Order No. 693...................................................................................................................6.

C. Order No. 743...................................................................................................................8.

D. NERC Petitions................................................................................................................11.

1. Revised Definition of Bulk Electric System ................................................................12.

2. NERC Petition for Approval of Revisions to Rules of Procedure to Adopt an 

Exception Process..............................................................................................................26.

E. Commission NOPR .........................................................................................................29.

II. Discussion .............................................................................................................................31.

A. Approval of the Revised Bulk Electric System Definition .............................................32.

NOPR Proposal..................................................................................................................32.

Comments..........................................................................................................................33.

Commission Determination...............................................................................................38.

B. The Core Definition of Bulk Electric System ..................................................................45.

NOPR Proposal..................................................................................................................45.

Comments..........................................................................................................................46.

C. Local Distribution.............................................................................................................57.

Comments..........................................................................................................................58.

Commission Determination...............................................................................................66.
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D. Inclusions and Exclusions in the Definition of Bulk Electric System.............................74.

1. Inclusion I1 (Transformers)..........................................................................................75.

Commission Determination...............................................................................................80.

2. Inclusion I2 (Generating Resources) ...........................................................................83.

3. Inclusion I3 (Blackstart Resources)..............................................................................97.

4. Inclusion I4 (Dispersed Power Producing Resources) ................................................104.

5. Inclusion I5 (Static or Dynamic Reactive Power Devices)..........................................116.

Exclusions..........................................................................................................................125.

6. Exclusion E1 (Radial Systems) ....................................................................................127.

7. Exclusion E2 (Behind the Meter Generation) ..............................................................178.

8. Exclusion E3 (Local Networks) ...................................................................................185.

9. Exclusion E4 (Reactive Power Devices)......................................................................235.

E. The NERC Rules of Procedure Exception Process, RM12-7-000 ..................................238.

NOPR Proposal..................................................................................................................238.

1. How Entities Will Review and Seek Inclusion of Necessary Elements ......................263.

2. NERC Role in Identifying Necessary Elements...........................................................270.

3. Commission Role in Identifying Necessary Elements.................................................279.

4. Technical Review Panel ...............................................................................................289.

NOPR Proposal..................................................................................................................289.

5. Use of Industry Subject Matter Experts .......................................................................295.

6. NERC’s Detailed Information Form ...........................................................................298.

7. NERC’s Implementation Plan ......................................................................................302.

NOPR Proposal ......................................................................................................................302.

8. NERC List of Facilities Granted Exceptions................................................................305.

9. Declassification of Facilities .......................................................................................311.

III. Information Collection Statement .......................................................................................319.

IV. Regulatory Flexibility Act Analysis ...................................................................................333.

V. Environmental Analysis .......................................................................................................339.

VI. Document Availability ........................................................................................................340.

VII. Effective Date and Congressional Notification ................................................................343.
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1. Pursuant to section 215(d) of the Federal Power Act (FPA),1 the Commission 

approves modifications to the currently-effective definition of “bulk electric system” 

developed by the North American Electric Reliability Corporation (NERC), the 

Commission-certified Electric Reliability Organization (ERO). The Commission finds 

that the modified definition of “bulk electric system” improves upon the currentlyeffective definition by establishing a bright-line threshold that includes all facilities 

operated at or above 100 kV and removing language that allows for broad regional 

discretion. The modified definition also provides improved clarity by identifying specific 

categories of facilities and configurations as inclusions and exclusions to the definition of 

“bulk electric system.” 

2. We believe that the proposed “core” definition, together with the more granular 

inclusions and exclusions, should produce consistency in identifying bulk electric system 

elements across the reliability regions. In addition, we find that NERC’s proposed caseby-case exception process to add elements to, and remove elements from, the definition 

of the bulk electric system adds transparency and uniformity to the determination of what 

constitutes the bulk electric system.

3. We recognize the substantial work invested by NERC and industry participants in 

developing the modified bulk electric system definition. We also appreciate that NERC 

timely submitted the revised definition within the twelve month time frame directed by 

 1 16 U.S.C. 824o(d) (2006). 
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the Commission in the underlying order, Order No. 743, which tasked NERC with this 

project.2

 We believe that NERC and industry’s efforts provide a technically grounded 

and legally supportable foundation for identifying elements and facilities that make up 

the bulk electric system. Other highlights of the Final Rule include: 

• accepts NERC’s revisions to its Rules of Procedure, which creates an exception 

procedure to add elements to, or remove elements from, the definition of “bulk 

electric system” on a case-by-case basis; 

• approves NERC’s implementation plan for the revised “bulk electric system” 

definition; 

• approves NERC’s form entitled “Detailed Information to Support an Exception 

Request” that entities will use to support requests for exception from the “bulk 

electric system” definition; 

• finds that the Commission can designate sub-100 kV facilities, or other facilities, 

as part of the bulk electric system, provided that the Commission provides 

opportunity for notice and comment; and

• establishes a process pursuant to which an entity can seek a determination by the 

Commission whether facilities are “used in local distribution” as set forth in the 

Federal Power Act.

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

Order No. 743, 133 FERC ¶ 61,150 (2010), order on reh’g, Order No. 743-A, 134 FERC 

¶ 61,210 (2011).
Docket Nos. RM12-6-000 and RM12-7-000 - 5 -

4. In the Notice of Proposed Rulemaking (NOPR), the Commission requested 

comment on certain aspects of NERC’s petition to better understand the application of 

the “core” definition, as well as the specific inclusions and exclusions.3

 The explanations 

provided by NERC and other entities in their comments have assisted in our 

understanding of the parameters of the definition, and we adopt many of these 

explanations in the Final Rule. However, in two particular circumstances we believe 

further action is necessary. We direct NERC to implement the bulk electric system 

definition consistent with the Commission determinations below. Specifically, we direct 

NERC to implement the exclusions for radial systems and local networks so that they do 

not apply to tie-lines for bulk electric system generators. In addition, we direct NERC to 

modify the local network exclusion to remove the 100 kV minimum operating voltage to 

allow systems that include one or more looped configurations connected below 100 kV, 

(as shown in figures 3 and 5 below) to be eligible for the local network exclusion. 

Further explanation of these configurations and the rationale for our determinations is 

provided below.

 3 Revision to Electric Reliability Organization Definition of Bulk Electric System 

and Rules of Procedure, Notice of Proposed Rulemaking, 77 FR 39857 (July 5, 2012) 

139 FERC ¶ 61,247 (2012) (NOPR).
Docket Nos. RM12-6-000 and RM12-7-000 - 6 -

I. Background

A. Section 215 of the FPA

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

mandatory and enforceable Reliability Standards, subject to Commission review and 

approval. Once approved, the Reliability Standards may be enforced by the ERO, subject 

to Commission oversight, or by the Commission independently.4

 The Commission 

established a process to select and certify an ERO5 and, subsequently, certified NERC as 

the ERO.6

 

B. Order No. 693

6. On March 16, 2007, in Order No. 693, pursuant to section 215(d) of the FPA, the 

Commission approved 83 of 107 proposed Reliability Standards, six of the eight 

proposed regional differences, and the NERC Glossary, which includes NERC’s 

definition of bulk electric system.7

 That definition provides: 

 4 See 16 U.S.C. 824o(e)(3) (2006). 

5 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). 

6 North American Electric Reliability Corp., 116 FERC ¶ 61,062 (2006), order on 

reh’g and compliance, 117 FERC ¶ 61,126 (2006) (certifying NERC as the ERO 

responsible for the development and enforcement of mandatory Reliability Standards), 

aff’d sub nom. Alcoa Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009).

7 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).
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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.8

7. In approving NERC’s definition of bulk electric system, the Commission stated 

that “at least for an initial period, the Commission will rely on the NERC definition of 

bulk electric system and NERC’s registration process to provide as much certainty as 

possible regarding the applicability to and the responsibility of specific entities to comply 

with the Reliability Standards.”9

 The Commission also stated that “[it] remains 

concerned about the need to address the potential for gaps in coverage of facilities.”10 

C. Order No. 743

8. On November 18, 2010, the Commission revisited the definition of “bulk electric 

system” in Order No. 743, which directed NERC, through NERC’s Reliability Standards 

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

that the definition encompasses all facilities necessary for operating an interconnected 

transmission network.11 The Commission also directed NERC to address the 

 8 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 75 n.47.

9 Id. P 75; see also Order No. 693-A, 120 FERC ¶ 61,053 at P 19 (“the 

Commission will continue to rely on NERC’s definition of bulk electric system, with the 

appropriate regional differences, and the registration process until the Commission 

determines in future proceedings the extent of the Bulk-Power System”).

10 Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 77.

11 Order No. 743, 133 FERC ¶ 61,150 at P 16.
Docket Nos. RM12-6-000 and RM12-7-000 - 8 -

Commission’s technical and policy concerns. Among the Commission’s concerns were 

inconsistencies in the application of the definition and a lack of oversight and exclusion 

of facilities from the bulk electric system required for the operation of the interconnected 

transmission network. In Order No. 743, the Commission concluded that the best way to 

address these concerns was to eliminate the Regional Entity discretion to define bulk 

electric system without NERC 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 removing from the bulk electric system 

facilities that are not necessary for operating the interconnected transmission network. In 

Order No. 743, the Commission allowed NERC to “propose a different solution that is as 

effective as, or superior to, the Commission’s proposed 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.”12 The Commission directed NERC to file 

the revised definition of bulk electric system and its process to exempt facilities from 

inclusion in the bulk electric system within one year of the effective date of the final 

rule.13 

9. In Order No. 743-A, the Commission reaffirmed its determinations in Order 

No. 743. In addition, the Commission clarified that the issue the Commission directed 

 12 Id.

13 Id. P 113.
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NERC to rectify was the discretion the Regional Entities have under the current 

definition to define the bulk electric system in their regions without any oversight from 

the Commission or NERC.14 The Commission also clarified that the 100 kV threshold 

was a “first step or proxy” for determining which facilities should be included in the bulk 

electric system.15 

10. The Commission further clarified 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” was intended to grant discretion to 

NERC, 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.16 The Commission stated that the “Seven Factor 

Test” adopted in Order No. 888 could be relevant and possibly a logical starting point for 

determining which facilities are local distribution for reliability purposes.17 However, the 

 14 Order No. 743-A, 134 FERC ¶ 61,210 at P 11.

15 Id. PP 40, 67, 102-103.

16 Id. P 68. 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 

at 31,783-84 (1996), order on reh’g, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048, 

order on reh’g, Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 

888-C, 82 FERC ¶ 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).

17 Order No. 743-A, 134 FERC ¶ 61,210 at P 69.
Docket Nos. RM12-6-000 and RM12-7-000 - 10 -

Commission left it to NERC to determine if and how the Seven Factor Test should be 

considered in differentiating between local distribution and transmission facilities for 

purposes of determining whether a facility should be classified as part of the bulk electric 

system.18 Order No. 743-A re-emphasized that local distribution facilities are excluded 

from the definition of Bulk-Power System and, therefore, must be excluded from the 

definition of bulk electric system.19 

D. NERC Petitions

11. On January 25, 2012, NERC submitted two petitions pursuant to the directives in 

Order No. 743: (1) NERC’s proposed revision to the definition of “bulk electric system” 

which includes provisions to include and exclude facilities from the “core” definition; 

and (2) revisions to NERC’s Rules of Procedure to add a procedure creating an exception 

process to classify or de-classify an element as part of the “bulk electric system.” 

1. Revised Definition of Bulk Electric System 

12. In Docket No. RM12-6-000, NERC filed a petition requesting Commission 

approval of a revised definition of “bulk electric system” in the NERC Glossary (NERC 

BES Petition). The definition consists of a “core” definition and a list of facilities 

configurations that will be included or excluded from the “core” definition. NERC 

proposed the following “core” definition of bulk electric system:

 18 Id. P 70.

19 Id. PP 25, 58.
Docket Nos. RM12-6-000 and RM12-7-000 - 11 -

Unless modified by the [inclusion and exclusion] lists shown 

below, all Transmission Elements operated at 100 kV or 

higher and Real Power and Reactive Power resources 

connected at 100 kV or higher. This does not include 

facilities used in the local distribution of electric energy.

NERC also requested approval of the proposed “Detailed Information to Support an 

Exception Request” form as satisfying the requirement in Order No. 743 that NERC 

develop “technical criteria” to address exception requests. Finally, NERC requested 

Commission approval of its plan for implementation of the revised definition of “bulk 

electric system.”

a. Inclusions and Exclusions to the Definition of Bulk 

 Electric System

13. As part of the revised definition, NERC developed inclusions and exclusions to 

eliminate discretion in application of the revised “bulk electric system” definition. The 

inclusions address five specific facilities configurations to provide clarity that the 

facilities described in these configurations are included in the bulk electric system. 

Inclusions:

I1 - Transformers with the primary terminal and at least one 

secondary terminal operated at 100 kV or higher unless excluded under 

Exclusion E1 or E3. 

I2 - Generating resource(s) with gross individual nameplate rating 

greater than 20 MVA or gross plant/facility aggregate nameplate rating 

greater than 75 MVA including the generator terminals through the highside of the step-up transformer(s) connected at a voltage of 100 kV or 

above.

I3 - Blackstart Resources identified in the Transmission Operator’s 

restoration plan.
Docket Nos. RM12-6-000 and RM12-7-000 - 12 -

I4 - Dispersed power producing resources with aggregate capacity 

greater than 75 MVA (gross aggregate nameplate rating) utilizing a system 

designed primarily for aggregating capacity, connected at a common point 

at a voltage of 100 kV or above.

I5 - Static or dynamic devices (excluding generators) dedicated to 

supplying or absorbing Reactive Power that are connected at 100 kV or 

higher, or through a dedicated transformer with a high-side voltage of 

100 kV or higher, or through a transformer that is designated in 

Inclusion I1.

14. NERC also explained that the facilities described in inclusions I1, I2, I4, and I5 

are each operated or connected at or above 100 kV. According to NERC, inclusion I3 

encompasses blackstart resources identified in a transmission operator’s restoration plan, 

which are necessary for the operation of the interconnection transmission system and 

should be included in the bulk electric system regardless of their size (MVA) or the 

voltage at which they are connected. NERC stated that the inclusions will further reduce 

the potential for the exercise of discretion and subjectivity to exclude such configurations 

from the bulk electric system. 

15. NERC explained that inclusion I1 includes transformers with the primary terminal 

and at least one secondary terminal operated at 100 kV or higher unless excluded under 

exclusion E1 or E3. NERC stated that transformers operating at 100 kV or higher are 

part of the existing definition, but since transformers have windings operating at different 

voltages, and multiple windings in some circumstances, clarification was required to 

explicitly identify which transformers are included in the bulk electric system. 

16. According to NERC, inclusion I2 includes in the bulk electric system the 

generator terminals through the high-side of the step-up transformers connected at a 
Docket Nos. RM12-6-000 and RM12-7-000 - 13 -

voltage of 100 kV or above. NERC states that this inclusion mirrors the text of the 

NERC Registry Criteria (Appendix 5B of the NERC Rules of Procedure) for generating 

units.20 

17. As noted above, inclusion I3 includes blackstart resources identified in the 

transmission operator’s restoration plan in the bulk electric system. NERC added 

inclusion I4 to accommodate the effects of variable generation on the bulk electric system 

and inclusion I5 to address static or dynamic devices dedicated to supplying or absorbing 

reactive power that are connected at 100 kV or higher. 

18. NERC’s modified definition of bulk electric system also provides four exclusions 

regarding facilities configurations that are not included in the bulk electric system. 

Generally, the exclusions address radial systems, behind-the-meter generation and local 

networks that distribute power to load: 

Exclusions:

E1 - Radial systems: A group of contiguous transmission Elements that 

emanates from a single point of connection of 100 kV or higher and:

a) Only serves Load. Or,

b) Only includes generation resources, not identified in Inclusion 

I3, with an aggregate capacity less than or equal to 75 MVA (gross 

nameplate rating). Or,

 20 See section III.c.1 and III.c.2 of Appendix 5B of the NERC Rules of Procedure.
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c) Where the radial system serves Load and includes generation 

resources, not identified in Inclusion I3, with an aggregate capacity 

of non-retail generation less than or equal to 75 MVA (gross 

nameplate rating).

Note – A normally open switching device between radial systems, as 

depicted on prints or one-line diagrams for example, does not affect this 

exclusion.

E2 - A generating unit or multiple generating units on the customer’s side 

of the retail meter that serve all or part of the retail Load with electric 

energy if: (i) the net capacity provided to the BES does not exceed 

75 MVA; and (ii) standby, back-up, and maintenance power services are 

provided to the generating unit or multiple generating units or to the retail 

Load by a Balancing Authority, or provided pursuant to a binding 

obligation with a Generator Owner or Generator Operator, or under terms 

approved by the applicable regulatory authority.

E3 - Local networks (LN): A group of contiguous transmission Elements 

operated at or above 100 kV but less than 300 kV that distribute power to 

Load rather than transfer bulk-power across the interconnected system. 

LN’s emanate from multiple points of connection at 100 kV or higher to 

improve the level of service to retail customer Load and not to 

accommodate bulk-power transfer across the interconnected system. The 

LN is characterized by all of the following:

a) Limits on connected generation: The LN and its underlying

Elements do not include generation resources identified in Inclusion 

I3 and do not have an aggregate capacity of non-retail generation 

greater than 75 MVA (gross nameplate rating);

b) Power flows only into the LN and the LN does not transfer 

energy originating outside the LN for delivery through the LN; and

c) Not part of a Flowgate or transfer path: The LN does not 

contain a monitored Facility of a permanent Flowgate in the Eastern 

Interconnection, a major transfer path within the Western 

Interconnection, or a comparable monitored Facility in the ERCOT or 

Quebec Interconnections, and is not a monitored Facility included in 

an Interconnection Reliability Operating Limit (IROL).

E4 – Reactive Power devices owned and operated by the retail customer 

solely for its own use.
Docket Nos. RM12-6-000 and RM12-7-000 - 15 -

Note - Elements may be included or excluded on a case-by-case basis 

through the Rules of Procedure exception process.

19. NERC explained that exclusion E1 is intended to enhance the clarity of the radial 

facilities exclusion and that criteria “b” and “c” of exclusion E1 identify the maximum 

amount of generation allowed on the radial facility while still qualifying for the radial 

facilities exclusion. NERC added the “normally open switch” note at the end of 

exclusion E1 to address a common network configuration in which two separate sets of 

facilities would be recognized as radial systems and not included in the bulk electric 

system are connected by a “normally open switch” which is a switch is set to the open 

position for reliability purposes.21 

20. NERC explained that the normally open switch note avoids numerous exception 

requests because this configuration is common and subjecting two sets of radial facilities 

that are normally unconnected to each other because the switch between them is open to 

the Reliability Standards during the limited time periods when the switch is closed for 

maintenance-related or outage-related circumstances is impractical and unworkable.

21. According to NERC, exclusion E2 excludes a generating unit or units on the 

customer’s side of the retail meter that serves all or part of the retail load subject to 

allowing a limited amount of generating capacity to be connected and that standby, backup, and maintenance power services are provided to the generating unit. NERC stated 

 21 NOPR, 139 FERC ¶ 61,247 at P 27 (citing NERC BES Petition at 19). 
Docket Nos. RM12-6-000 and RM12-7-000 - 16 -

that these generating units are not necessary for the operation of the interconnected 

transmission network because they serve a single retail load, provide a limited amount of 

capacity to the bulk electric system, and are fully backed up by other resources. 

22. With respect to the “local network” exclusion (exclusion E3), NERC explained 

that it encompasses local networks of transmission elements operated at between 100 kV 

and 300 kV that distribute power to load rather than transfer bulk power across the 

interconnected system. NERC further explained that local networks are not intended to 

provide transfer capacity for the interconnected transmission network and such networks 

should not be included in the bulk electric system, and the conditions established in 

exclusion E3 are sufficient to ensure that such local networks are being used exclusively 

for local distribution purposes. NERC adds that facilities used for the local distribution 

of electric energy are expressly excluded from the bulk electric system by the core 

definition as well as by the local network exclusion.22 

b. Detailed Information to Support an Exception Request

23. In response to the Order No. 743 directive to develop technical criteria to use in 

addressing requests for exceptions to the definition of the bulk electric system, NERC 

developed an alternative approach because it would be more feasible to develop a 

common set of data and information that Regional Entities and NERC could use to 

 22 See NOPR, 139 FERC ¶ 61,247 at P 30; See also NERC BES Petition at 22-23. 
Docket Nos. RM12-6-000 and RM12-7-000 - 17 -

evaluate exception requests rather than to develop the detailed criteria.23 The Detailed 

Information Form contains a common set of data that entities seeking an exception must 

submit with every exception request. According to NERC, the information that an 

applicant may submit in support of an exception request is not limited to the Detailed 

Information Form. Rather, an applicant is expected to submit all relevant data, studies 

and other information that support the exception request, and the Regional Entity and 

NERC may ask an applicant to provide other data and studies in addition to the Detailed 

Information Form. 

c. Implementation Plan for Revised Definition of 

“Bulk Electric System”

24. NERC requested that the revised definition become effective on the first day of the 

second calendar quarter after receiving applicable regulatory approval, or, in those 

jurisdictions where no regulatory approval is required, on the first day of the second 

calendar quarter after its adoption by the NERC Board of Trustees. NERC stated that the 

proposed effective date is appropriate to provide a reasonable time between the date of 

regulatory approval, which is not under the control of NERC or the industry, and the 

effective date of the revised definition of bulk electric system.

25. NERC also requested that compliance obligations for all newly-identified 

elements to be included in the bulk electric system should begin twenty-four months after 

the applicable effective date of the revised definition. While the Commission stated in 

 23 NERC BES Petition at 26.
Docket Nos. RM12-6-000 and RM12-7-000 - 18 -

Order Nos. 743 and 743-A that the transition period should not exceed 18 months, NERC 

explained that it is requesting a longer transition period in light of the actions that entities 

will need to complete in connection with the revised definition.

2. NERC Petition for Approval of Revisions to Rules of Procedure 

to Adopt an Exception Process

26. In Docket No. RM12-7-000, NERC filed proposed revisions to its Rules of 

Procedure for the purpose of adopting an “exception process” mechanism to add elements 

to, and remove elements from, the bulk electric system. NERC stated that decisions to 

approve or disapprove exception requests will be made by NERC, rather than by the 

Regional Entities, thereby eliminating the potential for inconsistency and subjectivity. 

Further NERC explained that the exception process is “not intended to be used to resolve 

ambiguous situations,” i.e., the exception process is only available after an initial 

determination has been made regarding whether an element is part of or not part of the 

bulk electric system through the application of the definition to the element.”24 

27. NERC stated that an owner of an element may submit a request to the applicable 

Regional Entity to include the element in, or remove it from, the bulk electric system.25 

In addition, a Regional Entity, planning authority, reliability coordinator, transmission 

operator, transmission planner, or balancing authority that has the elements covered by an 

 24 NOPR, 139 FERC ¶ 61,247 at P 38, quoting NERC ROP Petition at 10-11.

25 See NOPR, 139 FERC ¶ 61,247 at PP 39-45, detailing the three-step exception 

process.
Docket Nos. RM12-6-000 and RM12-7-000 - 19 -

exception request within its scope of responsibility may submit an exception request for 

the inclusion of an element or elements owned by a registered entity. Upon receiving an 

exception request, the applicable Regional Entity will review the exception request and 

will issue a recommendation to NERC. NERC will evaluate the Regional Entity 

recommendation, the accompanying technical documents, the Technical Review Panel 

opinion (if any), and any comments submitted, and will issue a final determination. 

Finally, NERC stated that an exception request will be subject to review to verify 

continuing justification for the exception. NERC also stated that an entity must certify 

every 36 months to the appropriate Regional Entity that the basis for the exception 

request remains valid. Further, NERC also included a method for an entity to challenge 

the NERC decision on an exception request to a NERC Compliance Committee. The 

entity may also appeal the final NERC decision to the Commission within 30 days 

following the date of the Compliance Committee‘s decision, or within such time period 

as the Commission’s legal authority permits.

28. In response to the Order No. 743 Commission statement that NERC should 

maintain a list of exempted facilities that can be made available to the Commission upon 

request, NERC maintained that the proposed exception process does not include 

provisions for such a list, adding that this is an internal administrative matter for NERC 

to implement that does not need to be embedded in the Rules of Procedure.26 NERC 

 26 NERC ROP Petition at 49.
Docket Nos. RM12-6-000 and RM12-7-000 - 20 -

stated it will develop a specific internal plan and procedures for maintaining a list of 

facilities for which exceptions have been granted. 

E. Commission NOPR 

29. The Commission issued the NOPR on June 22, 2012, and required that comments 

be filed within 60 days after publication in the Federal Register, or September 4, 2012. 

While seeking comment on various provisions of NERC’s petitions, the NOPR proposed 

to approve NERC’s modification to the currently-effective definition of bulk electric 

system and changes to the Rules of Procedure to add the exception process. The NOPR 

also requested comment on the appropriate role for NERC and the Commission in the 

identification of bulk electric system facilities and elements. 

30. The Commission received more than sixty comments on the proposed rulemaking. 

NERC and other commenters, inter alia, respond to the Commissions questions regarding 

the application of the proposed bulk electric system definition. These comments have 

assisted us in developing this Final Rule. A list of commenters appears in Appendix A to 

this Final Rule.27 

II. Discussion

31. For the reasons discussed below, the Commission adopts the NOPR proposal and 

approves NERC’s revised definition of bulk electric system and the specific inclusions 

 27 Further, NERC, MISO, Consumers, MISO Transmission Owners, Barrick, ITC 

Companies, and AMP filed reply comments. Although the NOPR did not allow for reply 

comments, we will accept these pleadings because they have assisted our understanding 

of NERC’s proposal in this Final Rule.
Docket Nos. RM12-6-000 and RM12-7-000 - 21 -

and exclusions set forth in the definition, as just, reasonable, not unduly discriminatory or 

preferential, and in the public interest. Likewise, the Commission approves NERC’s 

revised Rules of Procedure that set forth an exceptions process for determining whether 

elements and facilities are included in the bulk electric system on a case-by-case basis. 

While we discuss below specific provisions of the NERC proposal, provisions of the 

modified bulk electric system definition and related Rules of Procedures not specifically 

mentioned are approved in this Final Rule. Below, we address the following matters: 

(A) approval of the NERC definition; (B) issues concerning the “core” bulk electric 

system definition; (C) local distribution; (D) exclusions and inclusions in the bulk electric 

system definition; and (E) NERC’s Rules of Procedures exceptions process.

A. Approval of the Revised Bulk Electric System Definition 

NOPR Proposal

32. In the NOPR, the Commission proposed to approve a modification to the 

currently-effective definition of “bulk electric system” because it removes language 

allowing for regional discretion in the currently-effective bulk electric system definition, 

establishes a bright-line threshold that includes all facilities operated at or above 100 kV 

and identifies specific categories of facilities and configurations as inclusions and 

exclusions to provide clarity in the definition of bulk electric system.28 

 28 NOPR, 139 FERC ¶ 61,247 at P 18. 
Docket Nos. RM12-6-000 and RM12-7-000 - 22 -

Comments

33. NERC, Regional Entities, trade organizations and a majority of commenters from 

various industry segments support the Commission’s proposal to approve NERC’s 

proposals. APPA “strongly support[s]” NERC’s proposed definition.29 EEI supports 

NERC’s proposals and states that any changes to the definition should be made through 

the standard development process, not through directives. LPPC, NRECA, and WPPC 

also support approval of the definition and urge the Commission to adopt the NERC 

proposal and to refrain from pursuing additional regulatory mandates. Snohomish and 

WPPC agree that NERC has developed a “clear and workable definition” of the bulk 

electric system that markedly improves the existing definition. They also opine that the 

definition creates a foundation for reliability that focuses on core elements of the 

interconnected bulk transmission system, and provides a means for lower-voltage or 

peripheral elements of the electric system to be excluded from the bulk electric system. 

Other commenters state that the definition is consistent, repeatable and verifiable and will 

provide clarity that will assist NERC and affected entities in implementing Reliability 

Standards.

34. Other commenters, while noting that the NOPR represents a “positive 

development,” believe additional modifications are necessary “to achieve consistency 

 29 APPA Comments at 7.
Docket Nos. RM12-6-000 and RM12-7-000 - 23 -

within the limitations” of section 215 of the FPA and the Commission’s directives in 

Order Nos. 743 and 743-A.30

35. Some commenters oppose approval on various grounds. For example, NARUC is 

concerned that, even though the definition appears to honor the exclusion of local 

distribution from the bulk electric system, the definition does not go far enough to ensure 

“that a costly analysis . . . is not required to be performed with regard to local distribution 

elements that are by law excluded.”31 NARUC is also concerned that exclusion E3 (local 

networks) will exclude some, but not all, local distribution elements. According to 

NARUC, this could cause confusion as to the status of local distribution elements that are 

not also described in exclusion E3. Consequently, NARUC believes that the definition 

does not appropriately reflect the statutory limits of the Commission’s authority under 

FPA section 215 and its implementation could unnecessarily overreach into state 

jurisdictional local distribution facilities. 

36. NYPSC believes that the proposed definition will likely result in classifying 

certain facilities as part of the bulk electric system despite their being unnecessary for 

operating an interconnected transmission network. NYPSC states that the majority of the 

138 kV lines within New York City serve as direct feeders to the networked distribution 

system serving load. NYPSC also states that there is no technical justification for a 

 30 Holland Comments at 2. 

31 NARUC Comments at 4. 
Docket Nos. RM12-6-000 and RM12-7-000 - 24 -

100 kV bright-line definition.32 NYPSC contends that, even with the exclusions and the 

exception process, it is uncertain whether an exclusion or exception would apply to the 

138 kV lines noted above. NYPSC believes that this approach presumes the Commission 

has jurisdiction over all facilities operated at 100 kV or above, unless proven otherwise, 

which inappropriately shifts the legal and technical burdens to the states.

37. NYPSC, NARUC, and the Massachusetts DPU argue that the revised definition 

does not include a cost impact analysis that weighs costs related to the modified 

definition against the reliability benefits that the new definition would achieve. They 

contend that the lack of a cost-benefit analysis accompanying the revised definition 

represents an additional gap in the process for developing this Reliability Standard. 

NYPSC and the Massachusetts DPU contend that the costs of compliance with the 

definition will be excessive. NYPSC states that, according to NERC and the Northeast 

Power Coordinating Council, Inc. (NPCC), it would exceed $280 million. Thus, they 

advocate that, given the significant costs that the revised definition could impose on 

consumers, the Commission should reject NERC’s proposed modifications until they are 

supported by a cost-benefit analysis. 

Commission Determination

38. Pursuant to section 215(d)(2) of the FPA, we approve NERC’s revised definition 

of bulk electric system and the specific inclusions and exclusions set forth in the 

 32 NYPSC Comments at 3. See also Massachusetts DPU Comments at 6-7. 
Docket Nos. RM12-6-000 and RM12-7-000 - 25 -

definition, as just, reasonable, not unduly discriminatory or preferential, and in the public 

interest. NERC’s proposal provides additional clarity and granularity that will allow for 

greater transparency and consistency in the identification of elements and facilities that 

make up the bulk electric system and is responsive to the technical and policy concerns 

discussed in Order No. 743. 

39. NERC’s proposal adequately ensures that all facilities necessary for operating an 

interconnected electric energy transmission network are included under the bulk electric 

system. As we observed in Order No. 743, 

“[U]niform Reliability Standards, and uniform 

implementation, should be the goal and the practice, the rule 

rather than the exception, absent a showing that a regional 

variation is superior or necessary due to regional differences. 

Consistency is important as it sets a common bar for 

transmission planning, operation, and maintenance necessary 

to achieve reliable operation. . . . [W]e have found several 

reliability issues with allowing Regional Entities broad 

discretion without ERO or Commission oversight.33

The core definition eliminates the provision that allows broad regional discretion, and 

establishes a 100 kV bright-line threshold for determining, in the first instance, those 

elements and facilities that are included in the bulk electric system. The definition also 

includes specific inclusions and exclusions that address typical system facilities and 

configurations such as generation and radial systems, providing additional granularity 

that improves consistency and provides a practical means to determine the status of 

 33 Order No. 743, 133 FERC ¶ 61,150 at P 82 (footnote omitted). 
Docket Nos. RM12-6-000 and RM12-7-000 - 26 -

common system configurations. Thus, we agree with commenters that the modified 

definition is consistent, repeatable and verifiable and will provide clarity that will assist 

NERC and affected entities in implementing Reliability Standards. 

40. Accordingly, the Commission finds that NERC’s proposal satisfies the directives 

of Order No. 743 to develop modifications to the currently-effective definition of bulk 

electric system to ensure that the definition encompasses all facilities necessary for 

operating an interconnected transmission network and remove the Regional Entity 

discretion that currently allows for regional variations without review or oversight. We 

also find that NERC’s definition satisfies the Commission’s technical concerns in Order 

No. 743 through the use of a bright-line 100 kV threshold, with specific inclusions and 

exclusions within the definition, for identifying bulk electric system elements and the 

establishment of an exception process for facilities that are not necessary for operating 

the interconnected transmission network.

41. Moreover, we are not persuaded by the rationale of the commenters who advocate 

that we remand the NERC proposal. We disagree with NYPSC that the proposed 

definition will likely result in classifying certain facilities as part of the bulk electric 

system despite their being unnecessary for operating an interconnected transmission 

network. An entity that believes its facility is improperly classified as part of the bulk 

electric system by application of the definition may avail itself of the exception process to 

have the facility removed from inclusion in the definition. With regard to NYPSC’s 

claim that there is no technical justification for the 100 kV threshold, in Order No. 743, 

the Commission found “that many facilities operated at 100 kV and above have a 
Docket Nos. RM12-6-000 and RM12-7-000 - 27 -

significant effect on the overall functioning of the grid and that the majority of 100 kV 

and above facilities in the United States operate in parallel with other high voltage and 

extra high voltage facilities, interconnect significant amounts of generation sources and 

operate as part of a defined flowgate.” The Commission explained that this “illustrates 

their parallel nature and therefore their necessity to the reliable operation of the 

interconnected transmission system” and that “[p]arallel facilities operated at 100-200 kV 

will experience similar loading as higher voltage parallel facilities at any given time and 

the lower voltage facilities will be relied upon during contingency scenarios.” 34 In 

addition, in Order No. 743 the Commission identified the reliability concerns created by 

the current definition and a method to ensure that certain facilities needed for the reliable 

operation of the nation’s bulk electric system are subject to mandatory and enforceable 

Reliability Standards. The Commission noted that the material impact assessments 

implemented, for example, by NPCC “are subjective in nature, and results from such tests 

are inconsistent in application, as shown through the exclusion of facilities that clearly 

are needed for reliable operation.”35 The Commission also found that the vast majority of 

100 kV and above facilities are part of parallel networks with high voltage and extra high 

voltage facilities and are necessary for reliable operation.36 Thus, the Commission found 

 34 Order No. 743, 133 FERC ¶ 61,150 at P 73. 

35 Order No. 743, 133 FERC ¶ 61,150 at P 96.

36 Id.
Docket Nos. RM12-6-000 and RM12-7-000 - 28 -

that NERC should “establish a uniform definition that eliminates subjectivity and 

regional variation in order to ensure reliable operation of the bulk electric system” and 

that “the existing NPCC impact test is not a consistent, repeatable, and comprehensive 

alternative to the bright-line, 100kV definition we prefer.”37 

42. NERC already applies a general 100 kV threshold, and today all regions, with the 

exception of NPCC, also apply a 100 kV threshold. We also note NYPSC cites to the 

same methodology that the Commission found dubious in Order No. 743-A where the 

Commission explained that it had: 

serious concerns about NPCC’s [] 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. 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.38 

43. We also disagree with NYPSC’s contention that this approach presumes the 

Commission has jurisdiction over all facilities operated at 100 kV or above, unless 

proven otherwise, which inappropriately shifts the legal and technical burdens to the 

states. As noted above and in Order No. 743-A, the suggested solution of a 100 kV 

 37 Id. 

38 Order No. 743-A, 134 FERC ¶ 61,210 at P 47 (footnotes omitted) (citing Order 

No. 743, 133 FERC ¶ 61,150 at PP 74, 76 and 85). 
Docket Nos. RM12-6-000 and RM12-7-000 - 29 -

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.”39 Thus, we are not persuaded that NERC’s proposal 

inappropriately shifts legal or technical burdens. In addition, the Commission has 

maintained that the bright-line threshold would be a “first step or proxy” in determining 

which facilities should be included in the bulk electric system. The definition, coupled 

with the exception process will ensure that facilities not necessary for the operation of the 

interconnected transmission network will be properly categorized. Further, the 

Commission’s approach for determining whether elements are used for local distribution 

on a case-by-case basis, as discussed more fully below, addresses NARUC’s concerns as 

to the status of local distribution elements that are not also described in exclusion E3 and 

that the definition does not appropriately reflect the statutory limits of the Commission’s 

authority under FPA section 215 as well as NYPSC’s concern about the Commission 

having jurisdiction over all facilities operated at 100 kV or above. With regard to the 

specific examples cited by NYPSC, we find that such determinations are more 

appropriate for the exception process and beyond the scope of this proceeding. 

44. We also disagree with NYPSC and Massachusetts DPU that NERC’s proposal is 

flawed because NERC’s petition did not include a formal cost analysis. Order No. 743 

did not require such an analysis. Rather, Order No. 743 tasked NERC with certain 

 39 Order No. 743-A, 134 FERC ¶ 61,210 at P 36. 
Docket Nos. RM12-6-000 and RM12-7-000 - 30 -

directives and NERC’s petitions are intended to comply with those directives. In 

addition, while cost of implementation can be relevant in Commission review of a 

proposed Reliability Standard, the foremost concern is the reliability of the 

interconnected transmission network.

40 Therefore, we find that NERC’s petition 

adequately addresses the Commission’s Order No. 743 directives. 

B. The Core Definition of Bulk Electric System

NOPR Proposal

45. In the NOPR, the Commission proposed to approve the bulk electric system 

“core” definition developed by NERC which states as follows:

Unless modified by the lists shown below, all Transmission 

Elements operated at 100 kV or higher and Real Power and 

Reactive Power resources connected at 100 kV or higher. 

This does not include facilities used in the local distribution 

of electric energy.

In the NOPR, the Commission noted that NERC’s proposal appears to satisfy the 

objectives set forth in Order No. 743. The Commission also stated that NERC’s “core” 

definition establishes the fundamental threshold for inclusion of facilities in the bulk 

electric system as those that are operated at 100 kV or higher, if they are transmission 

elements, or are connected at 100 kV or higher, if they are real power or reactive power 

resources. In addition, the Commission stated that the core definition also establishes a 

100 kV criterion as a bright-line threshold, rather than as a general guideline as in the 

 40 See Order No. 672, FERC Stats. & Regs. ¶ 31,204 at P 330. 
Docket Nos. RM12-6-000 and RM12-7-000 - 31 -

current definition, i.e., the phrase “generally operated at” in the current definition is 

eliminated. 

Comments

46. NERC and a majority of commenters including most trade organizations believe 

that the core definition satisfies the Order No. 743 directives. By eliminating the 

language “as defined by the Regional Reliability Organization” and “generally operated 

at,” they state that the revised definition eliminates the subjectivity and regional 

variations that are possible under the current definition.41 WPPC supports the NERC 

proposals but is concerned that the NOPR could be read as attempting to impose 

nationally uniform standards without allowing regional variation. WPPC believes that 

FPA section 215 requires deference to Regional Entities in developing Reliability 

Standards and is concerned that the NOPR’s references to uniformity of the definition of 

bulk electric system must be limited by the deference accorded to Regional Entities in the 

statute. 

47. Other commenters seek modification of the core definition. For example, PSEG 

Companies believe that the core definition will introduce subjectivity because it omits 

facilities and systems necessary to operate the facilities above 100 kV, such as protection 

 41 See e.g., NERC, APPA, EEI, NRECA, ELCON, the Regional Entities, 

NV Energy, National Grid, Southern Companies, Duke Energy, International 

Transmission Company, TAPS, BPA, Hydro One and IESO, and Snohomish. 
Docket Nos. RM12-6-000 and RM12-7-000 - 32 -

systems, underfrequency load shedding systems and control centers.42 PSEG Companies 

suggest the addition of demand response above 75 MW within a balancing authority into 

the definition. In the same vein, ISO New England suggests including capacity resources 

connected below 100 kV and identifies protection systems, under-frequency and undervoltage load shedding systems, inclusion of non-bulk electric system facilities into 

transmission and operational planning, and control rooms as items that are important to 

operating the bulk electric system but not in the definition. ISO New England, therefore, 

believes that NERC should make the determination whether or not these facilities and 

control systems must comply with Reliability Standards independent of their designation. 

Valero seeks clarification that the core definition excludes elements “that are owned and 

used by an industrial end-user to serve its load.”43

48. Similarly, IUU and Barrick state that industrial generators are intrastate facilities 

that serve only the owner’s load and believe that they are excluded from the jurisdiction 

of the Commission.44 IUU and Barrick believe that some of the Reliability Standards 

appear to reach beyond the limits imposed by Congress and into these intrastate industrial 

generator facilities. According to IUU and Barrick, the definition needs an additional 

exclusion that excludes these intrastate facilities. 

 42 PSEG Comments at 4-6. 

43 Valero Comments at 3. 

44 See also Barrick Reply Comments at 2-3. 
Docket Nos. RM12-6-000 and RM12-7-000 - 33 -

49. Several commenters that support the NERC proposal also comment on matters not 

specifically raised in the NOPR. APPA recommends that the Commission state that it 

expects NERC will continue to treat the Phase 2 bulk electric system definition project as 

a priority in the 2013 budget year. APPA also requests that the Commission direct 

NERC to expedite the deregistration process for those entities or facilities that are no 

longer designated as part of the bulk electric system under the new definition or through 

application of the Rules of Procedure exception process. APPA believes that an 

expedited deregistration process would reduce the associated burden on entities that are 

no longer required to document compliance due to the revisions in the bulk electric 

system definition and the exception process.

50. Redding requests that, due to the connection between the definition and the NERC 

Functional Model, the Commission should direct revisions to the NERC Functional 

Model to accommodate entities that own or operate facilities that technically qualify as 

transmission but that have a limited, if any, impact on reliability.

Commission Determination

51. We find that the “core” definition satisfies the Order No. 743 directives to remove 

the subjectivity and regional variations that are possible under the current definition by 

eliminating the language “as defined by the Regional Reliability Organization” and 

“generally operated at,” in the revised definition. The “core” definition, quoted above, 

establishes the fundamental threshold for inclusion of facilities in the bulk electric system 

as those that are operated at 100 kV or higher, if they are transmission elements, or are 

connected at 100 kV or higher, if they are real power or reactive power resources. The 
Docket Nos. RM12-6-000 and RM12-7-000 - 34 -

core definition also establishes a 100 kV criterion as a bright-line threshold, rather than as 

a general guideline as in the current definition, i.e., the phrase “generally operated at” in 

the current definition is eliminated. The core definition also continues to capture 

equipment associated with the facilities included in the bulk electric system. 

52. Other than the directive to modify exclusion E3 as discussed below, the 

Commission declines to direct NERC to further modify the definition or the specified 

inclusions and exclusions. Specifically, we will not direct further revisions to address 

demand response, protection systems and other facilities or equipment as separate 

inclusions or exclusions as advocated by ISO New England, PSEG Companies, IUU or 

Barrick.45 Rather, NERC has indicated that it has initiated a Phase 2 of the development 

project for the definition of bulk electric system, and interested stakeholders have the 

opportunity in the first instance to raise their ideas in that forum regarding possible 

additions, inclusions and exclusion set forth in the bulk electric system definition.46 

 45 We note that, in Order No. 693, the Commission recognized demand side 

management as a type of resource for contingency reserve that should be treated on a 

comparable basis with other resources; and must meet similar technical requirements as 

other resources providing this service. Order No. 693, FERC Stats. & Regs. ¶ 31,242 at 

PP 330-335.

46 According to NERC, due to time constraints in meeting the compliance deadline 

set in Order No. 743, NERC separated the development of the revised definition into two 

phases. See NERC Petition at 46. NERC stated that Phase 1 culminated in the language 

of the proposed modified definition that is the primary subject of this Final Rule. Phase 2, 

which is ongoing, intends to focus on other industry concerns raised during Phase 1. 
Docket Nos. RM12-6-000 and RM12-7-000 - 35 -

53. Moreover, in the NOPR we acknowledged NERC’s statement that the core 

definition also continues to capture equipment associated with the facilities included in 

the bulk electric system.47 In the NOPR we agreed with NERC that while the new 

definition does not use the term “associated equipment,” the phrase is included in the 

definition through the defined term “Transmission Elements.”48 We adopt the NOPR 

proposal that the term “associated equipment,” is included in the definition through the 

defined term “Transmission Elements” which could include the facilities identified by 

PSEG Companies. 

54. With regard to Valero’s clarification, that the core definition excludes elements 

“that are owned and used by an industrial end-user to serve its load,” Valero can either 

seek to have this matter addressed generically, if appropriate, in NERC’s Phase 2, or seek 

to have this addressed on a case-by-case basis in the exception process that we approve in 

this Final Rule. 

55. We decline, as APPA requests, to direct NERC to expedite the deregistration 

process for those entities who own or operate facilities that are no longer designated as 

part of the bulk electric system. We do not expect there to be significant numbers of 

entities either needing to register or deregister due to the change in definition.49 To the 

 47 NOPR, 139 FERC ¶ 61,247 at PP 16, 55. 

48 NOPR, 139 FERC ¶ 61,247 at P 55 n.69.

49 See NOPR, 139 FERC ¶ 61,247 at P 132.
Docket Nos. RM12-6-000 and RM12-7-000 - 36 -

extent entities seek to deregister, NERC, as the ERO, can determine the appropriate 

timeframe for making such a determination. We also decline to order NERC to modify 

the Functional Model as Redding requests as the issues Redding raises are outside the 

scope of this proceeding. In response to WPPC’s concern, this Final Rule adopts the 

revised definition which eliminates regional discretion for determining whether an 

element is part of the bulk electric system. It does not address or subsume the ability of 

Regional Entities to develop Reliability Standards for their regions that meet criteria for 

regional Reliability Standards.

56. In summary, the Commission finds that NERC’s proposal adequately addresses 

the concerns articulated in Order No. 743 regarding regional discretion and the need for a 

consistent approach and satisfies the concerns regarding the elimination of 

inconsistencies across regions. 

C. Local Distribution

NOPR Proposal

57. The NOPR noted that, although Order No. 743 acknowledged that “Congress has 

specifically exempted ‘facilities used in the local distribution of electric energy’” it still is 

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

transmission.50 The NOPR observed that Order No. 743-A stated that “[w]hether 

facilities are used in local distribution will in certain instances raise a question of fact, 

 50 Order No. 743-A, 134 FERC ¶ 61,210 at P 67. 
Docket Nos. RM12-6-000 and RM12-7-000 - 37 -

which the Commission has jurisdiction to determine.”51 In addressing what constitutes 

local distribution, NERC stated in its petition that facilities used for the local distribution 

of electric energy are expressly excluded from the bulk electric system by the core 

definition as well as by the local network exclusion, exclusion E3.52 In the NOPR, the 

Commission requested comment regarding how NERC’s proposed definition is 

responsive to the Commission’s directives in Order Nos. 743 and 743-A. Specifically, 

the Commission requested comment on how NERC’s proposal adequately differentiates 

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

transparent manner.

Comments

58. NERC and numerous commenters state that the definition adequately 

differentiates between local distribution and transmission.53 NERC states that the revised 

definition distinguishes between bulk electric system facilities and non-bulk electric 

system facilities and local distribution facilities fall into the latter category.54 NERC adds 

that, by applying the definition, facilities used for local distribution will not be included 

 51 NOPR, 139 FERC ¶ 61,247 at P 58, quoting Order No. 743-A, 134 FERC 

¶ 61,210 at P 67. 

52 NOPR, 139 FERC ¶ 61,247 at P 59, (citing NERC BES Petition at 16). 

53 See e.g., APPA Comments at 8-9, EEI Comments at 4, NRECA Comments at 7, 

Hydro One Comments at 3, NV Energy Comments at 3-4, PHI Companies Comments 

at 3, TAPS Comments at 3, BPA Comments at 3, WPPC Comments at 27-30. 

54 NERC Comments at 6. 
Docket Nos. RM12-6-000 and RM12-7-000 - 38 -

due to their specific exclusion in the core definition. NERC and others also state that the 

exception process can be used to determine whether facilities are used for local 

distribution when an entity believes such facilities have been improperly included.55

59. While ELCON generally agrees with NERC’s position, ELCON comments that 

NERC’s proposal does not fully respond to the Commission’s directive in Order Nos. 743 

and 743-A. ELCON maintains that a definition of “local distribution” is necessary to 

avoid including assets that are clearly used for the local distribution as part of the bulk 

electric system. ELCON expresses concern that industrial consumers’ equipment that is 

rated 100 kV or above will be designated as a component of the bulk electric system, 

irrespective of whether such elements are material for the reliable operation of the 

interconnected Bulk-Power System. ELCON recommends that the Commission address 

this issue by establishing a joint working group with NARUC to draft a proposed 

definition of local distribution to exclude certain facilities from the scope of the definition 

of bulk electric system. 

60. Some entities that generally agree with NERC also suggest clarifications to 

improve the distinction between local distribution and transmission. MISO suggests that, 

to identify local distribution facilities, the Commission direct NERC to clarify the last 

sentence of the core definition by “cross-referencing” the exclusion criteria in the 

 55 See e.g. WPPC Comments at 28.
Docket Nos. RM12-6-000 and RM12-7-000 - 39 -

definition.56 Snohomish requests that the Commission clarify that the Seven Factor Test 

established in Order No. 888 is one element that can be used to evaluate an exception 

request in addition to other engineering and technical considerations.57 

61. Other commenters contend that NERC’s proposal does not adequately 

differentiate between local distribution and transmission facilities or reflect the statutory 

limits of the Commission’s authority under FPA section 215.58 As noted above, NARUC 

states that the NERC definition does not appropriately reflect the statutory limits of the 

Commission’s authority under Federal Power Act Section 215 and its implementation 

could unnecessarily overreach into state jurisdictional local distribution facilities. 

NARUC maintains that, while the definition of bulk electric system appears to exclude 

local distribution by restating the law, the definition does not go far enough to ensure that 

a costly analysis applying for an “exception” is not required to be performed with regard 

to local distribution elements that are by law “excluded.” NARUC contends that the 

mere fact that a subset of local distribution elements expressly excluded from the bulk 

electric system by the core definition are specifically identified in exclusion E3 could 

cause confusion as to the status of local distribution elements that are not also described 

in E3. Similarly, the Steel Manufacturers Association states that the Commission cannot 

 56 MISO Comments at 4. 

57 Snohomish Comments at 3. 

58 E.g., NARUC, Holland, NYPSC, and SmartSenseCom. 
Docket Nos. RM12-6-000 and RM12-7-000 - 40 -

allow NERC’s exception process to determine the boundaries of the Commission’s 

jurisdiction. 

62. Consumers Energy believes that the definition does not differentiate between 

transmission and local distribution because “Transmission Elements” and “local 

distribution” are undefined. Consumers Energy states that the Commission should clarify 

that any facilities that have been found by the Commission to be local distribution 

pursuant to the Seven Factor Test are also local distribution under FPA section 215 and 

therefore outside the bulk electric system.59 Consumers references a prior Commission 

declaratory order accepting the Michigan Public Service Commission’s determination of 

transmission and local distribution facilities.60 Consumers notes that it sold all of its 

“bulk electric system elements” to Michigan Electric Transmission Company, who is the 

registered transmission owner. ITC Companies and MISO filed reply comments 

requesting that the Commission reject the coordination and continuity aspect of 

Consumers’ proposal to automatically exclude from the definition those facilities that are 

“in series” with transmission facilities that are included in the bulk electric system 

definition.61 In addition, they state that this is not the proper proceeding to address 

 59 Consumers Comments at 3-8. 

60 Consumers Comments at 4 (citing July 29, 1998 letter order in Docket 

No. EL98-21-000). 

61 ITC Reply Comments at 6-7. 
Docket Nos. RM12-6-000 and RM12-7-000 - 41 -

whether specific facilities may or may not be part of the bulk electric system. Consumers 

filed a motion to strike the MISO reply comments. 

63. Portland is concerned that the Commission is assessing its reliability jurisdiction 

without addressing “the inconsistency between its reliability jurisdiction and its 

traditional ‘transmission’ jurisdiction under FPA section 201(b).” Portland states that the 

Commission could clarify that for entities who apply the local distribution exception in 

good faith, any future regulatory determination that such distribution facilities are to be 

treated as part of the bulk electric system within the scope of FPA section 215 regulation 

will be prospective only.62

64. Holland argues that, aside from the exclusions in the core definition, there are no 

criteria or guidelines that exclude local distribution facilities from the bulk electric 

system. Holland also argues that if an entity challenges a registration, there is no 

guidance as to what information NERC will consider whether to recognize the facilities 

in question as local distribution and exclude them from the bulk electric system. Holland 

contends that the proposed Rules of Procedure fail to provide any distinction between 

those facilities that must be excluded because they are local distribution versus those that 

should be excluded because, although they meet the [bulk electric system] bright-line 

criteria, they are not necessary for the reliable operation of the interconnected 

transmission system. Holland claims that the exception process does not make “any 

 62 Portland Comments at 4. 
Docket Nos. RM12-6-000 and RM12-7-000 - 42 -

distinction between criteria necessary for determining those facilities that must be 

excluded because they are local distribution versus those that should be excluded because 

they [] meet the [bulk electric system] criteria, but are not material.”63 Holland adds that 

“because the exclusions are not comprehensive, and because the ‘exceptions’ process 

provides no further guidance on the proper exclusion of these facilities, there would be no 

basis to support a conclusion that the NOPR has effectively and transparently identified, 

let alone justified, a second class or test for identifying local distribution for purposes of 

Section 215 of the FPA.”64 Similarly, Massachusetts DPU comments that exception 

requests will inevitably involve difficult questions regarding whether a facility is “used in 

the local distribution of electric energy,” an area over which states have exclusive 

authority under the FPA.65

65. Valero requests that the Commission direct NERC to develop criteria based on a 

“primary function test” to exclude facilities used in local distribution. In addition, Valero 

states that the Commission should “provide guidance to NERC by [] stating that, to 

constitute distribution, a facility need not be used exclusively for distribution purposes.

66 

Further, Valero contends that NERC’s “distribution use only” position contradicts the 

 63 Holland Comments at 6. 

64 Holland Comments at 9. See also Barrick Reply Comments at 2. 

65 Massachusetts DPU Comments at 10. 

66 Valero Comments at 8-12 (emphasis in original) (citing Detroit Edison v. 

FERC, 334 F.3d 48, 54 (D.C. Cir. 2003)). 
Docket Nos. RM12-6-000 and RM12-7-000 - 43 -

plain language of sections 201 and 215 of the FPA. Valero states that its “discrete on-site 

electrical equipment” is designed only to serve load at its refineries. While the facilities 

may enhance the reliability of electric service, Valero asserts they are only used by an 

industrial end-user of electricity for “the local distribution of electric energy” and must be 

excluded from the bulk electric system. The Power Agencies ask for clarification of 

footnote 79 in the NOPR and assume that the Commission is clarifying that certain 

facilities may not satisfy the revised definition, but may constitute transmission facilities 

for purposes other than applying FPA section 215.67

Commission Determination

66. For the reasons discussed below, we find that NERC’s “core” definition of bulk 

electric system definition, together with exclusion E3 (local networks), is consistent with 

the section 215 exclusion of local distribution facilities. We also find that, while NERC’s 

case-by-case exceptions process is appropriate to determine the technical issue of 

whether facilities are part of the bulk electric system, the jurisdictional question of 

whether facilities are used in local distribution should be decided by the Commission.

67. NERC’s “core” definition provides a 100 kV threshold for determining whether 

elements or facilities are included in the bulk electric system. As we indicated in Order 

No. 743, the 100 kV threshold is a reasonable “first step or proxy” for determining which 

facilities should be included in the bulk electric system. Indeed, it is reasonable to 

 67 See NOPR, 139 FERC ¶ 61,247 at P 60 n.79 stating that “an element that falls 

outside of the definition of bulk electric system is not necessarily local distribution.”
Docket Nos. RM12-6-000 and RM12-7-000 - 44 -

anticipate that this threshold will remove from the bulk electric system the vast majority 

of facilities that are used in local distribution, which tend to be operated at lower, sub-100 

kV voltages. Moreover, applying the four exclusions in NERC’s proposed definition 

should serve to further exclude facilities used in local distribution from the bulk electric 

system. In particular, as NERC indicates, exclusion E3 (local networks) – although 

not synonymous with local distribution - should serve to reasonably exclude many above100 kV facilities that are used in local distribution. Based on the information provided in 

NERC’s petition, as well as the supporting comments of EEI and others, we anticipate 

that the “core” definition together with exclusion E3 should provide a reasonable means 

to accurately and consistently determine on a generic basis whether facilities are part of 

the bulk electric system. In other words, most local distribution facilities will be 

excluded by the 100 kV threshold or exclusion E3 without needing to seek a Commission 

jurisdictional determination. Accordingly, we find this aspect of NERC’s petition 

reasonable.

68. In addition to the definition, NERC also submitted revisions to the Rules of 

Procedure (discussed below in greater detail) that allow for a case-by-case exception 

process. Included in this process is an opportunity for entities to seek to exclude facilities 

from the bulk electric system because they are used in local distribution. NERC’s 

petition does not provide criteria or guidance that it would apply in the case-by-case 

exception process to determine whether an element above 100 kV should be excluded as 
Docket Nos. RM12-6-000 and RM12-7-000 - 45 -

local distribution, as directed in Order No. 743.68 Thus, we cannot conclude that the 

case-by-case exception process will “adequately differentiate[] between local distribution 

and transmission facilities in an objective, consistent, and transparent manner.”69

69. In Order No. 743, the Commission stated that determining the line between 

transmission and local distribution should be part of the exception process and left it to 

NERC in the first instance to determine how to make such a determination.

70 

After further review of NERC’s proposal in this proceeding, and upon consideration of 

the comments submitted, we believe that it is more appropriate that the Commission 

make such case-by-case jurisdictional determinations when necessary, and to apply the 

Seven Factor Test set forth in Order No. 888 to make such determinations. The 

determination whether an element or facility is “used in local distribution,” as the phrase 

is used in the FPA, requires a jurisdictional analysis that is more appropriately performed 

 68 The Commission, in Order No. 743-A, explained 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.” Order 

No. 743-A, 134 FERC ¶ 61,210 at P 69. NERC, in its petition, did not adopt a specific 

test or criteria for determining whether a facility is local distribution, but indicated that an 

entity seeking an exception for local distribution facilities could provide a “seven factor” 

analysis as one means to support the petition. NERC BES Petition at 49. 

69 See NOPR, 139 FERC 61,247 at P 59. 

70 Order No. 743, 133 FERC ¶ 61,150 at P 38. 
Docket Nos. RM12-6-000 and RM12-7-000 - 46 -

by the Commission.71 Further, Commission review of whether a facility is used in 

local distribution comports with relevant legal precedent. As we explained in Order 

No. 743-A, “[w]hether facilities are used in local distribution will in certain instances 

raise a question of fact, which the Commission has jurisdiction to determine.”72 

70. As noted above, application of the “core” definition and the four exclusions should 

serve to exclude most facilities used in local distribution from the bulk electric system. 

However, there may be certain circumstances that present a factual question as to whether 

a facility that remains in the bulk electric system after applying the “core” definition and 

the four exclusions should nonetheless be excluded because it is used in local 

distribution. In such circumstances, which we expect will be infrequent, an entity must 

petition the Commission seeking a determination that the facility is used in local 

 71 Standardization of Generator Interconnection Agreements and Procedures, 

Order No. 2003, FERC Stats. & Regs. ¶ 31,146, at P 803 (2003), order on reh’g, Order 

No. 2003-A, FERC Stats. & Regs. ¶ 31,160, order on reh’g, Order No. 2003-B, FERC 

Stats. & Regs. ¶ 31,171 (2004), order on reh’g, Order No. 2003-C, FERC Stats. & Regs. 

¶ 31,190 (2005), aff'd sub nom. Nat’l Ass’n of Regulatory Util. Comm’rs v. FERC, 475 

F.3d 1277 (D.C. Cir. 2007), cert. denied, 552 U.S. 1230 (2008)(“‘Local distribution’ is a 

legal term; under FPA Section 201(b)(1), the Commission lacks jurisdiction over local 

distribution facilities.”).

72 Order No. 743-A, 134 FERC ¶ 61,210 at P 67 and n.78, (citing California 

Pacific Electric Co., LLC, 133 FERC ¶ 61,018 at n.59 (2010) (citing FPC v. Southern 

California Edison Co., 376 U.S. 205, 210 n.6 (1964) (asserting that “the Supreme Court 

has determined that whether facilities are used in local distribution involves a question of 

fact to be decided by the [Commission] as an original matter.”))). See also Connecticut 

Light & Power Co. v. Federal Power Commission, 324 U.S. 515, 534-35 (1945).
Docket Nos. RM12-6-000 and RM12-7-000 - 47 -

distribution.73 Such petitions should include information that will assist the Commission 

in making such determination, and notice of the petition must be provided to NERC and 

relevant Regional Entities. 

71. In addressing such petitions, the Commission will apply the Seven Factor Test set 

forth in Order No. 888. In Order No. 888, the Commission articulated the Seven Factor 

Test to determine, on a case-by-case basis, whether a facility is a local distribution 

facility or a transmission facility.74 However, the Commission has found that the factors 

identified in the Seven Factor Test are not exclusive when determining whether an 

element is used for local distribution. Specifically, the Commission recognized that the 

Seven Factor Test does not resolve all possible issues and that “there may be other factors 

that should be taken into account in particular situations.”75 The Commission will apply 

a similar analysis in determining in the context of FPA section 215 whether a facility is 

used in local distribution. In other words, while the starting point for the Commission’s 

analysis will be an analysis based on the Seven Factor Test, the Commission will 

consider other factors that should be taken into account in particular situations. 

 73 Such petitions will be assigned an “RC” docket prefix. The determinations 

would be public proceedings subject to notice and comment requirements which will 

allow NERC and interested parties (including state regulators) to provide input on a 

petition. 

74 Order No. 888, FERC Stats. & Regs. ¶ 31,036 at 31,771, 31,783-84, 

Appendix G. 

75 Order No. 888-A, FERC Stats. & Regs. ¶ 31,048 at 30,242.
Docket Nos. RM12-6-000 and RM12-7-000 - 48 -

72. To reiterate, we expect that the 100 kV threshold as a “first step or proxy” for 

determining which facilities should be included in the bulk electric system, plus the four 

exclusions (in particular the local network exclusion E3), will exclude many facilities 

that are used in local distribution and thus should be excluded from the bulk electric 

system. This approach recognizes that, although local distribution facilities are 

excluded from the definition, it still may be 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. We decline to clarify, as Portland requests, that for entities 

who apply the local distribution exception in good faith, any future regulatory 

determination that such distribution facilities are to be treated as part of the bulk electric 

system within the scope of FPA section 215 regulation will be prospective only. As 

explained above, in circumstances where a factual question remains after applying the 

“core” definition and the exclusions, entities must apply to the Commission for a 

determination of whether an element is used in local distribution. We believe this 

approach provides a means to maintain consistency and transparency across the various 

reliability regions but still have the necessary flexibility to make case-by-case 

determinations appropriate for reliability. 

73. To the extent the various reply comments by ITC Companies, MISO and 

Consumers raise questions about the status of specific facilities, we decline to address 

them in this Final Rule as this rulemaking proceeding is not the proper forum to decide 

such matters. 
Docket Nos. RM12-6-000 and RM12-7-000 - 49 -

D. Inclusions and Exclusions in the Definition of Bulk Electric System

NOPR Proposal

74. In the NOPR, the Commission proposed to approve, in addition to the core 

definition, specific inclusions and exclusions because the inclusions and exclusions 

provide added clarity regarding which elements are part of the bulk electric system as 

compared to the existing definition. In the NOPR, the Commission also posed questions 

about how some of the inclusions and exclusions will be applied to better understand 

potential applications of the inclusions and exclusions, their effect on identifying the 

facilities or elements for bulk electric system reliability, and whether possible gaps exist. 

We address these questions below. 

1. Inclusion I1 (Transformers)

NOPR Proposal

75. Inclusion I1 includes as part of the bulk electric system “[t]ransformers with the 

primary terminal and at least one secondary terminal operated at 100 kV or higher unless 

excluded under [the radial system or local network exclusion].” In its petition, NERC 

explained that, due to transformers having multiple windings operating at differing 

voltages, the intent of inclusion I1 includes transformers operating at 100 kV or higher on 

the primary winding and at least one secondary winding.76 

 76 NERC BES Petition at 17.
Docket Nos. RM12-6-000 and RM12-7-000 - 50 -

76. In the NOPR, the Commission stated that NERC’s approach to inclusion I1 “is a 

reasonable approach to identifying transformers that are appropriately included as part of 

the bulk electric system.”77 However, the Commission expressed concern whether a 

particular transformer – operated at 100 kV or higher on the primary winding but all 

secondary terminals are operated below 100 kV – should be part of the bulk electric 

system or whether the exception process would be sufficient to include these 

transformers.78 The Commission also requested comment on whether transformers that 

have a terminal operated at 100 kV or above on the high side and below 100 kV on the 

low side should be designated as part of the bulk electric system. 

Comments

77. NERC supports allowing the exception process to include the transformers 

described by the Commission. NERC states that the “vast majority” of transformers with 

low side voltages step down to a voltage class that is designed for distribution to load. 

NERC adds that the 100 kV threshold for secondary windings provides a “clear 

demarcation” between facilities used to transfer power as opposed to those that serve 

load. According to NERC, while there are instances where transformers with secondary 

windings below 100 kV are connected in parallel with high voltage transmission lines, it 

 77 NOPR, 139 FERC ¶ 61,247 at P 63. 

78 In the NOPR the Commission noted that the joint NERC and Commission staff 

report on the September 8, 2011, Arizona-Southern California blackout explains how 

transformers of this type were not monitored or analyzed by the reliability coordinator, 

transmission operators and balancing authorities. NOPR, 139 FERC ¶ 61,247 at P 63. 
Docket Nos. RM12-6-000 and RM12-7-000 - 51 -

is not possible to craft a bright-line inclusion of such transformers because the distinction 

may hinge on function as opposed to the physical characteristics of the transformer. 

NERC states that the exception process can evaluate whether such transformers should be 

included in the bulk electric system. A majority of commenters share NERC’s position 

and believe that most transformers with the configuration described by the Commission 

in the NOPR do not impact the bulk electric system and those that do can be classified as 

part of the bulk electric system through the exception process.79 

78. SoCal Edison agrees with NERC, but identifies transformers operated in parallel 

with the bulk electric system as those that should be designated as part of the bulk electric 

system irrespective of the operational voltage of the transformer. SoCal Edison argues 

that information regarding such transformers should be provided to the impacted entities, 

e.g., reliability coordinators and neighboring regional entities. SoCal Edison contends 

that including these types of transformers in the bulk electric system would have made 

the Regional Entities, reliability coordinators, transmission operators and balancing 

authorities aware of the contingencies of the transformers and their impact on the bulk 

electric system in the September 2011 blackout. 

79. SmartSenseCom states that transformers that operate at 100 kV or above with any 

secondary windings below 100 kV should be included. On the other hand, Consumers 

does not support inclusion I1 because it goes beyond the Commission’s jurisdiction and 

 79 E.g. APPA, EEI, ELCON, WREA, Anaheim, Riverside, Imperial Irrigation 

District, G&T Cooperatives, NV Energy, NESCOE, and TAPS.
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would confuse the distinction between the bulk electric system and local distribution. 

Consumers argues that inclusion I1 may create a “moving registration target” if related 

facilities are added to the bulk electric system.80

Commission Determination

80. We find that inclusion I1 is a reasonable approach to identifying transformers that 

are appropriately included as part of the bulk electric system. We agree with NERC that 

inclusion I1 includes transformers operating at 100 kV or higher on the primary winding 

and at 100 kV or higher on at least one secondary winding. With regard to the 

Commission’s concern in the NOPR about inclusion of a transformer that is operated at 

100 kV or higher on the primary winding but all secondary terminals are operated below 

100 kV, we agree with NERC that it is appropriate for such transformers to be considered 

for inclusion through the exception process. We are persuaded that transformers with 

low side voltages stepped down to a voltage class that is designed to distribute power to 

load and, therefore, the 100 kV threshold for secondary windings provides an initial 

screening between facilities used to transfer power as opposed to those that serve load. 

We agree with NERC’s assessment that crafting an inclusion for transformers described 

by the Commission is difficult because the distinction may hinge on function as opposed 

to the physical characteristics of the transformer. Therefore, we decline to include such 

transformers in inclusion I1. 

 80 Consumers Comments at 9-10. 
Docket Nos. RM12-6-000 and RM12-7-000 - 53 -

81. With regard to the specific configurations identified by SoCal Edison 

(transformers that operate in parallel with the bulk electric system irrespective of the 

operational voltage of the transformer), we will not make a determination of general 

application. Rather, such matters should be addressed in the case-by-case exception 

process. 

82. We do not agree with Consumers that inclusion I1 would be ineffective because it 

would include lower voltage distribution facilities that were not designed to provide 

reliability to the bulk electric system or prevent cascading outages. The 100 kV threshold 

for secondary windings provides a bright line between facilities used to transfer power as 

opposed to those that serve load, and if a transformer is included pursuant to inclusion I1, 

but an entity believes it is not necessary for operation of the interconnected transmission 

network, it may be considered for exclusion through the exception process. 

2. Inclusion I2 (Generating Resources) 

NOPR Proposal

83. Inclusion I2 of the bulk electric system definition provides for specific inclusion of 

generating resources with gross individual nameplate rating greater than 20 MVA or

gross plant/facility aggregate nameplate rating greater than 75 MVA. NERC developed 

this inclusion based on the text of the Registry Criteria for generating units while 
Docket Nos. RM12-6-000 and RM12-7-000 - 54 -

providing clarity by including “the generator terminals through the high-side of the stepup transformer connected at a voltage of 100 kV or above.”81 

84. In the NOPR, the Commission agreed that inclusion I2 is consistent with the 

individual and aggregate nameplate rating thresholds set forth in the Registry Criteria but 

noted the differing descriptions of the connection point of the generating resources.82 

Inclusion I2 specifies “generator terminals through the high-side of the step-up 

transformer(s) connected at a voltage of 100 kV or above,” and the Registry Criteria 

specifies a “direct connection” to the Bulk-Power System. Accordingly, the Commission 

requested comment whether inclusion I2 will result in a material change to registration of 

existing generating units due to the difference in the language regarding the connection 

point. The Commission also requested comment if a generating unit, with a gross 

individual nameplate rating greater than 20 MVA connected through the high-side of the 

step-up transformer connected at a voltage of 100 kV or above when the low side of the 

transformer is less than 100 kV, is included in the bulk electric system pursuant to 

inclusion I2. Further, the Commission asked how this result differs for a generation 

resource with two or more step-up transformers where the last transformer in the series 

operates at 100 kV or above.

 81 NERC BES Petition at 17. 

82 NOPR, 139 FERC ¶ 61,247 at P 65.
Docket Nos. RM12-6-000 and RM12-7-000 - 55 -

Comments

85. Most commenters do not believe that inclusion I2 will materially change 

registration of generating resources. NERC states that inclusion I2 connection point 

language merely clarifies the “directly connected” language in the Registry Criteria. 

NERC explains that while most generation is connected through a unit transformer on the 

high voltage bus within a facility, there are instances where generators are connected to 

lower voltages within a facility. NERC adds that most of these types of configurations 

are in older facilities where the higher voltage bus was added after the original 

generators. NERC confirms that the specific scenario described by the Commission 

would result in the generator being included in the bulk electric system provided that the 

transformers reside within a single site boundary and are used only to step-up the output 

voltage of the generator.83 APPA and others agree with NERC’s view. APPA adds that, 

if the transformers in question are also used to deliver power to serve local load, the 

generation resources and transformers should be excluded from the bulk electric 

system.84 PSEG Companies believe that inclusion I2 addresses the issue regarding two 

step-up transformers in series. PSEG Companies explain that both step-up transformers 

are part of the generator per inclusion I2 if the purpose of the transformers is to solely 

step-up the output voltage. 

 83 NERC Comments at 9-10. See also comments of EEI. 

84 APPA Comments at 14-15. See also comments of National Grid, TAPS, 

NESCOE, and G&T Cooperatives.
Docket Nos. RM12-6-000 and RM12-7-000 - 56 -

86. Arizona Public Service requests that the Commission clarify whether the voltage 

connection language in inclusion I2 applies only to the aggregated 75 MVA threshold or 

also to the 20 MVA threshold for individual generating units. Southern Companies 

believe that there are instances where generators may be connected to lower voltages that 

may fit under inclusion I2 but would not necessarily fit in the Registry Criteria. 

87. Some commenters do not support inclusion I2 for varying reasons. Dominion 

opposes inclusion of elements such as those provided for in inclusion I2 that are already 

subject to reliability standards because the element meets the criteria in the NERC 

Compliance Registry. ISO New England states that the connection language in inclusion 

I2 should be eliminated. ISO New England maintains that interpreting inclusion I2 to be 

based on generator plant size, independent of the voltage connection, is important from a 

generator stability modeling view point. This is because generators connected at voltages 

less than 100 kV can have a significant impact on system stability.85 ISO New England 

supports adding generators connected at lower voltages but not the system to which the 

generators are connected. ISO New England believes that adding generators, regardless 

of their connection voltage levels, would increase the universe of registered generators 

and would enhance reliability.

88. MISO recommends that the Commission clarify that operators of generating 

resources included through inclusion I2 will only be subject to Reliability Standards for 

 85 ISO New England Comments at 4. 
Docket Nos. RM12-6-000 and RM12-7-000 - 57 -

generators unless a specific determination is made that other standards should apply to a 

particular piece of equipment. MISO believes that, without this clarification, inclusion I2 

could increase the number of transmission operators by including generation equipment. 

89. Barrick believes that the term “gross plant/facility” in inclusion I2 needs to be 

clarified. Barrick states that it is not clear whether the terms are based on geographic 

proximity or structural definition. Barrick is also concerned that inclusion I2 is based on 

“gross” rating while exclusion E2 is based on net capacity and exclusion E3(a) is based 

on a non-retail basis, and that read together inclusion I2 and exclusions E2 and E3(a) 

appear to be in conflict.86 In reply comments, Barrick suggests that, instead of focusing 

on nameplate ratings, the focus should be on the normal configuration and operation of 

generation. 

90. SmartSenseCom states that the Commission should direct NERC to modify 

inclusion I2 to include generating units that are stepped up to 100 kV or above containing 

a transformer with a low side below 100 kV because, at these levels, generating resources 

should be presumed to impact reliability. SmartSenseCom contends that Reliability 

Standards should apply to such facilities “in light of their potential impact to system 

reliability, especially given the increasing levels of distributed generation penetration that 

is expected in the near future.”87 Springfield questions whether multiple individual units 

 86 Barrick Comments at 10. 

87 SmartSenseCom Comments at 12. 
Docket Nos. RM12-6-000 and RM12-7-000 - 58 -

are considered one unit if they have a shared bus. Springfield believes that such instances 

should not be considered individually. 

Commission Determination

91. The Commission approves inclusion I2. Based on the language of inclusion I2, its 

derivation from the Registry Criteria and the statements from NERC and commenters, the 

Commission concludes that application of inclusion I2 will not materially change 

registration of generating resources. The Commission accepts NERC’s explanation that 

the inclusion I2 connection point language merely clarifies the “directly connected” 

language in the NERC Registry Criteria, section III.c.1. Further, the Commission agrees 

with NERC and other commenters that multiple step-up transformers that are solely used 

to deliver the generation to the bulk electric system at 100 kV or above qualify the 

generator and the step-up transformers pursuant to inclusion I2.

92. APPA and commenters claim that, if a transformer is also used to deliver power to 

serve local load, through, for example a 69 kV network, the generation resources and 

transformers should be excluded from the bulk electric system. The Commission agrees 

with the specific example. In such cases, local load refers to end-user load and not 

generator-specific station service load. This example depicts a generator whose step-up 

transformer delivers the generation to a voltage level of 69 kV and thus does not meet the 

criteria in inclusion I2. A second transformer in this example that connects the 69 kV 

network to the bulk electric system is not solely delivering the generation to the bulk 

electric system but also delivers power from the bulk electric system to the 69 kV 

network.
Docket Nos. RM12-6-000 and RM12-7-000 - 59 -

93. Regarding Arizona Public Service’s request for clarification, the Commission 

finds that the voltage connection language in inclusion I2 applies to both the aggregated 

75 MVA threshold for a plant/facility and the 20 MVA threshold for individual units. 

94. The Commission disagrees with Dominion’s contention that inclusion I2 is not 

needed because the elements identified in inclusion I2 already meet the Registry Criteria. 

The NERC registration process uses element criteria to identify and register functional 

entities, not the actual equipment. In contrast, the focus of the bright-line definition is the 

facilities, not the owners or operators of the facilities. Similarly, with regard to Southern 

Companies’ belief that there are instances where generators may be connected to lower 

voltages that may fit under inclusion I2 but would not necessarily fit in the Registry 

Criteria, the Commission agrees that the Registry Criteria allows the Regional Entities 

and NERC to consider other factors regarding entity registration which may result in 

cases where the bulk electric system status and registry status differs for certain 

equipment owners and operators.

95. Regarding ISO New England’s assertion that generators that connect to the bulk 

electric system via transmission facilities with voltages below 100 kV are needed for 

reliability, the Commission believes these generators can be added to the bulk electric 

system through the exception process, and if registration is warranted for the owners and 

operators of these generators, the Registry Criteria provides NERC and the Regional 

Entities the option of registering “[a]ny generator, regardless of size, that is material to 
Docket Nos. RM12-6-000 and RM12-7-000 - 60 -

the reliability of the Bulk Power System.”88 Aggregate stability impacts of generation 

below 100 kV could fall into this category of “material to the reliability of the Bulk 

Power System.”

96. With respect to the suggestions and requests for clarification submitted by MISO, 

Barrick, SmartSenseCom and Springfield, commenters may raise these suggestions in 

NERC’s Phase 2 development effort.

3. Inclusion I3 (Blackstart Resources)

NOPR Proposal

97. NERC included as part of the bulk electric system definition “Blackstart 

Resources identified in a Transmission Operator’s restoration plan.” In the NOPR, the 

Commission agreed with NERC that inclusion of blackstart resources in the definition is 

vital to reliability and is an improvement to the definition. The Commission requested 

clarification whether the term “restoration plan” refers to the system restoration plans 

required in the Emergency Preparedness and Operations (EOP) Reliability Standards or 

included in a Commission approved tariff.89 The Commission also expressed concern 

whether a reliability gap exists with regard to cranking paths. The Commission explained 

that cranking paths are an important element of system restoration, and questioned 

 88 NERC Statement of Compliance Registry Criteria, section III.c.4.

89 NOPR, 139 FERC ¶ 61,247 at P 67. Reliability Standard EOP-005-1, System 

Restoration Plans, requires a transmission operator to create “a restoration plan to 

reestablish its electric system in a stable and orderly manner in the event of a partial or 

total shutdown of its system.” 
Docket Nos. RM12-6-000 and RM12-7-000 - 61 -

“whether reliability can be adequately maintained when blackstart generators are defined 

as part of the bulk electric system but not the transmission paths that are used to deliver 

the energy from blackstart generators to the integrated transmission system.”90

Accordingly, the Commission requested comment on whether a reliability gap exists and 

also requested comment on the appropriate role, if any, of state regulators in ensuring that 

energy from blackstart generation is reliably delivered through cranking paths to restart 

the system after an event. 

Comments

98. NERC confirms that the “restoration plan” in inclusion I3 refers to the restoration 

plans in the EOP Reliability Standards. Other commenters support NERC’s 

explanation.91 With regard to cranking paths, NERC explains that cranking paths above 

100 kV are included in the bulk electric system by the core definition. NERC states that 

some cranking paths identified in a restoration plan “are composed of distribution system 

elements.”92 NERC adds that certain Reliability Standards, such as Reliability Standards 

CIP-002-4 and EOP-005-2, address reliability of cranking paths without regard to voltage 

which demonstrates there are other ways to ensure reliable operation of the bulk electric 

system without including non-bulk electric system cranking paths within the definition. 

 90 NOPR, 139 FERC ¶ 61,247 at P 68. 

91 E.g. EEI, APPA, Southern Companies, SoCal Edison, PSEG Companies, and 

NV Energy. 

92 NERC Comments at 11. 
Docket Nos. RM12-6-000 and RM12-7-000 - 62 -

In contrast, PSEG Companies request that, if the Commission supports NERC’s 

exclusion of cranking paths below 100 kV, the Commission confirm that below 100 kV 

cranking paths would be excluded from being enforced in Reliability Standards that 

address cranking paths unless they are added to the bulk electric system by the exception 

process.93

99. Other commenters agree that no reliability gap exists and that the Commission 

correctly noted that including cranking paths may improperly bring distribution level 

elements into the bulk electric system. Southern Companies and others contend that if a 

cranking path that does not fall within the definition of bulk electric system but is needed 

for reliability, the exception process would be the place to make that determination.94 

NESCOE states that cranking paths are generally part of the distribution system and state 

regulators have the responsibility to ensure the reliability of these lower voltage facilities 

and are acutely aware of the importance of effective blackstart capability. NESCOE adds 

that these facilities are needed for restoration not for continuous operation.95 ODEC is 

concerned that including cranking paths will create an incentive for generators not 

making their units available for blackstart services. Alameda suggests that “any potential 

gap can be closed by requiring [t]ransmission [o]perators (“TOPs”) that identify 

 93 PSEG Comments at 10.

94 Southern Companies Comments at 7. See also TAPS Comments at 5. 

95 NESCOE Comments at 10. 
Docket Nos. RM12-6-000 and RM12-7-000 - 63 -

blackstart generation and a related cranking path or paths in their system restoration plans 

to analyze and enter into an operating agreement with the owner of identified cranking 

path facilities not owned by the [transmission operator].”96

100. While other commenters agree that the term “restoration plan” refers to the EOP 

Reliability Standards, they assert that cranking paths should be included in the bulk 

electric system. Idaho Power, ITC Companies and BPA assert that cranking paths are 

crucial to system restoration and implicate reliability even if they are local distribution or 

below 100 kV facilities.97 ITC Companies state that not including cranking paths will 

cause regional differences and inconsistent application resulting in some owners electing 

to exclude such assets. Without cranking paths included in the definition, ITC 

Companies state that they will be “required to ensure its blackstart plan does not include 

blackstart generators connected to transmission facilities at voltages below 100 kV since 

[they] could not be assured that the proper standards are being followed for these 

blackstart cranking paths.”98

101. MISO recommends that the Commission clarify that the term “restoration plan” 

refers to the EOP Reliability Standards but not include all blackstart resources in a 

Commission-approved tariff. MISO is concerned that including blackstart resources 

 96 Alameda Comments at 6.

97 Idaho Power Comments at 4, ITC Companies at 3-4. See also BPA Comments 

at 3-4. 

98 ITC Comments at 5.
Docket Nos. RM12-6-000 and RM12-7-000 - 64 -

from sources other than the EOP Reliability Standards is not necessary for reliability and 

could encourage generators to remove blackstart resources in order to avoid being subject 

to “unduly complex requirements.”99 

Commission Determination

102. We find that NERC’s inclusion of blackstart resources in the definition is an 

improvement to the definition. We also agree with NERC’s statement that the 

“restoration plan” in inclusion I3 refers to the restoration plans in the EOP Reliability 

Standards. With regard to cranking paths, the Commission declines to include all 

cranking paths regardless of voltage level. The Commission finds that cranking paths 

operating at or above 100 kV are included in the bulk electric system by the core 

definition, and if a cranking path that does not fall within the definition of bulk electric 

system, (i.e. operating at or above 100 kV) but is needed for reliability, such elements can 

be included in the bulk electric system through the exception process. We also disagree 

that not including cranking paths will cause regional differences and inconsistent 

application resulting in some owners electing to exclude such assets. The revised 

definition includes all Transmission Elements at or above 100 kV. Thus, to the extent a 

cranking path is operating at or above 100 kV and a “Transmission Element,” it would be 

included in the bulk electric system. If a cranking path is below 100 kV and is necessary 

for operation of the interconnected transmission network or operates at or above 100 kV 

 99 MISO Comments at 6. 
Docket Nos. RM12-6-000 and RM12-7-000 - 65 -

and is not necessary for the operation of the interconnected transmission network, the 

status of the cranking path may be determined in the exception process. These steps will 

ensure consistent treatment across the regions. In response to ITC Companies’ concern 

that, without cranking paths included in the definition it will be required to ensure its 

blackstart plan does not include blackstart generators connected to transmission facilities 

at voltages below 100 kV, we note that such elements can be considered for inclusion 

through the exception process. Similarly, with regard to NESCOE’s statement that lower 

voltage cranking paths are generally part of the distribution system, we note that facilities 

operating below 100 kV would be excluded as part of applying of the core definition. In 

addition, as we discuss above, in certain instances the Commission will make 

determinations as to which facilities are used in local distribution and thus should be 

excluded from the bulk electric system.100

103. With regard to PSEG Companies’ request that the Commission confirm that 

Reliability Standards do not apply to below 100 kV cranking paths unless they are added 

to the bulk electric system by the exception process, we find that PSEG Companies’ 

request is outside the scope of this proceeding but note that Reliability Standard EOP005-2 addresses cranking paths with no voltage limits.101

 100 See supra PP 66-73.

101 Reliability Standard EOP-005-2, Requirement R6 states “[e]ach [t]ransmission 

[o]perator shall verify through analysis of actual events, steady state and dynamic 

simulations, or testing that its restoration plan accomplishes its intended function. This 

shall be completed every five years at a minimum.” Requirement R6.1 states that the 

(continued...)
Docket Nos. RM12-6-000 and RM12-7-000 - 66 -

4. Inclusion I4 (Dispersed Power Producing Resources) 

NOPR Proposal 

104. NERC asserts inclusion I4, dispersed power producing resources with aggregate 

capacity greater than 75 MVA (gross aggregate nameplate rating), is needed “to 

accommodate the effects of variable generation” on the bulk electric system.102 NERC 

further stated that even though inclusion I4 could be considered subsumed in inclusion I2 

(generating resources), NERC believes it is appropriate “to expressly cover dispersed 

power producing resources utilizing a system designed primarily for aggregating 

capacity.”103

105. In the NOPR the Commission stated that inclusion I4 provides “useful 

granularity” in the bulk electric system definition, but requested comment whether 

inclusion I4 includes “the individual elements (from each energy-producing resource at 

the site through the collector system to the common point at a voltage of 100 kV or 

above) used to aggregate the capacity and any step-up transformers used to connect the 

system to a common point at a voltage of 100 kV or above.”104 

 

transmission operator shall verify “[t]he capability of [b]lackstart [r]esources to meet the 

[r]eal and [r]eactive [p]ower requirements of the [c]ranking [p]aths and the dynamic 

capability to supply initial [l]oads.”

102 NERC BES Petition at 18.

103 Id. 

104 NOPR, 139 FERC ¶ 61,247 at P 71. 
Docket Nos. RM12-6-000 and RM12-7-000 - 67 -

Comments

106. NERC states that the inclusion is meant to address the dispersed power producing 

resources themselves, not the individual elements of the collector systems operated below 

100 kV. With regard to energy delivery elements in collector systems and 

interconnection facilities, NERC states these items were specifically not included in 

inclusion I4. According to NERC, this decision was intended to avoid categorically 

including as part of the bulk electric system assets that may include local distribution 

facilities. EEI believes that inclusion I4 applies to generating resources meeting the 

threshold in the aggregate, not the individual generating units. EEI agrees with NERC 

that the inclusion does not include individual elements of the collector systems operated 

below 100 kV. LPPC believes that generating units aggregating to 75 MVA are often 

very small and non-dispatchable, and the reliability implications of these units will be 

negligible but the compliance burden would be quite high. 

107. Several commenters urge the Commission to not interpret inclusion I4 as 

including wind turbines and electrical collector systems within a wind plant and only 

include the electrical equipment at the point of interconnection with the bulk electric 

system.105 AWEA believes that including all this equipment will potentially burden the 

owners with NERC compliance processes that were intended for large scale generators. 

AWEA argues that the “main transformer’s high-side terminal and the generator lead/tie 

 105 See, e.g., AWEA, Southern Companies, Consumer Energy, BPA. Hydro One, 

G&T Cooperatives, and ISO New England.
Docket Nos. RM12-6-000 and RM12-7-000 - 68 -

line” should also be excluded unless another generator connects to the initial generator’s 

facilities.106 AWEA asserts that no one has demonstrated that there is any material 

reliability benefit from including resources envisioned by inclusion I4. AWEA and 

others state that if the Commission believes such resources should be included, such 

inclusion should be done on a case-by-case basis rather than generically.107 

108. Along the same lines, NESCOE believes that, absent a reliability risk a generic 

inclusion could adversely impact state policies to encourage renewable generation 

development by imposing additional costs. NESCOE states that setting the line for 

inclusion at 75 MVA is not supported by technical analysis since intermittent sources of 

power deliver only a fraction of their nameplate rating. NESCOE believes 300 MVA is a 

better threshold.

109. ISO New England contends that the term “common point” is unclear and notes 

that the inclusion could be interpreted to mean that if the individual generating units 

are “all collected at 34.5 kV, the ‘common point’ is at 34.5 kV and the entire group 

of resources should be found to be [not part of the bulk electric system].”108 

ISO New England believes this is not an appropriate interpretation because it would 

defeat the intent of the inclusion which is to classify large aggregated generating stations 

 106 AWEA Comments at 2. 

107 E.g., Idaho Power. 

108 ISO New England Comments at 7. 
Docket Nos. RM12-6-000 and RM12-7-000 - 69 -

as part of the bulk electric system. Similarly, Springfield questions the meaning of 

“collector system” and proposes language to define it.109

110. SmartSenseCom states that facilities over a certain significant nameplate rating 

that are stepped up to over 100 kV should be subject to Reliability Standards in light of 

their potential impact to system reliability. SmartSenseCom suggests that the 

Commission direct NERC to modify inclusions I2 and I4 in order to ensure that 

generating units that are stepped up to 100 kV or above by the use of a transformer with a 

low side of less than 100 kV (or multiple contiguous transformers of less than 100 kV on 

the low side) are also included within this definition.110

111. MISO recommends that the Commission withdraw its proposal to approve 

inclusion I4. MISO believes inclusion I4 is unnecessary given the criteria in inclusion I2. 

MISO states that elements meeting the criteria in inclusion I2 would be considered part of 

the bulk electric system, irrespective of whether it is considered a dispersed power 

producing resource. MISO adds that a specific inclusion for dispersed power producing 

resources could subject the collector systems to unnecessary monitoring by the reliability 

coordinator or other registered entities as collector systems at dispersed power producing 

facilities generally do not affect the reliability of the bulk electric system.

 109 Springfield proposes to add the following sentence at the end of inclusion I4: 

“For purposes of this inclusion, a Collector System is any infrastructure not connected to 

load – where parasitic load associated with a generation unit or units is not considered 

load.”

110 SmartSenseCom Comments at 12.
Docket Nos. RM12-6-000 and RM12-7-000 - 70 -

Commission Determination

112. The Commission finds that inclusion I4 provides useful granularity in the bulk 

electric system definition. The clarifying language in inclusion I4 regarding the collector 

system language is consistent with language in the Registry Criteria, section III.c.2. The 

Commission agrees that it is appropriate “to expressly cover dispersed power producing 

resources utilizing a system designed primarily for aggregating capacity.”111

113. As the Commission previously stated in the inclusion I2 discussion, multiple stepup transformers that are solely used to deliver the generation to the bulk electric system at 

100 kV or above qualify the generator or plant/facility and the step-up transformers for 

inclusion in the bulk electric system. 

114. Similarly, the collector system in inclusion I4, described by NERC and others as 

being designed for aggregating capacity and solely used to deliver the aggregated 

capacity to the bulk electric system at 100 kV and above, falls into the category of 

multiple step-up transformers through the high side of the main transformer that connects 

to 100 kV or above. NERC reasons that proposed inclusion I4 was intended to avoid 

categorically including assets that may include local distribution facilities. While we 

believe most collector systems operate below 100 kV, the Commission disagrees that 

collector systems described in inclusion I4 that solely deliver aggregated generation to 

the bulk electric system contain local distribution facilities because power is delivered 

 111 NERC BES Petition at 18. 
Docket Nos. RM12-6-000 and RM12-7-000 - 71 -

from the collector system to the bulk electric system. However, the Commission will not 

direct NERC to categorically include collector systems pursuant to inclusion I4. 

115. We disagree with AWEA and other commenters that contend that inclusion I4 

should be interpreted to not include the dispersed power producing resources within a 

wind plant in the bulk electric system. We agree with NERC’s statement that the purpose 

of this inclusion is to include such variable generation (e.g., wind and solar resources). 

NERC noted that, while such generation could be considered subsumed in inclusion I2 

(because the gross aggregate nameplate rating of the power producing resources must be 

greater than 75 MVA), NERC considered it appropriate for clarity to add this separatelystated inclusion to expressly cover dispersed power producing resources using a system 

designed primarily for aggregating capacity. In addition, although dispersed power 

producing resources (wind, solar, etc.) are typically variable suppliers of electrical 

generation to the interconnected transmission network, there are geographical areas that 

depend on these types of generation resources for the reliable operation of the 

interconnected transmission network. The Commission believes that owners and 

operators of these resources that meet the 75 MVA gross aggregate nameplate rating 

threshold are, in some cases, already registered and have compliance responsibilities as 

generator owners and generator operators. Regarding AWEA’s request that a 

transformer’s high-side terminal and the generator lead line should also be excluded, such 

determinations may be made on a case-by-case basis in the exception process. With 

regard to commenters who believe that dispersed power producing resources should be 

included on a case-by-case basis rather than generically, this would be inconsistent with 
Docket Nos. RM12-6-000 and RM12-7-000 - 72 -

the bright-line concept that NERC developed to have consistent application of the 

definition across the country. If such generating resources are included through 

inclusion I4, they are eligible for exclusion through use of the exception process. With 

respect to the concern raised by ISO New England regarding the term “common 

point,” ISO New England may raise this concern in NERC’s Phase 2 development 

effort.

5. Inclusion I5 (Static or Dynamic Reactive Power Devices)

NOPR Proposal

116. Inclusion I5 identifies as part of the bulk electric system “[s]tatic or dynamic 

devices (excluding generators) dedicated to supplying or absorbing Reactive Power that 

are connected at 100 kV or higher, or through a dedicated transformer with a high-side 

voltage of 100 kV or higher, or through a transformer that is designated in Inclusion I1.” 

In its petition, NERC explained that this inclusion is the technical equivalent of inclusion 

I2 (generating resources), for reactive power devices and points out that the existing 

definition is unclear as to how these devices are treated.112 NERC stated inclusion I5 

provides clarity by “providing specific criteria for Reactive Power devices, thereby 

further limiting subjectivity and the potential for discretion” in the application of the 

revised definition.113

 112 NERC BES Petition at 18.

113 Id. 
Docket Nos. RM12-6-000 and RM12-7-000 - 73 -

117. In the NOPR, the Commission agreed with NERC that inclusion I5 adds clarity to 

the application of the bulk electric system definition by providing specific criteria for 

reactive power devices. For cases where the reactive power device is connected through 

a transformer designated in inclusion I1, the Commission requested comment whether 

both the reactive power device and the transmission elements connecting the reactive 

power device to the transformer are included as part of the bulk electric system pursuant 

to inclusion I5.114

Comments

118. NERC and other commenters note that inclusion I5 is intended to include the 

reactive resource itself and the other portions of the definition are intended to designate 

whether the remaining electrical components are part of the bulk electric system.115 

NERC, EEI, National Grid, Utility Services and G&T Cooperatives refer to inclusion I1 

as the proper place to determine whether transformers connected to reactive devices are 

included as part of the bulk electric system. 

119. BPA and WPPC support excluding both the reactive device and the transformer 

from the bulk electric system if the device supports local distribution. Conversely, if the 

facilities provide reactive and voltage support to the bulk electric system, the reactive 

 114 NOPR, 139 FERC ¶ 61,247 at P 73. 

115 E.g., EEI.
Docket Nos. RM12-6-000 and RM12-7-000 - 74 -

device and associated equipment, such as the transformer, should be classified as a bulk 

electric system facility.

120. AEP considers the transmission elements connecting the reactive power device to 

the transformer to be included in the bulk electric system definition and should be 

deemed part of inclusion I5.116 Idaho Power contends that both the reactive device and 

the transformer should be included in the bulk electric system. Idaho Power states that if 

the transformer is included as part of inclusion I1, then it should be included.117

121. PSEG Companies view the issue as one of “bulk electric system contiguity” and 

therefore should be addressed during Phase 2. MISO recommends that the Commission 

require NERC to include a size threshold or an impact test. According to MISO, this will 

avoid creating incentives to owners of small reactive devices to disconnect them to avoid 

being classified as transmission owners or operators. With regard to transformers, MISO 

states that both the reactive power device and the transmission elements are included, but 

because these facilities have a generally localized impact on reliability, MISO 

recommends that the Commission clarify that they are not transmission equipment that 

subjects their owners and operators to the requirements applicable to registered 

transmission operators under the NERC Reliability Standards.

 116 AEP Comments at 4.

117 Idaho Power Comments at 5.
Docket Nos. RM12-6-000 and RM12-7-000 - 75 -

122. G&T Cooperatives suggest two clarifications. First, inclusion I5 should not apply 

to reactive power devices that are connected to the bulk electric system by a radial line 

excluded by exclusion E1 or a local network excluded by exclusion E3. G&T 

Cooperatives view this exclusion as implicit in inclusion I5, which references devices 

“connected at 100 kV or higher, or through a dedicated transformer with a high-side 

voltage of 100 kV or higher, or through a transformer that is designated in [i]nclusion 

I1.” Second, G&T Cooperatives believe that inclusion I5 should be clarified to include a

minimum size threshold similar to the size threshold for generating resources under 

Inclusion I2. According to G&T Cooperatives because inclusion I2 does not apply to all 

generating resources and inclusion I5 is the “technical equivalent” of inclusion I2, a size 

threshold comparable to that found in inclusion I2 is implicit for reactive power devices. 

Commission Determination

123. The Commission approves inclusion I5 and finds that the inclusion adds clarity to 

the application of the bulk electric system definition by providing specific criteria for 

reactive power devices. The Commission also accepts NERC’s response for cases where 

the reactive power device is connected through a transformer designated in inclusion I1 –

that the reactive resource itself is included in the bulk electric system pursuant to 

inclusion I5 and the transmission elements connecting the reactive power device to the 

transformer are addressed in other portions of the definition. The Commission notes that 

this interpretation is different from inclusion I2 because inclusion I2 specifies including 

the equipment (step-up transformers) that connects generators to the bulk electric system. 

Nonetheless inclusion I5 provides criteria for reactive power devices that are not 
Docket Nos. RM12-6-000 and RM12-7-000 - 76 -

explicitly addressed in the existing definition. The Commission does not agree with 

G&T Cooperatives that exclusions E1 and E3 override inclusion I5 and exclude the 

reactive power devices. Exclusions E1 and E3 exclude transmission elements only and 

not resources.

124. The Commission agrees with PSEG Companies that issues, such as whether the 

connecting equipment for reactive devices should be included pursuant to inclusion I5, 

can be raised in Phase 2. Similarly, the issues raised by AEP, Idaho Power, MISO and 

G&T Cooperatives may be raised in NERC’s Phase 2 effort.

Exclusions

125. The proposed definition identifies four facilities configurations that should not be 

included in the bulk electric system: (1) radial systems; (2) behind-the-meter generating 

units; (3) local networks; and (4) retail customer reactive power devices. 

126. We agree that the proposed exclusions provide clarity and granularity. For 

example, the exclusion of generating units on the customer’s side of the retail meter that 

serves all or part of the retail load (exclusion E2) and the exclusion for reactive power 

devices owned and operated by a retail customer for its own use (exclusion E4) provide 

reasonable limitations on bulk electric system elements. While we approve in the 

Final Rule the language of exclusions E1, E2 and E4, we have concerns with regard to 

the application of exclusions E1 and E3 in specific situations and, thus, direct NERC to 

implement or apply these exclusions consistent with the determinations set forth below. 

In addition, we direct NERC to remove the 100 kV minimum operating threshold 

language from exclusion E3. 
Docket Nos. RM12-6-000 and RM12-7-000 - 77 -

6. Exclusion E1 (Radial Systems)

127. Exclusion E1 provides as follows:

Radial systems: A group of contiguous transmission Elements that emanates from 

a single point of connection of 100 kV or higher and:

a) Only serves Load. Or,

b) Only includes generation resources, not identified in Inclusion I3, 

with an aggregate capacity less than or equal to 75 MVA (gross nameplate 

rating). Or,

c) Where the radial system serves Load and includes generation 

resources, not identified in Inclusion I3, with an aggregate capacity of nonretail generation less than or equal to 75 MVA (gross nameplate rating).

Note – A normally open switching device between radial systems, as 

depicted on prints or one-line diagrams for example, does not affect this 

exclusion.

In its petition, NERC explained that radial facilities are excluded under the currently 

effective bulk electric system definition, and the detailed criteria in the revised definition 

provide enhanced clarity.118 

Commission Determination

128. The Commission approves exclusion E1. We agree with NERC that the currentlyeffective definition of bulk electric system excludes radial facilities, and the 

modifications provide additional granularity regarding the radial exclusion. In the 

NOPR, the Commission requested comment regarding specific applications of the E1 

radial system exclusion. Below, we discuss these applications and comments received, 

and provide further explanation or direction as we deem appropriate.

 118 NERC BES Petition at 18.
Docket Nos. RM12-6-000 and RM12-7-000 - 78 -

a. Exclusion E1 Does Not Apply to Whether Generation is 

Included or Excluded

NOPR Proposal

129. In the NOPR, the Commission requested comment on whether exclusion E1 

removes from the bulk electric system “generation connected to a radial system that

otherwise satisfies inclusion I2.”119 The Commission sought to ensure that the conditions 

in exclusion E1 would not “lead to conflicting results when applying inclusion I2 and 

exclusion E1.120 The Commission noted that exclusion E1 applies to “a group of 

contiguous transmission Elements that emanates from a single point of connection of 

100 kV or higher....”121 The Commission observed that the term “Elements” includes 

the term generator, and that the use of the term “transmission” before “Elements” 

indicates that exclusion E1 applies only to transmission elements.122 Thus, the 

Commission stated that “transmission Elements” do not include generating resources that 

are bulk electric 

 119 NOPR, 139 FERC ¶ 61,247 at P 76. 

120 Id.

121 NOPR, 139 FERC ¶ 61,247 at P 77.

122 “Element” is defined in the NERC Glossary as “[a]ny electrical device with 

terminals that may be connected to other electrical devices such as a generator, 

transformer, circuit breaker, bus section, or transmission line. An element may be 

comprised of one or more components.” (emphasis added). 
Docket Nos. RM12-6-000 and RM12-7-000 - 79 -

system resources pursuant to the generating resources included in inclusion I2 connected 

to a radial line operated at 100 kV above.123

Comments

130. NERC confirms that exclusion E1 does not apply to nor is it determinative of 

whether any generation is included or excluded from the bulk electric system. NERC 

states that, whether or not generation is included in the bulk electric system is determined 

by inclusions I2 through I4 and exclusion E2. Other commenters, including EEI, 

SoCal Edison, TAPS, Hydro One, and Alameda, also state that exclusion E1 does not 

apply to generating resources. Southern Companies suggest that the use of the term 

“includes” in subparts (b) and (c) could lead to some ambiguity because the implication is 

that a radial system includes generating resources. Southern Companies suggests that, 

the word “serves” should replace the word “include” to better reflect the intent of the 

provision.

131. PSEG Companies state there is confusion created by the fact that generators 

included in one provision of the definition (inclusion I2) are excluded under others 

(exclusions E1 through E3). According to PSEG Companies, a generator cannot be 

included under one provision of the bulk electric system definition and excluded under 

 123 See NOPR, 139 FERC ¶ 61,247 at P 77 and n.100 (citing NERC BES Petition, 

Exh. D, Consideration of Comments Report, at 223 (“Exclusion E1 is an exclusion for 

the contiguous transmission Elements connected at or above 100 kV.”)). 
Docket Nos. RM12-6-000 and RM12-7-000 - 80 -

another provision and that this issue requires clarification and, once clarified, the bulk 

electric system definition needs to be modified accordingly.124 

132. SmartSenseCom states that in the event of a conflict between an inclusion and 

exclusion, “there should exist a presumption that the [e]lement be considered included, 

absent an [e]xception” and asks that the Commission direct NERC to include a provision 

that states this presumption.125

Commission Determination

133. The Commission finds that the radial system exclusion only applies to 

“transmission Elements” and does not apply to nor is it determinative of whether any 

generation is included or excluded from the bulk electric system. This understanding is 

consistent with NERC’s defined terms, and consistent with the comment of NERC and 

other commenters. Further, in response to Southern Companies, AEP and PSEG 

Companies, we believe that the language of exclusion E1 is sufficiently clear that it does 

not exclude generation facilities that are otherwise included as part of the bulk electric 

system pursuant to inclusion I2. Thus, we will not direct NERC to modify exclusion E1 

to state this more explicitly. We agree with SmartSenseCom that exclusion E1 should 

not lead to conflicting results when applying inclusion I2, but we decline to direct NERC 

to include a provision that specifically states this presumption. 

 124 PSEG Comments at 11-13.

125 SmartSenseCom Comments at 13.
Docket Nos. RM12-6-000 and RM12-7-000 - 81 -

b. Definition of “Radial Systems,” Figure 1 and Condition 

(a) Radials Only Serving Load

NOPR Proposal

134. Exclusion E1 defines the term “radial systems” as “a group of contiguous 

transmission Elements that emanates from a single point of connection of 100 kV or 

higher.” In the NOPR, the Commission requested comment on how NERC’s proposal 

would be applied in the three scenarios. Figure 1 in the NOPR depicted facilities 

configurations in which all of the 230 kV and 69 kV transmission elements emanate from 

a single point of connection of 100 kV or higher. The Commission requested comment 

on whether each of the radial systems shown in figure 1, the 230 kV elements above each 

transformer to the point of connection to each 230 kV line, respectively, are excluded 

from the bulk electric system pursuant to exclusion E1. 
Docket Nos. RM12-6-000 and RM12-7-000 - 82 -

Figure 1

Two Radial Systems Eligible for Exclusion E1

Comments

135. NERC and other commenters state that both radial systems depicted in figure 1 

would be subject to exclusion E1(a) because they each only serve load.126 ELCON 

agrees with NERC adding that these types of radial systems pose no reliability risk to the 

interconnected transmission network if the system is lost due to a fault condition. 

Similarly, SoCal Edison states that the figure 1 facilities would either be excluded or not 

 126 E.g., Southern Companies, AEP, National Grid, TAPS, ISO New England, 

Barrick, IUU, and WPPC. 
Docket Nos. RM12-6-000 and RM12-7-000 - 83 -

part of the bulk electric system. SoCal Edison asserts that, because transformers 1 and 2 

each have secondary voltages that are less than 100 kV, they do not meet the inclusion I1 

requirements and, thus, are not included in the bulk electric system. In other words, 

SoCal Edison believes exclusion E1 should exclude all radial facilities that are greater 

than 100 kV up to the point where “the system is no longer radial, as indicated in figure 1 

by the brackets where the 230 kV lines meet [lines 1 and 2].”127 APPA believes that all 

the scenarios described by the Commission could create reliability concerns “if taken in 

isolation and operated in a certain matter” and believes that the exception process can 

capture configurations that pose a significant risk to the reliable operation of the 

interconnected transmission network. Idaho Power maintains that it is inappropriate to 

apply exclusion E1 for 230 kV elements in the scenarios if the breakers are part of the 

protection scheme for a three terminal 230 kV line. Idaho Power adds that if either 

breaker only opens for transformer protection, the exclusion would be applicable. 

136. Anaheim agrees that the radials shown in figure 1 should be excluded and requests 

clarification that the associated bus work and protection system equipment installed on 

those radial lines are also excluded. Anaheim advocates that the exclusion should also 

apply to protection system equipment on the excluded facilities that provide backup 

protection for devices that are part of the bulk electric system, i.e. lines 1 and 2 in 

figure 1. 

 127 SoCal Edison Comments at 5.
Docket Nos. RM12-6-000 and RM12-7-000 - 84 -

137. BPA is concerned about excluding the 230 kV lines without review by a planning 

authority or transmission operator because the fault magnitude on voltages above 200 kV 

are much higher than below 200 kV lines. BPA states that since actual power flows on 

systems above 200 kV are much higher, these systems have a higher risk for serious 

impacts on the interconnected transmission system.

138. Holland supports the exclusion of radial systems but contends that the phrase 

“emanates from a single point of connection” could be too narrowly interpreted. 

According to Holland, multiple buses within a single substation could be viewed as 

multiple points of connections. Holland believes that an entity whose connection 

emanates from a single substation should not be denied an exclusion solely because it 

connects to multiple buses at the single substation. 

139. Consumers argues that the exclusion of 100 kV radial systems that only serve load 

exceeds the Commission’s jurisdiction and the Seven Factor Test.128 Consumers believes 

that exclusion E1(a) would exclude radials that only serve load and this phrase expands 

the Commission’s jurisdiction by classifying 100 kV distribution systems that primarily 

serve load but could also have a secondary purpose. Consumers also argues that this 

exclusion is inconsistent with the Seven Factor Test which examines whether local 

distribution facilities are “primarily” radial in character. Further, Consumers argues that 

 128 Consumers cites to Detroit Edison Co. v. FERC, 334 F.3d 48 (D.C. Cir 2003) 

as support for its belief that the Commission cannot rewrite the FPA to exclude only 

facilities used exclusively in local distribution. See Consumers comments at 7. 
Docket Nos. RM12-6-000 and RM12-7-000 - 85 -

the Commission should not adopt a rule that exceeds its jurisdiction or constitutes a 

collateral attack on the local distribution findings of the Seven Factor Test.

Commission Determination

140. The Commission agrees with NERC that the radial systems shown in figure 1 

meet the definition of “radial system” in exclusion E1. This configuration would result in 

the 230 kV lines between transformers 1 and 2 to the two 230 kV lines, respectfully, 

being excluded from the bulk electric system. The Commission agrees with NERC and 

other commenters that both radial systems depicted in figure 1 would be subject to 

exclusion E1 condition (a) because they each only serve load. 

141. Idaho Power, BPA and Anaheim raise concerns about protection system 

equipment and design, needed for analysis by the planning authority and transmission 

operator, while APPA states that all scenarios described by the Commission could create 

reliability concerns. Regarding these concerns, the Commission agrees with APPA that 

the exception process can be used to add to the bulk electric system specific 

configurations that pose a significant risk to the operation of the interconnected 

transmission network.

142. The Commission disagrees with Holland’s interpretation that the phrase ”emanates 

from a single point of connection” can refer to multiple buses. The phrase refers to a 

single point, and if there is more than one point of connection the configuration does not 

meet the radial system definition as stated in exclusion E1. NERC, in the standard 

development process, emphasized that radial systems cannot have multiple connections at 
Docket Nos. RM12-6-000 and RM12-7-000 - 86 -

100 kV or higher. Networks that have multiple connections at 100 kV or higher may 

qualify under exclusion E3.129

143. The Commission also disagrees with Consumers that the exclusion of 100 kV 

radial systems that only serve load expands the Commission’s jurisdiction by classifying 

100 kV distribution systems that primarily serve load, but may also have a secondary 

purpose, as transmission. First, exclusion E1 condition (a) reflects the language 

contained in the current bulk electric system definition and therefore, is itself not an 

expansion from the existing definition. In addition, as NERC stated, application of the 

definition is a three-step process. In step 1, the core definition is used to establish the 

bright line of 100 kV, the overall demarcation point between bulk electric system and 

non-bulk electric system elements. Step 2, applying the specific inclusions, provides 

additional clarification for the purposes of identifying specific elements that are included 

in the bulk electric system. Step 3 is to evaluate specific situations for potential exclusion 

from the bulk electric system. Further, an entity may seek a case-specific exception if it 

believes that facilities with radial qualities that are not excluded pursuant to exclusion E1 

or petition the Commission when seeking a determination whether a facility, otherwise 

included in the bulk electric system, is used in local distribution. Thus, merely applying 

 129 NERC BES Petition, Exhibit E, “Complete Development Record of the 

Proposed Revised Definition of “Bulk Electric System,” Consideration of Comments on 

Initial Ballot - Definition of BES,” at 259.
Docket Nos. RM12-6-000 and RM12-7-000 - 87 -

the definition, and the inclusions or exclusions is not necessarily the end of the inquiry 

regarding whether an element is part of the bulk electric system. 

c. Figure 2 and Condition (a) Radials Serving Only Load

NOPR Proposal

144. In the NOPR, the Commission requested comment on the scenario shown in figure 

2 which shows a 115 kV loop, with the configuration emanating from two points of 

connection of 100 kV or higher. Specifically, the Commission requested comment on 

whether “the 115 kV and 230 kV elements above Transformers 1 and 2 to the points of 

connection to the two 230 kV lines would be excluded from the bulk electric system 

pursuant to exclusion E1.”130 The Commission asked for comment on whether it is more 

appropriate to analyze figure 2 pursuant to the “local network” exclusion E3 and, if so, 

what if any elements operated at or above 100 kV would be excluded pursuant to 

exclusion E3. 

 130 NOPR, 139 FERC ¶ 61,247 at P 80. 
Docket Nos. RM12-6-000 and RM12-7-000 - 88 -

Figure 2

Networked Configuration w/115 kV Loop 

Comments

145. NERC states that figure 2 is a non-radial loop on the 115 kV system. According 

to NERC, the 115 kV elements above transformers 1 and 2 to the point of interconnection 

with lines 1 and 2 would not be eligible for exclusion E1 because they do not emanate 

from a single point of connection. NERC also states that it would be appropriate to 

evaluate figure 2 under exclusion E3 as a potential local network. 131 For such a 

 131 See also Comments of NESCOE, BPA, Idaho Power, ITC Companies, and 

National Grid. 
Docket Nos. RM12-6-000 and RM12-7-000 - 89 -

candidate local network to qualify for exclusion, NERC states that additional technical 

analysis is needed to determine if all the exclusion E3 criteria are satisfied.132 NERC 

asserts that without such a technical analysis, the 115 kV elements above transformers 1 

and 2 should be considered part of the bulk electric system. 

146. Likewise, Idaho Power, ITC Companies, and National Grid contend that the 

figure 2 configuration should be included in the bulk electric system. Southern 

Companies believe exclusion E1 may apply from the breakers down and that the 

configuration may belong to exclusion E3. AEP assumes that each of the facilities below 

the 115 kV loop shown in figure 2, and including breaker 1 and breaker 2, are radial and 

excluded pursuant to exclusion E1. According to AEP, the facilities above breakers 1 

and 2 may be excluded pursuant to exclusion E3 depending on the circumstances.133

147. Valero states that the figure 2 configuration is very similar to common facilities 

configurations employed in many industrial facilities involving the interconnection of the 

industrial facility to the utility through two high voltage feeder lines that originate at 

different utility owned and operated substations. Valero requests that the Commission 

include in the final rule an additional exclusion that would “categorically exclude from 

the [bulk electric system] any on-site high voltage switchyard facilities (less than 300 kV)

owned by the industrial end-user where the predominant function of the facilities is to 

 132 E.g., ISO New England Comments at 10, MISO Comments at 7.

133 AEP Comments at 7.
Docket Nos. RM12-6-000 and RM12-7-000 - 90 -

distribute electricity in an inward direction to the end-user’s load.”134 WPPC argues that 

figure 2 shows both radial and network systems and that the system from the 115 kV loop 

upwards would be assessed under exclusion E3 and below that point would be assessed 

by exclusion E1. 

Commission Determination

148. The Commission affirms NERC’s statement that figure 2 is a non-radial loop and 

thus would not be eligible for exclusion E1 because it does not emanate from a single 

point of connection. The Commission agrees with commenters that the elements below 

the 115 kV loop should be assessed as two separate radial systems pursuant to exclusion 

E1. The remaining elements (the 115 kV loop, transformers 3 and 4 and the 230 kV tie 

lines above the transformers to the two 230 lines 1 and 2) should be assessed pursuant to 

exclusion E3 and if the configuration meets the criteria of exclusion E3, the elements 

could be excluded.

149. Regarding Valero’s request for an additional exclusion if equipment owners’

configurations cannot meet the exclusion E3 criteria, Valero can request that the elements 

be excluded through the exception process. The exception process allows equipment 

owners to request an exception regardless of the owner’s registration status.

 134 Valero Comments at 8. 
Docket Nos. RM12-6-000 and RM12-7-000 - 91 -

d. Figure 3 and Condition (a) Radials Only Serving Load

NOPR Proposal 

150. In the NOPR, the Commission agreed with NERC’s proposal that radial systems 

only serving load and emanating from a single point of connection of 100 kV or higher 

should be excluded from the bulk electric system. However, the Commission expressed 

concern “that the exclusion could allow elements operating at 100 kV or higher in a 

configuration that emanates from two or more points of connection “to be deemed 

“radial” even though the configuration remains contiguous through elements that are 

operated below 100 kV.”135 Figure 3 in the NOPR illustrated this concern, and the 

Commission asked for comment on how to evaluate the configuration relative to the 

radial system definition. The Commission also requested comment on the 

appropriateness of examining elements below 100 kV to determine if the configuration 

meets exclusion E1, i.e., whether figure 3 depicts “a system emanating from two points of 

connection at 230 kV and, therefore, the 230 kV elements above the transformers to the 

points of connection to the two 230 kV lines would not be eligible for the exclusion E1 

notwithstanding the connection below 100 kV.”136

 135 NOPR, 139 FERC ¶ 61,247 at P 81. 

136 Id. 
Docket Nos. RM12-6-000 and RM12-7-000 - 92 -

Figure 3

Networked Configuration w/69 kV Loop 

Comments

151. NERC disagrees with the Commission’s characterization of figure 3 in the NOPR. 

NERC states that figure 3 does not depict a configuration with two points of 100 kV or 

higher or a system emanating from two points of connection at 230 kV. According to 

NERC, except for lines 1 and 2, all the other elements depicted in figure 3 are excluded 

from the bulk electric system. NERC explains that the elements between line 1 and 

transformer 2 and from line 2 to transformer 1 are excluded by exclusion E1(a) because 

“each separate set of [e]lements [described above] is contiguous and emanate from a 
Docket Nos. RM12-6-000 and RM12-7-000 - 93 -

single point of connection of 100 kV or higher.”137 NERC states that the elements below 

the 69 kV side of transformers 1 and 2 are excluded from the definition because they are 

less than 100 kV, and transformers 1 and 2 are excluded because they “bridge voltages of 

69 kV and 230 kV” and therefore do not meet inclusion I1. 

152. NERC further explains that the focus of the definition of bulk electric system is on 

looped or networked connections at or above 100 kV. According to NERC, connections 

operated below 100 kV, generally do not carry significant parallel flow due to the higher 

impedance of lower voltage facilities. If such facilities are necessary for the reliable 

operation of the interconnected transmission network, NERC states that the exception 

process can be used to include such facilities. 

153. Exelon agrees with NERC and explains that it has many connections similar to the 

one shown in figure 3 and provides a specific example where a 138 kV substation is fed 

by two radially connected 138 kV lines which in turn are connected through 40 MVA 

transformers to a 12 kV bus section. Exelon states that in its example the 40 MVA 

transformers cross bus sections so that if one of the 138 kV lines is out of service, each 

side of the 12 kV bus retains service. Exelon believes that due to the high impedance of 

the transformers, little energy flows between the buses in Exelon’s example.138 Exelon 

 137 NERC Comments at 19. 

138 Exelon Comments at 6. TAPS states that impedance is inversely proportional 

to the square of the voltage of the network and power flow is inversely proportional to the 

impedance. According to TAPS, impedance factors are very significant in limiting the 

amount of parallel path flows. TAPS Comments at 7. 
Docket Nos. RM12-6-000 and RM12-7-000 - 94 -

states that owners and operators of these configurations would be required to go through 

the exception process. 

154. Other commenters believe that the figure 3 configuration may not be eligible for 

exclusion E1. SoCal Edison explains that the 69 kV loop is not open and therefore is a 

parallel path to the 230 kV system. BPA, Alameda and WREA do not view the figure 3 

system as eligible for exclusion E1 because the system is networked. Idaho Power states 

that the 230 kV lines would be included only if there is a protection system in place for 

the 230 kV lines. According to Idaho Power, the elements above the transformers in 

figure 3 would not be excluded from the bulk electric system. Idaho Power believes this 

configuration should be evaluated under exclusion E3.

Commission Determination

155. The Commission finds figure 3, which is identical to figure 5, is a networked 

configuration through a 69 kV loop and does not qualify for exclusion E1. The 

Commission also finds that, because the load in figure 3 can be served by either 230 kV 

line, it does not depict a “radial system.” However, the facilities below 100 kV may or 

may not be necessary for the operation of the interconnected transmission network, and 

this decision can be made case-by-case in the exception process. In other words, such 

facilities below 100 kV depicted in figure 3 would be excluded under the general 

threshold of the core definition unless found on a case-specific basis as necessary for the 

reliable operation of the interconnected transmission network. Thus, the Commission, 

while disagreeing with NERC’s interpretation, does not propose to include the below 

100 kV elements in figure 3 in the bulk electric system, unless determined otherwise in 
Docket Nos. RM12-6-000 and RM12-7-000 - 95 -

the exception process. Further, as we discuss below in connection with exclusion E3 and 

figure 5, while we find that the configuration shown in figures 3 and 5 would not be 

eligible for exclusion E1, we believe that such configurations should be eligible for 

exclusion E3 for local networks. However, exclusion E3 as written requires the 

candidate local network to be contiguous and above 100 kV, thus, the exclusion E3 

language as written does not allow for figures 3 and 5 to be eligible for the local network 

exclusion because they are not contiguous and include facilities that are not above 

100 kV. Therefore, we direct NERC to modify exclusion E3 to remove the 100 kV 

minimum operating voltage in the local network definition. This modification will 

enable configurations similar to figures 3 and 5 to be assessed for the local network 

exclusion. The Commission believes this modification, together with satisfying the 

criteria outlined in exclusion E3, will appropriately exclude local network configurations 

that are not necessary to the reliable operation of the interconnected transmission 

network.139 

 139 NERC and Exelon contend that looped or networked connections operating 

below 100 kV generally do not carry significant parallel flow because of higher 

impedance characteristics and thus need not be evaluated as part of a radial system. 

However, the Commission believes that excluding these configurations solely on the 

level of impedance does not consider other factors, including voltage, the system 

configuration, type of conductors, length of conductors, and proximity of the networked 

system in the interconnected transmission network. Regardless of our disagreement with 

NERC and Exelon regarding the consideration of impedance, however, as we discuss 

above, configurations such as those described by Exelon may be assessed for exclusion 

through exclusion E3, which apply criteria to determine whether such facilities are 

necessary for reliable operation of the interconnected transmission network. 

(continued...)
Docket Nos. RM12-6-000 and RM12-7-000 - 96 -

e. Condition (b) – Radials With Limited Generation and 

Condition (c) – Radials With Limited Generation and 

Load

NOPR Proposal

156. Exclusion E1, condition (b) describes generation connected to a radial system with 

no load, and condition (c) describes generation connected to a radial system with 

generation and load. In its petition, NERC stated that conditions (b) and (c) are “intended 

to address the circumstances of small utilities (including municipal utilities and 

cooperatives).”140 

157. In the NOPR, the Commission requested comment regarding the specific 

circumstances that conditions (b) and (c) are intended to address. In addition, the 

Commission observed that the power generated on these radial systems would be 

“delivered or injected to the bulk electric system and transported to other markets.”141 

The Commission noted that it appeared that a line 100 kV or above connected to a 

generator with a capacity 75 MVA or below would not be included in the bulk electric 

system. The Commission requested comment on the appropriateness of excluding such 

radial facilities. 

 

Accordingly, the inclusion or exclusion of such facilities is better determined through 

application of exclusion E3, or case-by-case in the exception process.

140 NERC BES Petition at 19.

141 NOPR, 139 FERC ¶ 61,247 at P 83. 
Docket Nos. RM12-6-000 and RM12-7-000 - 97 -

Comments 

158. With respect to applicability to small utilities, NERC states that exclusion E1, 

conditions (b) and (c) are not intended solely for such entities. According to NERC, 

these conditions are intended to exclude radial systems that have limited benefit to the 

reliability of the interconnected transmission network. NERC states that the 

configurations described in exclusion E1(b) and (c) “pose no reliability risk to the 

interconnected transmission network when the radial system is lost due to a failure or 

fault condition.”142

159. NERC states that the basis for exclusion E1(b) “is dependent on a single point of 

failure causing the radial system to separate” from the bulk electric system, which will 

result in a limited loss of generation without an adverse reliability impact to the 

interconnected transmission network.”143 NERC explains that exclusion E1(c) addresses 

the installation of limited amounts of generation that are installed within a radial system 

and are intended to serve local load within that radial system.

160. In response to the Commission’s question about the delivery or injection of power 

from the radial systems described in these exclusions, NERC states that because of the 

limitation of the generation in exclusion E1(b) and (c), the power generated on the radial 

system would be delivered to the embedded load within the radial system and injected 

 142 NERC Comments at 20. 

143 NERC Comments at 20. 
Docket Nos. RM12-6-000 and RM12-7-000 - 98 -

into the bulk electric system in very limited quantities. NERC argues that subjecting the 

elements associated with this type of radial system to all the Reliability Standards has 

limited benefit to the reliability of the interconnected transmission network. NERC 

believes it is more appropriate to identify these elements through the “the applicability in 

specific standards where a reliability benefit can be identified.”144

161. A number of commenters agree with NERC.145 Idaho Power states that the 

exclusion is appropriate if the generation connected to the radials is not relied on to meet 

reliability performance criteria on bulk electric system elements. Idaho Power indicates 

that it follows the WECC guidelines and thresholds (10 MVA individually, 20 MVA 

aggregate) to determine the appropriateness of excluding the power from components 

from radial connected generation. Alameda contends that the radial systems in these 

exclusions have only a minor impact on the bulk electric system and that system planning 

and operation assessments must provide for reliable operation under N-1 contingency 

operations including loss of the exclusion E1(b) and (c) configurations. WPPC states that 

the generator thresholds in these conditions are a logical cut-off to separate radial systems 

with generation that is not likely to be meaningful to operation of the bulk electric 

system.

 144 NERC Comments at 21-22. 

145 E.g. Idaho Power, National Grid, AEP, Hydro One, ISO New England, and 

BPA. 
Docket Nos. RM12-6-000 and RM12-7-000 - 99 -

162. Anaheim urges the Commission to clarify that the presence of generation 

resources connected at voltages below 100 kV “does not invalidate the availability of the 

radial exclusion for lines that are operated at greater than 100 kV unless the generating 

unit is actually connected to the higher voltage line.”146 PSEG Companies state there is 

confusion regarding the generation limits in exclusion E1(b) and (c) and in exclusion E3. 

They contend that it is not clear if the generation limit only applies to generators 

connected at 100 kV or higher. PSEG Companies also ask for clarification regarding the 

definition of the phrase “non-retail generation.”147

163. AEP does not believe that the three conditions of exclusion E1 would remove the 

generation connected to the radial system from the bulk electric system definition but 

states that the conditions may have the consequence of removing the radial line itself 

from the definition in error. According to AEP, this would be in cases of a 25 MVA 

generator (meeting I2 properties) but less than 75 MVA aggregate. AEP suggests that the 

conditions in (b) and (c) be revised to reference non-bulk electric system generation.148 

Commission Determination

164. We approve exclusion E1 conditions (b) and (c). However, we direct NERC 

to implement exclusion E1 so that the exclusions for radial systems do not apply to 

 146 Anaheim Comments at 7.

147 PSEG Comments at 3.

148 AEP Comments at 5.
Docket Nos. RM12-6-000 and RM12-7-000 - 100 -

tie-lines for bulk electric system generators identified in inclusion I2. If the generator is 

necessary for the operation of the interconnected transmission network, the Commission 

believes that it is generally appropriate to have the radial tie-line operating at or above 

100 kV that delivers the generation to the bulk electric system included as well. 

165. In general, we believe that it is appropriate to have the bulk electric system 

contiguous, without facilities or elements “stranded” or “cut-off” from the remainder of 

the bulk electric system as shown in the figure below. However, the contiguous quality 

of the bulk electric system is lost in exclusion E1, condition (b), because it removes from 

the bulk electric system the 100 kV or greater generator tie-line that connects the bulk 

electric system generator to the interconnected transmission network. Such tie-lines 

should be subject to appropriate Reliability Standards. 

Radial System with BES Generation
Docket Nos. RM12-6-000 and RM12-7-000 - 101 -

166. NERC explains that the exclusion of radial systems pursuant to conditions (b) and 

(c) is based on the premise that a single point of failure causing the radial system to 

separate from the bulk electric system, resulting in the loss of a limited amount of 

generation will not have an adverse reliability impact. However, there are other 

reliability concerns that NERC does not address. For example, both the radial line 

emanating from a generator and the portion of the bulk electric system to which it is 

connected have protective relays that require coordination to prevent the lines from 

tripping. The generator needs to coordinate the protective relays with transmission 

operators, otherwise there may not be adequate information to prevent a fault on the 

radial line from causing cascading outages on the bulk electric system. The Commission 

also notes that the phrase “adverse reliability impact,” which is defined in the NERC 

Glossary of Terms as “the impact of an event that results in frequency-related instability; 

unplanned tripping of load or generation; or uncontrolled separation or cascading outages 

that affects a widespread area of the Interconnection,” is an extreme result that should not 

occur from the loss of a single tie-line for any sized generator.149 A single contingency 

that results in an “adverse reliability impact” violates planning and operating criteria in 

Commission approved Reliability Standards.150 NERC also does not consider issues, 

 149 See the NERC Glossary of Terms at 

http://www.nerc.com/files/Glossary_of_Terms.pdf

150 See, e.g., Reliability Standards, TPL-002-0b and IRO-004-2.
Docket Nos. RM12-6-000 and RM12-7-000 - 102 -

such as the issue raised by Idaho Power, that the exclusion is appropriate if the generation 

connected to the radial system is not relied on to meet reliability performance criteria. 

167. Some commenters suggest there is a conflict between the inclusion I2 and 

exclusion E1 because they believe that the 100 kV or greater tie-line and the generator 

should remain in the bulk electric system. We agree that exclusion E1 as written does not 

prevent the radial tie-line operating at or above 100 kV from the high side of the step-up 

transformer to the bulk electric system from being excluded while the generator and 

associated step-up transformer(s) remain included. Inclusion I2 depends on the status of 

the tie-line based on the core definition’s 100 kV threshold to determine if a generator 

and its step-up transformers are part of the bulk electric system. Thus, this inclusion 

results in most bulk electric system generators having a contiguous connection to the 

interconnected transmission network. As noted above, we believe that it is generally 

appropriate to have the bulk electric system contiguous. Therefore, the Commission 

directs NERC to implement exclusion E1 so that the exclusion for radial systems does not 

apply to tie-lines for bulk electric system generators identified in inclusion I2. This 

directive provides consistent application of the entire definition by not allowing exclusion

E1 to override the qualifying tie-lines pursuant to inclusion I2. 

168. The Commission also rejects NERC’s argument that subjecting the elements 

associated with this type of radial system to all the Reliability Standards has a limited 

benefit to the reliability of the interconnected transmission network. In cases of radial 

tie-lines for bulk electric system generators where the generator owner also owns the 

tie-line, NERC has exercised discretion, on a case-by-case basis, in determining which 
Docket Nos. RM12-6-000 and RM12-7-000 - 103 -

entities require registration as transmission owners/operators and identified sub-sets of 

applicable reliability standard requirements for these entities.151 In other situations, such 

generator tie-lines may appropriately be considered an extension of the generation 

facility, which would not subject significant additional compliance obligations on the 

generator owner and/or operator. 

169. In response to the question raised by PSEG Companies about whether the 

generation limit specified in exclusion E1(b) and (c) only applies to generators connected 

at 100 kV or higher, we note that exclusions E1(b) and (c) do not specify the generation 

connected to the radial system or local network to any voltage. 

f. Normally Open Switches

NOPR Proposal

170. NERC included a note accompanying the description of exclusion E1 stating that 

“[a] normally open switching device between radial systems, as depicted on prints or 

one-line diagrams for example, does not affect this exclusion.” NERC drafted this note 

to address a common network configuration in which two separate sets of facilities that, 

each standing alone, would be recognized as radial systems but are connected by a switch 

that is set to the open position for reliability purposes. In its petition, NERC explained 

that these switches are installed by entities to provide greater reliability to their end-use 

customers. NERC also explained that “a normally open switch” will be identified in 

 151 E.g., New Harquahala Generating Company, LLC, 123 FERC ¶ 61,173, order 

on clarification, 123 FERC ¶ 61,311 (2008).
Docket Nos. RM12-6-000 and RM12-7-000 - 104 -

documents such as prints or one-line diagrams and that “[t]he concept and usage of the 

‘normally open switch’ in such configuration is well understood in the electric utility 

industry.”152

171. In the NOPR, the Commission requested comment on NERC’s characterization 

and whether the phrase “normally open” is subject to interpretation or misunderstanding, 

or whether a “normally open” configuration is potentially difficult to oversee. The 

Commission also requested comment on the need of transmission operators or other 

functional entities to study the system impacts of the closing of a “normally open” 

switch, or to take other steps to ensure awareness of the impacts of the loop that is created 

by the closing of the switch if the closed loop is not included as part of the bulk electric 

system.

Comments 

172. NERC explains that the term “normally opened” is well understood and 

commonly used in industry for a variety of reasons including public and personnel safety. 

NERC also explains that the purpose of recognizing a normally open switch in the 

definition is to preserve the bright-line so that the facilities can be characterized as they 

are planned to be operated which avoids the need to constantly reclassify elements to 

adjust to the changing operating conditions that occur on the system. NERC believes that 

a normally open switch is not difficult to oversee. 

 152 NERC BES Petition at 19.
Docket Nos. RM12-6-000 and RM12-7-000 - 105 -

173. Nearly all commenters that addressed this issue agree with NERC’s positions. 

NRECA highlights NERC’s explanation that the configuration is so common that to write 

the definition to include radial systems connected by a normally open switch, with the 

caveat that entities can request an exception, would result in a flood of exception 

requests. Steel Manufacturers Association points out that such a switch can make a 

secondary connection point available to a large industrial load when needed to improve 

service reliability and continuity. Consumers Energy states that such switches would 

only be closed during emergency conditions and an entity in that instance would follow 

contingency plans and ensure that a proper study is performed on a normally open switch 

that is closed due to the emergency to avoid related equipment failures. TAPS agrees 

with NERC and notes that such switches are marked as normally open on one line 

diagrams. 

174. PSEG Companies state that in effect the switch is irrelevant because if the 

normally open switch is open the systems are radial and therefore excluded and when the 

switch is closed the radial systems are also excluded for the same reasons figure 3 

facilities should be excluded. Alameda submits it documents a normally open switch in 

operational diagrams and SCADA applications and its use is coordinated in advance with 

its transmission operator. Alameda also states that the system impacts of closing a 

normally open switch do not need to be required to be studied since it is the operational 

experience and documentation of such switch that is most important. 

175. G&T Cooperatives state that some operational studies would be useful if there is 

an upcoming operational decision to close the normally open switch that could parallel 
Docket Nos. RM12-6-000 and RM12-7-000 - 106 -

the bulk electric system. However, G&T Cooperatives explain that the study would be 

used to ensure that the system can operate with the switch closed without inadvertently 

tripping one of the source breakers. G&T Cooperatives explain that a normally open 

switch would not need to be modeled into any real-time model or contingency analysis, 

nor would it require the interconnecting radial systems to be incorporated into the bulk 

electric system, where such conditions are managed through quick changes to the 

equivalence bus loads or generation capacities. Similarly, TAPS states that closing a 

normally open switch does not have an impact on the system that needs to be studied 

because it is only close to change a down stream path on a temporary basis and does not 

create a loop. 

Commission Determination

176. Upon consideration of comments, we are persuaded that the concept of a normally 

open switch is well understood, common and not difficult to oversee. We accept NERC’s 

explanation that recognizing a normally open switch in the definition will preserve the 

bright-line so that the facilities can be characterized as they are planned to be operated 

and avoids the need to constantly reclassify elements to adjust to the changing operating 

conditions that occur on the system. 

177. With regard to the Commission’s question concerning the need to study the system 

impacts of the closing of a “normally open” switch, at this time we will not require them 

to be studied. We are persuaded that the operational experience and documentation of 

such switch is most important and, thus, we decline to require additional studies. 
Docket Nos. RM12-6-000 and RM12-7-000 - 107 -

7. Exclusion E2 (Behind the Meter Generation)

NOPR Proposal

178. NERC stated in its petition that the wording of exclusion E2 is extracted from the 

Statement of Compliance Registry Criteria.153 In the NOPR, the Commission stated that 

the exclusion of “[a] generating unit or multiple generating units on the customer’s side 

of the retail meter...” was an appropriate exclusion that provides additional clarity and 

granularity to the definition of bulk electric system.154 While the Commission did not ask 

specific questions about exclusion E2, several commenters expressed support for the 

inclusion, while others stated concerns with the exclusion. 

Comments

179. NERC and EEI agree with the Commission that the exclusion provides additional 

clarity. ELCON notes that such configurations are commonly employed by industrial 

users of electricity, and they do not affect in any significant way the bulk power system. 

On the other hand, ISO New England believes that exclusion E2 should be eliminated 

because it is contrary to the reliability of the bulk electric system. According to 

ISO New England, a 400 MW generator which is behind the meter with a 400 MW load 

could be excluded even though it could have a significant impact on the performance of 

the bulk electric system. ISO New England states that the owner of the generator in this 

example would not need to provide generator stability modeling information nor abide by 

 153 NERC BES Petition at 22.

154 NOPR, 139 FERC ¶ 61,247 at P 88. 
Docket Nos. RM12-6-000 and RM12-7-000 - 108 -

the many normally applicable Reliability Standards. MISO believes that the exclusion 

could encourage entities to move generation capacity behind the meter which could 

adversely impact the bulk electric system. 

180. PSEG Companies state that exclusion E2 could exclude generation included in 

inclusion I2. For example, PSEG Companies contends that, if a single 200 MVA behindthe-meter generator is connected to the bulk electric system at 100 kV or higher, the net 

capacity provided to the bulk electric system does not exceed 75 MVA and the generator 

has standby, backup, and maintenance services, under exclusion E2 the generator would 

be excluded from the bulk electric system, but it would be included pursuant to 

inclusion I2.155 

181. Other commenters, such as Barrick and the IUU, believe additional clarification is 

needed for the terms “retail meter” and “net capacity.” Specifically, they question what 

the capacity is “net” of or whether it means the sum of flows at all points of connection to 

the bulk electric system. They also question whether “net” means the capacity of a 

generator that is made available for use by someone other than an owner of the generator 

or capacity less parasitic load only. 

182. Barrick and IUU believe there is more than one use for the term “retail meter,” and 

it is not clear whether all situations are covered by the use in the proposed exclusion E2. 

Barrick proposes that the term “retail meter” should include an end-user’s meter at an 

 155 PSEG Comments at 14.
Docket Nos. RM12-6-000 and RM12-7-000 - 109 -

end-user’s generator when that meter is used to measure the end-user’s generation for 

consumption.

Commission Determination

183. We find that exclusion E2 provides additional clarity to the definition of bulk 

electric system, and we disagree that exclusion E2 is contrary to the reliability of the bulk 

electric system. We agree with ELCON that such configurations are commonly 

employed by industrial users of electricity. Indeed, this exclusion is similar to the 

exclusion for such facilities in NERC’s Registry Criteria.156 With regard to 

ISO New England’s and PSEG Companies specific examples, to the extent such scenario 

exists, they may be eligible for inclusion or exclusion through use of the exception 

process. 

184. We decline to define the additional terms cited by commenters, such as Barrick 

and the IUU, who believe additional clarification is needed for the terms “retail meter” 

and “net capacity.” These terms are in common use in the electric power industry. 

Therefore, we do not see a need to adopt a formal definition. 

8. Exclusion E3 (Local Networks)

NOPR Proposal

185. NERC’s proposed exclusion E3 defines the term “local networks” as:

A group of contiguous transmission Elements operated at or 

above 100 kV but less than 300 kV that distribute power to 

 156 NERC Statement of Compliance Registry Criteria, section III.c.4. 
Docket Nos. RM12-6-000 and RM12-7-000 - 110 -

Load rather than transfer bulk-power across the 

interconnected system. LN’s emanate from multiple points of 

connection at 100 kV or higher to improve the level of service 

to retail customer Load and not to accommodate bulk-power 

transfer across the interconnected system.

Exclusion E3 also identifies three criteria that must be satisfied for the exclusion to apply: 

(a) limit on connected generation to 75 MVA aggregate capacity of non-retail generation 

(gross nameplate rating); (b) power flows only into the local network and does not 

transfer through the local network; and (c) the local network is not part of a flowgate or 

transfer path.

186. In the NOPR, the Commission requested comment on: (1) whether generation 

resources are excluded by this exclusion; (2) how the exclusion applies to a looped lower 

voltage system; (3) whether the 300 kV ceiling is appropriate for the application of the 

exclusion; and (4) whether the prohibition for generation produced inside a local network 

is not transporting power to other markets outside the local network applies in both 

normal and emergency operating conditions.157 The Commission also sought further 

explanation regarding the design and technical justification of a local network. These 

issues are discussed in detail in the following sections.

 157 NOPR, 139 FERC ¶ 61,247 at P 89. 
Docket Nos. RM12-6-000 and RM12-7-000 - 111 -

a. Local Network Design and Technical Justification

NOPR Proposal

187. In the NOPR, the Commission requested explanation and comment on the 

statement in NERC’s petition that “neither will the local network’s separation or

retirement diminish the reliability of the interconnected electric transmission network.”158 

In its petition, NERC stated that the design and operation of local networks is such that at 

the point of connection with the interconnected transmission network is similar to that of 

a radial facility, in particular that power always flows in the direction from the 

interconnected transmission network into the local network.159 Further, according to 

NERC, “[l]ocal networks provide local electrical distribution service and are not planned, 

designed or operated to benefit or support the balance of the interconnected transmission 

network.”160

188. In the NOPR, the Commission observed that, while a radial facility emanates from 

one point of connection to the interconnected transmission network, a local network by 

definition has multiple points of connection to the interconnected transmission network. 

Thus, regarding a local network, a contingency situation may arise where one of the 

multiple connections to the interconnected transmission network separates, while other 

local network connections maintain connectivity with the bulk electric system. 

 158 NERC BES Petition, Exhibit G at 2. (Local Network Technical Justification).

159 NERC BES Petition at 22.

160 Id. 
Docket Nos. RM12-6-000 and RM12-7-000 - 112 -

Accordingly, the Commission requested comments to better understand how an entity 

with a candidate local network would analyze such contingencies to determine potential 

impacts to the reliable operation of the interconnected transmission network.

Comments

189. EEI, MISO and other commenters generally support exclusion E3.161 With respect 

to the issue raised by the Commission regarding how an entity’s local network separation 

will not diminish the reliability of the interconnected transmission network, NERC 

explains that the reliability of the interconnected transmission network is not impacted by 

the existence or absence of the local network. NERC maintains that excludable facilities 

under exclusion E3 will naturally satisfy this principle because the exclusion E3 

conditions were crafted in such a way to ensure reliability is not adversely impacted by 

the disconnection of the local network. While specific analyses are not necessary to 

support exclusion of facilities under exclusion E3, NERC states that transmission 

operators or other functional entities need to be aware of the change of status of all 

devices on the system and the impact to the system from device changes. According to 

NERC, exclusion of a local network does not obviate the transmission operator or other 

functional entity from the responsibility to assess the system impact on any bulk electric 

 161 E.g., NRECA, ELCON, BPA, and G&T Cooperatives.
Docket Nos. RM12-6-000 and RM12-7-000 - 113 -

system facility due to the separation of one local network connection while the remainder 

of the local network remains connected with the bulk electric system.162 

190. TAPS agrees with NERC stating “sophisticated engineering analysis should not be 

needed to determine the applicability of [i]nclusions and [e]xclusions.”163 Likewise, 

WREA agrees with NERC’s assertion that the entity with a local network does not need 

to analyze local network contingencies since this analysis is already made by the 

transmission planner and transmission operator responsible for the bulk electric system 

facilities feeding the local network. Regarding the transmission planner responsibilities, 

WREA states the NERC Reliability Standard TPL-002 requires the transmission planner 

to study N-1 contingencies and prepare plans for reliable operation. WREA further 

explains that the transmission operator is required to plan to meet unscheduled changes in 

system configuration pursuant to Reliability Standard TOP-002, R6 and “if there are 

non-[bulk electric system] facilities that are significant, that have not been properly 

represented in a [transmission operator’s] models, [then] when the [transmission 

operator] performs its required model accuracy validation (TOP-002, R19), the 

[transmission operator] would observe a modeling inconsistency and would be able to 

take steps to correct the modeling error.”164 

 162 NERC Comments at 26.

163 TAPS Comments at 9.

164 WREA Comments at 8-9.
Docket Nos. RM12-6-000 and RM12-7-000 - 114 -

191. AEP advocates for a baseline or cut-off point, which would be determined by the 

size (in MW) of the local network. Idaho Power believes that the statement means that 

total separation or loss of the local network elements does not cause a reliability 

performance impact on the remaining bulk electric system elements. Idaho Power 

explains that it would analyze such contingencies by evaluating overload levels and 

voltage performance impacts on the remaining bulk electric system elements as well as 

overload levels and voltage performance on the remaining local network elements.

192. Southern Companies state that such a contingency would be incorporated into 

planning studies regardless of whether the local network was part of the bulk electric 

system.165 BPA believes that before a candidate local network is excluded, it must be 

evaluated by the impacted balancing authority, transmission operator and planning 

authority to ensure the integrity of the bulk grid is not compromised.166

Commission Determination

193. The Commission approves exclusion E3. The Commission accepts NERC’s 

explanation about the statement that “neither will the local network’s separation or 

retirement diminish the reliability of the interconnected transmission network.” The 

Commission also accepts NERC’s comments relating to how an entity with a candidate 

local network would analyze such contingencies to determine potential impacts to the 

 165 Southern Companies Comments at 13.

166 BPA Comments at 7-8.
Docket Nos. RM12-6-000 and RM12-7-000 - 115 -

reliable operation of the interconnected transmission network. In particular, the 

Commission agrees that the exclusion of a local network does not obviate the 

transmission operator or other functional entity from the responsibility to assess the 

system impact of separating one local network connection while the remainder of the 

local network remains connected with the bulk electric system. We will not direct NERC 

to modify the provision as suggested by AEP and BPA. Rather, as NERC indicates, AEP 

and BPA may raise these suggestions with NERC in the Phase 2 development effort.

b. Figure 5, Contiguous Transmission Elements and the 100 

kV Lower Limit

194. Exclusion E3 defines local networks as “[a] group of contiguous transmission 

Elements operated at or above 100 kV but less than 300 kV that distribute power to Load 

rather than transfer bulk-power across the interconnected system.” While the local 

network exclusion applies to contiguous transmission elements operating at a minimum 

of 100 kV, the Commission stated in the NOPR that it is unclear how the exclusion 

applies to a looped lower voltage system. The Commission provided an example of its 

concern depicted in figure 5 in the NOPR which shows a 69 kV looped system emanating 

from two points of connection at 100 kV or higher. 
Docket Nos. RM12-6-000 and RM12-7-000 - 116 -

Figure 5

Networked Configuration w/69 kV Loop

195. In the NOPR, the Commission stated that figure 5 depicts a group of elements that 

are contiguous through a 69 kV loop and requested comment whether the configuration 

in figure 5 qualifies as a local network and, in particular, whether the configuration 

satisfies the conditions that a local network be contiguous and operated at or above 

100 kV. 

Comments

196. NERC views figure 5 the same as figure 3 - as a looped system below 100 kV -

that is not considered under this exclusion because the elements below 100 kV are 
Docket Nos. RM12-6-000 and RM12-7-000 - 117 -

presumed to be not part of the bulk electric system.167 NERC maintains that, if it is 

determined that the sub-100 kV looped system is necessary for the reliable operation of 

the interconnected transmission network, the exception process may be utilized to include 

the appropriate elements. NERC states that figure 5 depicts two separate and distinct 

groups of elements that each emanate from a single point of interconnection at 230 kV 

and only serve load. Accordingly, NERC states that 230 kV lines 1 and 2 are included in 

the bulk electric system with the only other included elements being the lines extending 

from lines 1 and 2. However, according to NERC, the elements between 230 kV line 1 

and transformer 2 and between 230 kV line 2 and transformer 1 are each subject to 

exclusion E1(a) because each separate set of elements is contiguous and emanate from a 

single point of connection of 100 kV or higher. NERC asserts that the elements below 

the 69 kV side of transformers 1 and 2 are excluded because they are less than 100 kV. 

NERC explains that transformers 1 and 2 are excluded because they bridge voltages of 

69 kV and 230 kV and therefore, inclusion I1 is not applicable because a transformer 

must have two terminals over 100 kV to qualify for inclusion I1. According to NERC, 

the definition should focus on looped or networked connections at 100 kV or greater 

because such connections, when operated below 100 kV, generally do not carry 

 167 Figure 5 and figure 3 set forth in the NOPR are identical configurations.
Docket Nos. RM12-6-000 and RM12-7-000 - 118 -

significant parallel flow because of the higher impedance associated with lower voltage 

facilities.168 

197. Exelon states that the clear intent of the definition is that configurations such as 

shown in figure 5 are radial systems subject to exclusion E1 (radial systems). According 

to Exelon, had this not been the intent of exclusion E1, exclusion E3 would have allowed 

for a local network where the tie was below 100 kV to avoid a reliability gap. Exelon 

believes that the configuration shown in figure 5, which is identical to figure 3, does not 

qualify as a local network within the terms of exclusion E3 and supports NERC’s view 

that figure 5 represents two radial systems that qualify under exclusion E1. Exelon 

cautions that, if the Commission determines that the systems depicted in figure 5 do not 

qualify under exclusion E1 because of the low voltage tie and does not qualify under 

exclusion E3 because the tie is at low voltage and not a 100 kV or above, such a decision 

would leave a gap under which a substantial number of facilities that are not part of the 

bulk electric system would be classified as such. Exelon states that it would have to go 

through the separate exception process for dozens of substations, at great cost and for no 

useful purpose. Exelon states that the Commission should clarify that the configuration 

shown in figures 3 and 5 qualifies as a radial system and is excluded pursuant to 

exclusion E1.

 168 NERC Comments at 27-28.
Docket Nos. RM12-6-000 and RM12-7-000 - 119 -

198. Other commenters disagree with NERC’s position. Idaho Power believes the 

network configuration with a 69 kV loop belongs to a local network category pursuant to 

exclusion E3 and that these types of networks should be studied to identify if there is any 

resulting voltage, overload, or stability violation that could propagate and impact the 

reliability of the system. Idaho Power believes that the 69 kV loop can tie the 230 kV 

systems together; therefore, outages in the 230 kV system could cause loop flow in the 

69 kV system. According to Idaho Power, planning studies would have to be performed 

to determine the amount of loop flow and whether the loop flow could lead to outages on 

the 69 kV system, resulting in further impact to the bulk electric system.169 WREA also 

notes figure 5 is the same as figure 3 and states that the 230 kV elements described in the 

figure would not qualify for the radial system exclusion E1 because the 230 kV elements 

are networked via facilities less than 100 kV. WREA concludes the elements above 

100 kV in the figure might qualify for the local network exclusion and the below 100 kV 

facilities in this configuration are non-bulk electric system on the basis of the core 

definition unless the facilities are included via the exception process.170 AEP believes 

that figure 5 could be considered for exclusion E3, provided that it is understood that at 

some point on the local network, the network could be of the size that would have a 

 169 Idaho Power Comments at 11.

170 WREA Comments at 9.
Docket Nos. RM12-6-000 and RM12-7-000 - 120 -

potential impact on the bulk electric system and would still need to meet the parameters 

of exclusion E3.171

Commission Determination

199. As discussed above, the Commission is directing a modification to exclusion E3 to 

better capture local networks like those depicted in figure 5. The Commission notes that 

Exelon believes that the configuration shown in figure 5, which is identical to figure 3, 

does not qualify as a local network within the terms of exclusion E3. While figures 3 and 

5 are a networked configuration through a 69 kV loop, they do not qualify for the local 

network exclusion because exclusion E3 defines local networks as “[a] group of 

contiguous transmission Elements operated at or above 100 kV but less than 300 kV that 

distribute power to Load rather than transfer bulk-power across the interconnected 

system.” The configuration in figure 5 includes elements that are below 100 kV, and 

does not have contiguous elements operating at or above 100 kV but less than 300 kV. 

As noted above, while the Commission finds that these configurations should not be 

eligible for exclusion E1, we believe that they should be eligible for the local network 

exclusion. Therefore, we direct NERC to modify exclusion E3 to remove the 100 kV 

minimum operating voltage in the local network definition. Within 30 days of the 

effective date of this Final Rule, we direct NERC to submit a schedule outlining how and 

when it will make the modification to the definition. 

 171 AEP Comments at 10.
Docket Nos. RM12-6-000 and RM12-7-000 - 121 -

c. 300 kV Cap

NOPR Proposal

200. NERC explained the selection of a 300 kV cap for the applicability of an 

exclusion for a local network was based upon recent NERC standards development work 

in Project 2006-02 “Assess Transmission Future Needs and Develop Transmission Plans” 

which sets a voltage level of 300 kV to differentiate extra high voltage (EHV) facilities 

from high voltage facilities acting as a threshold to distinguish between expected system 

performance criteria.172 In the NOPR, the Commission noted that NERC provided an 

example of the electrical interaction between a typical local network and the bulk electric 

system which depicted a local network operating at 115 kV. However, the Commission 

observed that NERC did not provide examples of a local network operating within the 

200 to 300 kV range. The Commission expressed concern whether the 300 kV ceiling is 

appropriate and reflects actual system configurations that serve local distribution, the 

stated purpose of the local network exclusion. Thus, the Commission requested comment 

whether the 300 kV ceiling is appropriate for the application of exclusion E3 and 

requested examples of systems between 200 and 300 kV that would qualify for this 

exclusion.

 172 NERC BES Petition at 23.
Docket Nos. RM12-6-000 and RM12-7-000 - 122 -

Comments

201. NERC asserts that the 300 kV cap is appropriate. NERC reiterates that the voltage 

cap is consistent with the distinction being made between extra high voltage and high 

voltage in the Reliability Standard TPL-001-2. NERC adds that the important attributes 

of a local network are the limit on capacity of connected non-retail generation, 

prohibition of power flow out of, or through, the local network, and prohibition of local 

networks containing flowgates or major transfer paths. NERC maintains that these 

attributes, rather than the operating voltage of the local network facilities, assure that 

local networks do not impact reliability of the interconnected transmission network.

202. Most commenters agree that the 300 kV threshold is appropriate.173 With respect 

to the Commission’s request for examples of systems between 200 and 300 kV that 

would qualify for this exclusion, ICNU states that, one of its members operates a large 

industrial facility that takes service from the bulk electric system from two transformers, 

both of which operate at 230 kV on the high side, but step down to 13.5 kV for 

distribution within the complex. According to ICNU, this industrial plant serves no 

reliability function and serves only the retail load, but if the ceiling for exclusion E3 were 

lowered to 200 kV, this network potentially would not be excluded because it contains 

some elements operating between 200-300 kV. ICNU believes that the function of a 

local network, rather than its voltage, is the critical factor in excluding it from the bulk 

 173 E.g. National Grid, AEP, ICNU, and WPPC. 
Docket Nos. RM12-6-000 and RM12-7-000 - 123 -

electric system and therefore, recommends a local network exclusion based on function, 

not voltage. Nonetheless, to the extent a ceiling is deemed necessary, ICNU states that 

the 300 kV threshold is appropriate. 

203. WPPC supports the 300 kV ceiling and WPPC states that the ceiling reflect 

industry’s extensive use of 115-230 kV system to provide distribution service through a 

local network. WPPC points out that in low density areas it is more economical to serve 

load using one 230 kV network rather than four 69 kV networks. WPPC adds that many 

55 and 69 kV networks that serve towns and cities have been upgraded to 115 or 230 kV 

for economic, technical and environmental reasons, but raising the voltage does not 

change their function. 

204. In contrast, BPA, Hydro One, and WREA express concern regarding the 300 kV 

cap. BPA states that the 300 kV ceiling may not “reflect[] actual system configurations 

that serve local distribution, the stated purpose of the local network exclusion.”174 BPA 

believes that exclusion E3 should not apply to any facility above 200 kV, without 

appropriate review, analysis, and concurrence, from the impacted transmission operator, 

planning authority, and reliability coordinator. BPA states that fault magnitudes on 

systems between 200 kV and 300 kV are much higher than fault magnitudes on systems 

operated below 200 kV. According to BPA, these systems have a much higher potential 

for serious impacts than networks operating below 200 kV if something fails to operate 

 174 BPA Comments at 8. 
Docket Nos. RM12-6-000 and RM12-7-000 - 124 -

properly, including cascading outages, transient instability, and post transient voltage 

instability.

205. Hydro One believes that the 300 kV cap associated with the applicability of 

exclusion E3 is not justifiable on technical grounds, and submits that certain systems with 

greater than 300 kV should be able to qualify for exclusion E3 based on their own merits. 

Hydro One states that a radial or a local network below 300 kV can have as much or 

more impact on the reliability of the interconnected transmission network than a local 

network operating at 300 kV or above depending upon its location and configuration. 

WREA also disagrees with the 300 kV ceiling and recommends that the Commission 

delete this limitation entirely. 

Commission Determination

206. The Commission approves the 300 kV voltage threshold for local networks for the

initial implementation of the definition. While we approve the 300 kV threshold, the 

limited number of examples provided for 200-300 kV systems cause us to seek additional 

information. Thus, following implementation when actual exclusion data is available, the 

Commission directs NERC to submit a compliance filing within one year of the 

implementation date identifying in sufficient detail the types of local network 

configurations that have been excluded from the bulk electric system under this 

exclusion. This will assist us in better understanding the type and magnitude of systems 

that fall into above 200 kV category.
Docket Nos. RM12-6-000 and RM12-7-000 - 125 -

d. Criterion (a) – Limits on Connected Generation 

NOPR Proposal

207. Exclusion E3 criterion (a) provides that the local network and its underlying 

elements do not include the blackstart resources identified in inclusion I3 and do not have 

an aggregate capacity of non-retail generation greater than 75 MVA gross nameplate 

rating. In addition, criterion (a) does not limit the amount of generation besides “nonretail generation” connected to the local network. The Commission stated in the NOPR 

that it agrees with NERC that “local networks” do not include blackstart resources and 

agrees with the limits on the connected generation imposed by this exclusion. The 

Commission also stated that similar to the discussion of the definition of “radial systems” 

in exclusion E1, the exclusion E3 local network exclusion applies to “transmission 

Elements,” but does not exclude generation resources connected to a local network that 

otherwise satisfy inclusion I2. 

Comments 

208. NERC concurs with the Commission’s statement that “local networks” do not 

include blackstart resources and agrees with the limits on the connected generation 

imposed by this exclusion. NERC, EEI, Alameda, Hydro One, and WREA state that, 

whether or not generation is included in the bulk electric system is determined by 

inclusions I2 through I4 and exclusion E2. In addition, NERC confirms that exclusion E3 

does not exclude generation resources. 

209. In contrast, some commenters are concerned about allowing generators identified 

in inclusion I2 to be connected to local networks. Idaho Power states that it is not 
Docket Nos. RM12-6-000 and RM12-7-000 - 126 -

appropriate to exclude a local network if it contains generation that would normally be 

included in the bulk electric system through inclusion I2.175 PSEG Companies states that 

“there is confusion created by the fact that generators included in the [bulk electric 

system] definition per [inclusion] I2 are at the same time excluded under [exclusions] E2 

and E3.”176 According to PSEG Companies, a generator cannot be included under one 

provision of the bulk electric system definition and excluded under another provision and 

that this issue requires clarification and, once clarified, the bulk electric system definition 

needs to be modified accordingly.

210. Some commenters seek clarification of exclusion E3 criterion (a) regarding the 

term “non-retail.”177 Barrick and the IUU raise several questions about exclusion E3. 

First, they claim that the phrase “not . . . non-retail generation” is unclear and question 

whether it means generation used for retail. They also question whether exclusion E3 

excludes generation resources for an owner’s own use or generation used for wholesale. 

They also ask how the term “non-retail” relates to “net capacity.”

211. While Holland supports the exclusion of local networks from the bulk electric 

system, Holland argues that criteria (a) and (b) should be eliminated because they limit 

the amount of connected generation, even where the connected generation is distributed 

 175 Idaho Power Comments at 10.

176 PSEG Comments at 11.

177 E.g., Barrick, IUU, and PSEG.
Docket Nos. RM12-6-000 and RM12-7-000 - 127 -

locally. Holland states that exclusion E3(a) improperly maintains the aggregate 75 MVA 

limit for connected generation. Holland believes this limit is inconsistent with the 

concept of a local network and should be removed. Holland explains that if the local 

network does not accommodate bulk power transfer across the interconnected system, 

then the amount of generation that exists and is distributed within that system, regardless 

of size, is distributed and consumed locally, and is therefore beyond the scope of FPA 

Section 215. Holland maintains that, if the Commission does not remove exclusion E3(a) 

in its entirety, it should require the limitation to be based on the net of the local network’s 

total load, rather than the gross nameplate rating.

212. NESCOE contends that three conditions in exclusion E3 would unnecessarily 

include some New England networks in the bulk electric system without any clear 

reliability benefit. In particular, NESCOE states that the limits on connected generation 

should be raised to 300 MVA instead of 75 MVA, stating that the northeast portion of the 

eastern interconnection defines a 1200 MVA loss of source as the largest contingency to 

which the control area is designed to operate. Therefore, NESCOE believes that 25 

percent of that contingency at 300 MVA falls well within typical loss of source 

expectations for the northeast. Alameda suggests that the Commission raise the 

connected generation limitation for local network exclusions to 150 MVA. According to 

Alameda, since the local network is comparable to two radials, limiting a local network to 

75 MVA could result in entities choosing to operate two less reliable radial systems, each 

with 75 MVA of generation, rather than one local network with 150 MVA of generation 

to avoid a designation as bulk electric system for their local network. 
Docket Nos. RM12-6-000 and RM12-7-000 - 128 -

Commission Determination

213. We find that the local network exclusion only applies to “transmission Elements” 

and does not allow the exclusion of generation resources otherwise included in the bulk 

electric system pursuant to inclusion I2, as discussed above in our determination 

regarding exclusion E1.

214. Further, as discussed above regarding exclusion E1, the Commission agrees with 

Idaho Power, PSEG Companies, SmartSenseCom, and AEP that tie-lines for generators 

identified in the inclusion I2 should not qualify for exclusion as radial systems or local 

networks. Rather the tie-lines can be considered for exclusion under NERC’s exception 

process. Accordingly, consistent with the Commission’s directive discussed above 

regarding exclusion E1, the Commission directs NERC to implement exclusion E3 so 

that the exclusion for local networks does not apply to bulk electric system generator 

tie-lines operated at or above 100 kV as shown in the figure below. 
Docket Nos. RM12-6-000 and RM12-7-000 - 129 -

115 kV Loop with BES Generation

215. In response to Barrick’s and IUU’s requests for clarification, we decline to clarify 

the terms/phrases “non-retail,” “gross plant/facility,” “not necessary,” “aggregate,” “net 

capacity,” and “retail meter.” We believe the terms/phrases are sufficiently clear. 

However, Barrick and IUU may pursue further clarification from NERC in an appropriate 

forum such as NERC’s Phase 2 project. 

216. With regard to the comments of Holland, NESCOE and Alameda, we will not 

direct any change in the connected generation limitation for the local network exclusion. 

The limit on connected generation within the local network is consistent with the existing 

threshold above which a generating plant in aggregate becomes subject to registration 

under the NERC Registry Criteria. Entities may avail themselves of the exception 
Docket Nos. RM12-6-000 and RM12-7-000 - 130 -

process to exclude a local network that otherwise does not qualify pursuant to 

exclusion E3.

e. Criterion (b) – Power Flows only into the Local Network

NOPR Proposal

217. Exclusion E3 criterion (b) specifies that, to qualify for the exclusion, power can 

only flow into the local network and the local network does not transfer energy 

originating outside the local network for delivery through the local network. The 

Commission noted in the NOPR that, pursuant to criterion (b), generation produced 

inside a local network is not transporting power to other markets outside the local 

network. The Commission stated in the NOPR that it understands that criterion (b) 

applies in both normal and emergency operating conditions.178 

Comments

218. NERC confirms, and TAPS, Idaho Power and others concur with the 

Commission’s understanding that, pursuant to criterion (b), generation produced inside a 

local network is not transporting power to other markets outside the local network. 

NERC and other commenters also agree that criterion (b) applies in both normal and 

emergency operating conditions. 

 178 See NOPR, 139 FERC ¶ 61,247 at P 98 (citing NERC BES Petition, Exh. E at 

59 (“The Commission directed NERC to revise its BES definition to ensure that the 

definition encompasses all Facilities necessary for operating an interconnected electric 

Transmission network. The SDT interprets this to include operation under both normal 

and Emergency conditions....”)).
Docket Nos. RM12-6-000 and RM12-7-000 - 131 -

219. NERC states that prohibitions on outbound power flow and transportation of 

power to other markets beyond the local network apply in all conditions, both normal and 

contingent, and will eliminate the exclusion of facilities which may contribute power 

flow into the bulk electric system under contingent or unusual circumstances. According 

to NERC, basing the determination solely on normal conditions could lead to inconsistent 

application of this exclusion and would introduce subjectivity into the application of the 

definition. 

220. Duke Energy agrees with NERC’s comment that prohibitions on outbound power 

flow beyond the local network apply in “both normal and contingent conditions,” but 

believes that “contingent” should be further clarified as limited to N-1 contingencies for 

the bright line definition. Idaho Power also agrees, and comments that additional 

clarification is needed to define whether the meaning of “emergency conditions” includes 

contingencies within the local network itself. In contrast, Southern Companies states that 

criterion (b) would apply in normal but not emergency operating conditions. MISO 

cautions against precluding local networks from sending electricity to the transmission 

system in emergency conditions when doing so could improve the availability of 

electricity.

221. Portland notes that the application of criterion (b) in both normal and emergency 

operating conditions is similar to one element of the Seven Factor Test that states that 

power rarely if ever flows out. Portland suggests that the Commission should clarify the 

relationship between the Seven Factor Test and the local distribution exception in the 

reliability regulatory context. 
Docket Nos. RM12-6-000 and RM12-7-000 - 132 -

222. Alameda believes that the power flow prohibition should apply only where the 

flow from the local network is necessary for the reliable operation of the interconnected 

transmission network. Alameda contends that these conditions would typically apply 

during peak or near-peak operating conditions and that it would be inappropriate to 

include a local network in the bulk electric system because generation flowed outside the 

local network only under off peak conditions when these flows were not vital to 

reliability. Alameda suggests that the power flow prohibition be modified to allow flows 

of less than 75 MVA to flow outside the network, making the local networks electrically 

comparable to radial systems with a 75 MVA generator. 

223. ISO New England believes the NOPR suggests an implicit expectation regarding 

the determination of local networks in that there is no stated requirement for contingency 

analyses in that determination. ISO New England believes that the Commission 

understanding of criterion (b) implies that criterion (b) needs to be analyzed both pre- and 

post-contingency. In such a case, this issue needs to be defined in the exclusion. 

Additionally, ISO New England requests clarification whether this indicates that one 

must apply a first contingency to the analysis or a second contingency in determining if 

the criterion is met. 

224. Dow asserts that the requirement that power may only flow into a local network 

should be clarified to apply only to power that originates outside of, and flows through, a 

local network. Dow believes that it should not apply to power generated by non-retail 

generation resources meeting applicable size or export quantity thresholds that are 

connected to local networks. Dow maintains such a clarification is consistent with other 
Docket Nos. RM12-6-000 and RM12-7-000 - 133 -

language in the exclusion specifying that up to 75 MVA of non-retail generation may be 

attached to a local network. Dow views the reference to non-retail generation as intended 

to apply to generation resources that are used to make wholesale sales which requires that 

power be able to flow into the bulk electric system for delivery to downstream buyers. 

Dow also states that exclusion E3 should be clarified to address situations in which a 

local network does not qualify for the local network exclusion because it is not clear 

“whether all facilities rated 100 kV and above that are part of the local network would be 

considered part of the [bulk electric system] and become subject to transmission-related 

reliability standards....”179 

225. Valero contends that criterion (b) indicates that the existence of a power flow that 

“transfers through the local network” would disqualify an element from satisfying the 

exclusion. On the other hand, Valero points to the excerpt from the NERC BES Petition 

which implies that this meaning of criterion (b) might not be the appropriate 

interpretation.180 Valero requests that the Commission either clarify as stated above or 

modify criterion (b) to allow for transfers through the local network if such transfers are 

not necessary for the reliability of the interconnected transmission network. 

 179 Dow Comments at 6. 

180 The NERC statement is quoted in the NOPR at P 81: “[l]ocal networks provide 

local electrical distribution service and are not planned, designed or operated to benefit or 

support the balance of the interconnected transmission network.” 
Docket Nos. RM12-6-000 and RM12-7-000 - 134 -

226. NESCOE and G&T Cooperatives state that minimal transfers may and do occur, 

and local networks should not necessarily be ineligible for exclusion E3 simply because 

some amount of power may transfer out of the network. NESCOE states that the 

Commission should direct NERC to reevaluate exclusion E3 to allow these minimal 

flows up to a 100 MVA limit.181 G&T Cooperatives state that even with optimal load 

projections, there may be times when energy flows into the local network that exceed the 

load, and in those cases the local network may need to export the excess energy back to 

the bulk electric system which could create perverse incentives to restrict flows into and 

out of the local network. G&T Cooperatives suggest that criterion (b) should be read to 

allow exclusion E3 to cover local networks in which “normally” power flows into the 

local network and the local network does not transfer energy originating outside the local 

network for delivery through the local network. 

227. Holland states that the exclusion E3(b) criterion is unnecessary and should be 

removed. Holland states that exclusion E3(b) appears to be concerned with flows 

originating from outside of the local network, coming into the local network, and then 

exiting the local network to loads outside of the local network. According to Holland, 

however, exclusion E3(c) appears to address this concern because it fails to recognize 

that a local network may have internal generation that is less than its peak load but in 

excess of off-peak load levels. Holland states that, if exclusion E3(b) is maintained, then 

 181 NESCOE states that this represents 25 percent of the rated value of a typical 

345/115 kV substation. 
Docket Nos. RM12-6-000 and RM12-7-000 - 135 -

the clause, “[p]ower flows only into the [local network],” should be deleted because it is 

inconsistent with the second clause, “the [local network] does not transfer energy 

originating outside the [local network] for delivery through the [local network].” 

Commission Determination 

228. The Commission finds that: (1) pursuant to exclusion E3 criterion (b), generation 

produced inside a local network should not transport power to other markets outside the 

local network; and (2) exclusion E3 criterion (b) applies in both normal and emergency 

operating conditions. The Commission agrees with NERC’s statements that basing the 

determination solely on normal or optimal conditions could lead to inconsistent 

application of this exclusion and hence the definition itself, and would also introduce a 

degree of subjectivity in the application of the definition that is not in the interest of 

reliability.

229. MISO and other commenters suggest that local networks should be allowed to 

deliver power to the bulk electric system in some circumstances.182 The Commission

agrees that the facilities should supply such power if needed, but disagrees that facilities 

expected to be needed in this way should nonetheless be excluded from the bulk electric 

system. If a local network is expected to be needed to operate the interconnected 

transmission network, i.e., to meet reliability performance criteria in transmission 

planning assessments, it should not be excluded from the bulk electric system under 

 182 E.g. Southern Companies, Alameda, Dow, Valero, NESCOE, Holland and 

G&T Cooperatives.
Docket Nos. RM12-6-000 and RM12-7-000 - 136 -

exclusion E3. The Commission also rejects Holland’s suggestion to remove criterion (b) 

because NERC has presented an acceptable technical justification for this and the other 

criteria in exclusion E3.183 In response to Alameda’s comment that some power should 

be permitted to flow out of a local network during off-peak hours, the Commission 

disagrees that the bright-line definition should be modified for case-specific 

circumstances. Entities can seek to exclude configurations that do not meet the exclusion 

E3 criteria through the exception process on a case-by-case basis. The Commission 

agrees with Portland that criterion (b) is similar to one element of the Seven Factor Test 

but otherwise addresses what constitutes local distribution above. 

230. In response to Idaho Power and ISO New England asking for how emergency 

conditions are defined to determine if a candidate configuration meets exclusion E3 

criterion (b), the Commission believes that the best way to show that a local network 

meets criterion (b) is through historical power flow data. 

231. We will not direct NERC to allow minimal flows up to a 100 MVA limit as 

NESCOE requests. NESCOE may choose to pursue this matter further with NERC, with 

the Phase 2 project being one appropriate forum. Similarly, Dow may raise its contention 

that exclusion E3 should not apply to certain non-retail generation resources during 

Phase 2. Regarding Dow’s argument that exclusion E3 should be further clarified, we 

believe our discussion above regarding figure 5 adequately addresses Dow’s concern.

 183 NERC BES Petition at 22-24. 
Docket Nos. RM12-6-000 and RM12-7-000 - 137 -

f. Criterion (c) – Not Part of a Flowgate or Transfer Path

232. Exclusion E3 criterion (c) specifies a “local network” does not contain a 

monitored facility of a permanent flowgate in the Eastern Interconnection, a major 

transfer path within the Western Interconnection, or a comparable monitored facility in 

the ERCOT or Quebec Interconnections, and is not a monitored facility included in an 

interconnection reliability operating limit. NERC stated that the presence of a local 

network is not for the operability of the interconnected electric transmission network; 

neither will the local network’s separation or retirement diminish the reliability of the 

interconnected electric transmission network.”184 The Commission stated in the NOPR 

that it believes that this is an appropriate criterion.

Comments 

233. G&T Cooperatives state that criterion (c) should be clarified to allow local 

networks to come under exclusion E3 even if they are interconnected with a “monitored 

facility of a permanent Flowgate” in the Eastern Interconnection or a “major transfer 

path” in the Western interconnection. G&T Cooperatives recognize that such monitored 

facilities and major transmission paths are important to reliability, but criterion (c) could 

be read in a manner that would prevent a local network interconnected with such major 

facilities from qualifying under exclusion E3. G&T Cooperatives do not believe that 

NERC intended such a broad reading. 

 184 NOPR, 139 FERC ¶ 61,247 at P 93 (citing NERC BES Petition, Exhibit G 

at 2).
Docket Nos. RM12-6-000 and RM12-7-000 - 138 -

Commission Determination

234. The Commission finds that exclusion E3 criterion (c) is an appropriate criterion. 

We agree with NERC that facilities with, e.g., permanent flowgates, cannot be included 

in a local network as the separation of such facilities during a system event could have an 

adverse impact on the operation of the interconnected transmission network. The 

language for criterion (c) only prohibits flowgates and their associated monitored 

elements from being within a candidate local network. Therefore, we believe the 

language is sufficiently clear and will not direct NERC to modify this provision in 

response to G&T Cooperatives request for clarification. 

9. Exclusion E4 (Reactive Power Devices)

NOPR Proposal

235. Exclusion E4 excludes from the bulk electric system “Reactive Power devices 

owned and operated by the retail customer solely for its own use.” NERC explained that 

exclusion E4 is the technical equivalent of exclusion E2 for reactive power devices and 

that the currently effective bulk electric system definition is unclear as to how these 

devices are to be treated. In the NOPR, the Commission stated that this is an appropriate 

exclusion that provides additional clarity and granularity to the definition of bulk electric 

system.

Comments

236. NERC, ELCON and EEI support the Commission’s proposal. Steel 

Manufacturers Association supports a definitive exclusion for reactive power equipment 

that is installed and used to benefit end use loads. The exclusion, however, in the 
Docket Nos. RM12-6-000 and RM12-7-000 - 139 -

Steel Manufacturers Association’s opinion, should not be confined to such devices that 

are owned and operated by a retail customer solely for its own use because there are 

instances in which capacitor banks have been installed for the benefit of a steel-making 

facility but, for various reasons, that equipment is owned, operated and maintained by its 

local utility. Consequently, the Steel Manufacturers Association suggests that exclusion 

E4 be revised to read: “Reactive Power devices owned and operated by, or installed 

solely for the benefit of, retail customers.”

Commission Determination

237. The Commission finds that exclusion E4 is an appropriate exclusion that provides 

additional clarity and granularity to the definition of bulk electric system. In response to 

the Steel Manufacturers Association, we will not direct the suggested clarifying change to 

exclusion E4 criterion. Rather, Steel Manufacturers Association may choose to pursue

this matter further with NERC in its Phase 2 project.

E. The NERC Rules of Procedure Exception Process, RM12-7-000 

NOPR Proposal

238. As described above in section I.D.2, NERC proposed revisions to its Rules of 

Procedure to provide an “exceptions process” to add elements to, and remove elements 

from, the bulk electric system, on a case-by-case basis. NERC stated, inter alia, that the 

exception process decisions to approve or disapprove exception requests will be made by 

NERC, rather than by the Regional Entities. 

239. In the NOPR, the Commission proposed to find that, pursuant to section 215(f) of 

the FPA, the exception process is just, reasonable, not unduly discriminatory or 
Docket Nos. RM12-6-000 and RM12-7-000 - 140 -

preferential, and in the public interest and satisfies the requirements of section 215(c). 

Further, the Commission proposed to find that the proposed exception process satisfies 

the statement in Order No. 743 that NERC establish an exception process for excluding 

facilities that are not necessary for the reliable operation of the interconnected 

transmission network from the definition of the bulk electric system.185 

Comments

240. Many commenters support the exception process as proposed. Commenters state 

that the exception process will be able to handle the more unusual situations that need to 

be addressed on a case-by-case basis, including sub-100 kV transmission elements that 

are necessary for the reliable operation of the interconnected transmission network. 186 

They further state that the exception process balances the need for effective and efficient 

administration with due process and clarity of expectations and promotes consistency in 

determinations and eliminates regional discretion by having all decisions on exception 

requests made at NERC. Southern Companies support approval of the exception process 

and assert that the Commission should allow time for NERC, Regional Entities and 

industry to implement the definition and exception process and determine at a later date 

whether it is sufficiently capturing the appropriate facilities. 

 185 See NOPR, 139 FERC ¶ 61,247 at PP 103-04 (citing Order No. 743, 133 FERC 

¶ 61,150 at P 16). 

186 E.g., ELCON, TAPS, and Southern Companies. 
Docket Nos. RM12-6-000 and RM12-7-000 - 141 -

241. MISO states that RTOs, as reliability coordinators, planning coordinators or 

authorities, and balancing authorities, should be allowed to file exception requests. 

MISO also states that there should be fewer requirements for filing exception requests by 

RTOs because they have been assigned substantial authority over facilities under their 

authority by their member transmission owners and operators, and because they utilize 

rigorous stakeholder processes. Specifically, MISO requests that the Commission direct 

NERC to modify the exception process to recognize RTO stakeholder processes and their 

results as evidence that the RTO as the submitting entity conferred with the owner about 

the reasons for an exception and either an agreement was reached between the entities 

that an exception should be filed and that the RTO should submit the exception, or that 

the entities could not reach agreement regarding the submission of such an exception 

request.

242. NYISO comments that the exception process needs to provide interested parties 

notice and an opportunity to be heard. NYISO states that ISOs and RTOs have an 

interest in participating in an exception proceeding prior to a final determination by the 

Regional Entity or NERC because exception requests may affect them operationally or in 

their planning studies depending upon the final determination made on the specific 

exception request.

243. NYPSC and NESCOE are concerned that NERC’s proposal does not give state 

commissions an opportunity to participate directly in the process. NESCOE states that, 

without state participation, NERC will not address the full range of substantive concerns 

that may arise in any given case, and, if the Commission is asked to review an exemption
Docket Nos. RM12-6-000 and RM12-7-000 - 142 -

determination, the record presented will not reflect the states’ views. NESCOE is also 

concerned that the exceptions process lacks a mechanism for a state regulatory authority 

to initiate review of the classification of an element. NESCOE contends that states may 

have an interest in the proper classification of bulk electric system facilities, but they are 

not in a position to submit an exception request because they lack the detailed 

information required for a submission under the proposal. NESCOE suggests that this 

can be remedied by allowing a state to request a review from the relevant Regional Entity 

and to require the Regional Entity to submit a formal exception request if it finds that the 

classification is inaccurate. In addition, NESCOE believes that a state should have a right 

to seek review from NERC of the Regional Entity’s determination.

244. In reply comments, NERC disagrees with MISO and explains that the exception 

process needs to be applied consistently and that the required information should be the 

same regardless of the identity of the submitter. NERC states that the Detailed 

Information Form is intended to ensure that a consistent baseline of technical information 

is provided to the Regional Entity and NERC with all exception requests, in addition to 

the specific information and arguments submitted by the submitting entity in support of 

its exception request. The MISO Transmission Owners and AMP support NERC’s 

comments. 

245. NERC also explains that RTOs and ISOs have the ability to file an exception 

request where they are acting in their capacity as planning authorities, reliability 

coordinators, transmission operators, transmission planners, or balancing authorities. 

NERC states that “the exceptions process is technical and is based on engineering 
Docket Nos. RM12-6-000 and RM12-7-000 - 143 -

expertise, and these are the necessary parties with the required information.”187 NERC 

also disagrees regarding a state or third party role and the need for notice and access to 

information. NERC states that state commissions have other means and methods at their 

disposal for working with entities to identify candidates for an exception request. NERC 

notes that the exception process provides that detailed notice of any request would be 

provided to every registered entity with reliability oversight obligation (e.g., planning 

authorities, reliability coordinators, transmission operators, transmission planners, or 

balancing authorities) for the element subject to the request and that general information 

about an exception request will be publicly posted. NERC also notes that third parties 

including state regulatory agencies will have adequate opportunity to provide comments 

regarding the request without formally participating in the process.

246. ICNU states that the Commission should make clear that utilities and Regional 

Entities, not end-use customers should be required to perform the studies to determine if 

a facility of an end-use customer should be included or excluded. Alameda suggests that 

the Commission set forth a future date for review of the definition seeking both an

effectiveness report from NERC as well as industry comment.

247. IUU and Barrick believe that NERC’s explanation that an exception may be 

obtained by showing that the element is “not necessary” for reliable operation of the 

interconnected transmission system is too ambiguous and does not give adequate 

 187 NERC Reply Comments at 5.
Docket Nos. RM12-6-000 and RM12-7-000 - 144 -

information as to what may or may not be eligible for an exception. They believe 

guidance is necessary as to the types of evidence that should be presented in an exception 

request and the criteria to which the evidence will be subjected. 

248. Redding states that the exception process provides that entities are not required to 

use the exception process to affirmatively demonstrate they fall within the general local

distribution carve-out in the core definition or meet one of the exclusions. Redding notes 

that new section 509 of the Rules of Procedure states that application of the entire

definition will determine what facilities qualify as bulk electric system components. 

Therefore, Redding argues that section 509 confirms that no exception request is 

necessary if the facility fits within either the local distribution carve-out language of the 

core definition, or the explicitly identified exclusions. Furthermore, Redding argues that 

this is confirmed by NERC’s statement that the definition expressly excludes both 

“facilities used in the local distribution of electric energy,” and radial systems as

described in Exclusion E1 of the definition. Redding believes this statement recognizes 

that facilities that are excluded from the definition at the outset - through either the core 

definition or the specific exclusions - need not submit any requests through the 

exemption process confirming that exclusion.

249. Holland is concerned that the exception process is too narrowly focused on

excluding facilities that are not necessary for the reliable operation of the interconnected

transmission network. Holland does not believe that exceptions should be limited to a

demonstration that the facilities lack a material impact to the bulk electric system. 

Holland supports the exception process for this purpose; however, the lack of materiality 
Docket Nos. RM12-6-000 and RM12-7-000 - 145 -

demonstration is independent of the question of whether the facilities should be excluded 

on the grounds that they are used in local distribution. Holland believes the Commission 

should clarify that, for exceptions seeking exclusion based upon a claim of being local 

distribution, NERC must evaluate additional information submitted, and not merely rely 

on the criteria in Exclusions E1 through E4. 

250. Steel Manufacturers Association is concerned that because the Rules of Procedure 

provide that only a Regional Entity may submit an exception request for the inclusion in 

the bulk electric system of an element owned by an owner that is not a registered entity, 

they do not contemplate that the owner will be notified that its facilities are being

considered for inclusion in the bulk electric system.

Commission Determination

251. Pursuant to FPA section 215(f), we approve the NOPR proposal and find that the 

exception process is just, reasonable, not unduly discriminatory or preferential, and in the 

public interest. Further, we find that the proposal satisfies the statement in Order No. 743 

that NERC establish an exception process for excluding facilities that are not necessary 

for the reliable operation of the interconnected transmission network from the definition 

of the bulk electric system.188 The exception process balances the need for effective and 

efficient administration with due process and clarity of expectations and promotes 

consistency in determinations and eliminates regional discretion by having all decisions 

 188 See Order No. 743, 133 FERC ¶ 61,150 at P 16. 
Docket Nos. RM12-6-000 and RM12-7-000 - 146 -

on exception requests made at NERC. The exception process also provides for 

involvement of persons with applicable technical expertise in making decisions on 

exception requests and allows for an entity to appeal a final NERC decision to the 

Commission.

252. The exception process provides a reasonable mechanism for the ERO to determine 

whether a facility or element should be added to, or removed from, the bulk electric 

system on a case-by-case basis. However, for the reasons explained above in our 

discussion in section II.C regarding local distribution, the case-by-case determination of 

whether an element or facility is used in local distribution will be decided by the 

Commission. 

253. We also find that NERC’s explanation, that it was not feasible to develop a single 

set of technical criteria that would be applicable to all exception requests so it developed 

the Detailed Information Form (discussed in detail below) to ensure that a consistent 

baseline of technical information is provided for NERC to make a decision on all 

exception requests, is reasonable. We find that this information, coupled with the 

proposed exception process, allows NERC to provide consistent determinations on 

exception requests submitted from different regions involving the same or similar facts 

and circumstances, and allows NERC to take into account the aggregate impact on the 

bulk electric system of approving or denying all the exception requests. Thus, we find 

that NERC’s proposal is clear, transparent, and uniformly applicable and is as equally 

efficient and effective as the Order No. 743 directive to establish an exception process for 
Docket Nos. RM12-6-000 and RM12-7-000 - 147 -

excluding facilities that are not necessary for the reliable operation of the interconnected 

transmission network. 

254. We are not persuaded by Barrick’s and IUU’s comments that more guidance is 

necessary. Order No. 743 tasked NERC with developing a revised definition and 

exemption process. NERC noted that it was not feasible to develop a single set of 

criteria. The Commission believes that applying the 100 kV threshold in the definition, 

the inclusions and exclusions and the information required in the Detailed Information 

Form will be a sufficient starting point to enable the ERO to make determinations as to 

whether an element is necessary for reliable operation of the interconnected transmission 

network. The body of exception decisions that NERC promulgates will further assist 

entities in presenting the relevant facts and circumstances when seeking an exception.

255. In response to MISO’s request, we note that RTOs and ISOs, in their capacity as 

planning authorities, reliability coordinators, transmission operators, transmission 

planners, or balancing authorities, have the ability to file an exception request.189 We are 

not persuaded that fewer requirements should apply to exception requests submitted by 

RTOs and ISOs, and we agree with NERC, MISO Transmission Owners and AMP that 

the exception process needs to be applied consistently and that the required information 

should be the same regardless of the identity of the submitter. 

 189 See NERC ROP Petition, Attachment 1, Proposed Appendix 5C, Section 4.1.
Docket Nos. RM12-6-000 and RM12-7-000 - 148 -

256. NYISO comments that the exception process should provide interested parties -

particularly ISOs and RTOs - notice and an opportunity to be heard. As we note above, 

the exception process affords ISOs and RTOs, in their capacity as planning authorities, 

reliability coordinators, transmission operators, transmission planners, or balancing 

authorities, notice and opportunity to comment on elements within their scope of 

responsibility. 

257. Similarly, with regard to NYPSC’s and NESCOE’s comments on the role of state 

commissions in the exception process, we believe that NERC’s proposal is reasonable 

and provides an adequate opportunity for state regulator participation. Specifically, 

NERC explains in its ROP petition that, in developing the proposed Rules, state 

regulators and others raised concerns about their ability to participate in the exception 

process. NERC responded that “the exception process should be one based on the 

technical reliability issues of the specific case presented.... [A] procedure that 

encouraged or even invited multi-party filings would unduly complicate the process 

without any concomitant benefit in reliability.”190 However, to provide transparency and 

some opportunity for participation, the proposed exception process provides that “(1) 

detailed notice of any request would be provided to every Registered Entity with 

reliability oversight obligation for the Element subject to the Request and (2) general 

 190 NERC ROP Petition, Att. 9 (“The Development Process and Basis for the ROP 

Team’s Recommended Provisions - How Stakeholder Comments were Considered and 

Addressed”) at 7.
Docket Nos. RM12-6-000 and RM12-7-000 - 149 -

information about the request will be publicly posted,” thereby allowing third parties 

including state regulators “adequate opportunity to provide comments regarding the 

request without formally participating in the process.”191 We agree that NERC’s 

proposal strikes an appropriate balance between efficient processing of highly technical 

decisions and the opportunity for states and other entities to comment in the exception 

process. Nonetheless, as discussed above, requests for exclusion from the bulk electric 

system on local distribution grounds will be determined by the Commission on a case-bycase basis. In such proceedings, state regulatory authorities will have an opportunity to 

intervene and provide comments. 

258. We disagree with Redding’s characterization of how the exception process is not 

necessary for determining whether an element is used for local distribution. Redding’s 

characterization of the exception process leaves the determination of whether an element 

is used for local distribution in the hands of registered entities or NERC. However, as we 

explain in the local distribution discussion above, in circumstances where there is a 

factual question as to whether facilities not otherwise excluded from the bulk electric 

system by the core definition and four exclusions should nonetheless be excluded because 

they are used in local distribution, a determination should be made by this Commission. 

In addition, in our discussion in section II.C above regarding local distribution, we 

 191 Id.
Docket Nos. RM12-6-000 and RM12-7-000 - 150 -

provide direction with respect to how an entity may seek a determination of whether an 

element is used in local distribution.

259. Regarding Steel Manufacturers Association’s concern that the Rules of Procedure 

do not contemplate that an owner of an element that is not a registered entity will be 

notified by a Regional Entity that its facilities are being considered for inclusion in the 

bulk electric system, we note that section 4.1 of Appendix 5C the Rules of Procedure 

states that when a Regional Entity requests an exception, the Regional Entity “shall 

prepare and submit copies of its exception request (or portions thereof) to all applicable 

entities...”192 Further, section 4.4 of Appendix 5C provides that, if the submitting entity 

is not the owner (i.e., is a Regional Entity, planning authority, balancing authority, etc) it 

must provide a copy of the exception request to the owner. Therefore, if a Regional 

Entity submits an exception request for an element owned by a non-registered entity, the 

owner is notified.

260. With respect to Holland’s request for clarification for what must be submitted for 

a claim of being local distribution, we believe that our discussion above regarding how 

local distribution elements will be determined addresses Holland’s concerns. 

261. In response to ICNU’s comments, the Commission notes that NERC has identified 

the entities that are responsible for providing the information necessary for an exception 

request. Section 3.2 of the exception process states that “the burden to provide a 

 192 NERC Rules of Procedure, Appendix 5C, section 4.1.
Docket Nos. RM12-6-000 and RM12-7-000 - 151 -

sufficient basis for approval of an exception request in accordance with the provisions of 

the exception procedure is on the submitting entity.” Additionally, in section 4.1 of the 

exception process, NERC lists the eligible submitting entities as the owner of an element, 

or a Regional Entity, planning authority, reliability coordinator, transmission operator, 

transmission planner, or balancing authority that has (or will have upon inclusion in the 

bulk electric system) the elements covered by an exception request within its scope of 

responsibility.

262. Southern Companies state that the Commission should allow time for NERC, 

Regional Entities and industry to implement the definition and exception process and 

determine at a later date whether it is sufficiently capturing the appropriate facilities. 

Similarly, Alameda suggests that the Commission set forth a future date for review of the 

definition seeking both an effectiveness report from NERC as well as industry comment. 

First, as discussed below, the Commission is granting NERC’s request for a 24 month 

implementation plan. The Commission believes that this is sufficient to implement the 

definition and exception process. In addition, the Commission declines to set a future 

date to determine effectiveness of the definition and the exception process. 

1. How Entities Will Review and Seek Inclusion of Necessary 

Elements 

NOPR Proposal

263. In Order Nos. 743 and 743-A, the Commission indicated that our goal is that the 

definition of bulk electric system should include all facilities necessary for the operation 

of the interconnected transmission network, except for local distribution. Further, while 
Docket Nos. RM12-6-000 and RM12-7-000 - 152 -

the Commission explained that one way to meet the goal was to establish a 100 kV 

“bright line” threshold, the Commission also made clear that the “bright line” threshold 

would be a “first step or proxy” in determining what facilities should be included in the 

bulk electric system.193 The NOPR reiterated that, in Order Nos. 743 and 743-A, the 

Commission held that NERC should not necessarily stop at 100 kV and should, through 

the development of the exception process, ensure that “critical facilities operated at less 

than 100 kV, and that the Regional Entities determine [which facilities] are necessary for 

operating the transmission network.”194 The Commission clarified that the inclusion of 

sub-100 kV facilities should be done in an “appropriate and consistent” manner.195 

Finally, in the NOPR, the Commission noted that the September 2011 Blackout Report 

reinforced statements in Order Nos. 743 and 743-A with respect to ensuring that sub-100 

kV facilities, as appropriate, are included in the bulk electric system.196 The Commission 

further noted that the NERC proposals at issue in this rulemaking take steps to address 

the treatment of sub-100 kV facilities, as well as other facilities, necessary for the 

operation of the interconnected transmission network, through the exception process. 

However, in light of the September 2011 Blackout Report, the Commission requested 

 193 Order No. 743-A, 134 FERC ¶ 61,210 at P 40; see also NOPR, 139 FERC 

¶ 61,247 at P 106.

194 Order No. 743, 133 FERC ¶ 61,150 at P 121. 

195 Order No. 743-A, 134 FERC ¶ 61,210 at P 103.

196 NOPR, 139 FERC ¶ 61,247 at P 107. 
Docket Nos. RM12-6-000 and RM12-7-000 - 153 -

comment on how the relevant entities who control and run facilities on the interconnected 

transmission network will seek inclusion of sub-100 kV facilities, as well as other 

facilities, to ensure that all facilities that are necessary for the operation of the bulk power 

system are designated as bulk electric system elements.197

Comments

264. NERC proposes that entities can identify sub-100 kV facilities for inclusion in a 

variety of ways: in the course of performing planning assessments, from day-to-day 

operating experience, or assessment of system events that indicate facilities not identified 

by application of the definition are necessary for reliable operation of the interconnected 

transmission network. NERC further states that an entity that requests the inclusion or 

exclusion of a facility must provide certain technical and engineering support for its 

request. NERC also points out that the exception process provides for the appeal of a 

decision to NERC as to whether a facility is part of the bulk electric system. NERC 

believes this process adequately addresses the issue of whether certain sub-100 kV 

facilities are included in the bulk electric system. 

265. ELCON states that the NOPR’s suggestion that the entities would not take 

cognizance of Commission or NERC findings related to any sub-100 kV elements that 

have a material impact on system reliability would call into question the efficacy of the 

entire construct established by the Commission to address reliability issues. 

 197 NOPR, 139 FERC ¶ 61,247 at PP 109-10.
Docket Nos. RM12-6-000 and RM12-7-000 - 154 -

266. APPA believes that it will be excessively burdensome to industry and small 

entities if they have to conduct a study of all their sub-100 kV elements. APPA asserts 

that it would require small registered entities to hire consultants to perform studies to 

assess the impact of large numbers of non-bulk electric system facilities. 

267. Idaho Power believes that entities could periodically (e.g. every five years) review 

the impact of sub-100 kV facilities and verify if any of the inclusions would require them 

to be included and explain why certain sub-100 kV facilities are excluded. 

268. ISO New England and National Grid believe that, during the conduct of 

transmission planning system assessments, performed in accordance with requirements of 

the NERC Transmission Planning Reliability Standards, facilities required for inclusion 

in the bulk electric system may be identified.

Commission Determination

269. As we held in Order Nos. 743 and 743-A, the goal of revising the definition of 

bulk electric system is to ensure that all necessary facilities are included in the bulk 

electric system. As we noted in Order No. 743, applying the definition of bulk electric 

system should be a “first step or proxy” in determining which facilities should be 

included in the bulk electric system.198 The Commission stated that NERC should not 

end the inquiry at 100 kV and should, through the development of the exception process, 

ensure that “critical” facilities operated at less than 100 kV, and that the Regional Entities 

 198 NOPR, 139 FERC ¶ 61,247 at P 106 (citing Order No. 743-A, 134 FERC 

¶ 61,210 at P 40). 
Docket Nos. RM12-6-000 and RM12-7-000 - 155 -

determine are necessary for operating the interconnection network are included.199 We 

continue to expect entities to identify and include sub-100 kV facilities, as well as other 

facilities, necessary for the operation of the interconnected transmission network. In the 

NOPR we asked how the entities responsible for including elements in the bulk electric 

system will assure that the all facilities, including sub-100 kV elements, that are 

necessary for operating the interconnected transmission network will be included in the 

bulk electric system. We find NERC’s response to that question reasonable: that 

Regional Entities, planning authorities, reliability coordinators, transmission operators, 

transmission planners, balancing authorities, and owners of system elements will include, 

through the exception process, facilities identified in the course of performing planning 

assessments, from day-to-day operating experience, or assessment of system events that 

are not included by application of the definition but are necessary for reliable operation of 

the interconnected transmission network. We believe that entities, having knowledge of 

their systems and the concomitant planning assessments and system impact studies, will 

identify an element that is necessary for reliable operation of the integrated transmission 

network while conducting their day-to-day operations and planning and performing 

studies. If the element does not fall within the definition, we expect that the entity will 

submit the element for inclusion through the exception process. Use of this process 

should ensure that the all sub-100 kV elements, as well as other facilities, necessary for 

 199 Order No. 743, 133 FERC ¶ 61,150 at P 121. 
Docket Nos. RM12-6-000 and RM12-7-000 - 156 -

the operation of the interconnected transmission network are included in an “appropriate 

and consistent” manner. By identifying and seeking inclusion of sub-100 kV facilities, 

and other facilities, in the bulk electric system through performance of these routine 

functions, such as those identified by ISO New England and National Grid, we do not 

expect that entities will have to perform studies indiscriminately to make such 

determinations. Indeed, comments indicate that the determination of which elements, 

including sub 100 kV elements, should be included in the bulk electric system is a natural 

part of an entities’ process for assuring the reliable operation of the grid.200 Thus, the 

Commission believes that, if a study is needed outside the ordinary course of operations, 

it would be infrequent. By adopting this approach, we believe that APPA’s concerns 

about burdensome tasks are alleviated. 

2. NERC Role in Identifying Necessary Elements

270. In the NOPR, the Commission observed that, despite NERC’s statutory functions 

to develop and enforce Reliability Standards, its continent-wide perspective, and 

technical understanding that can provide valuable assistance in the identification of bulk 

electric system facilities, the exception process does not provide that NERC may initiate 

an exception request. Accordingly, the Commission requested comments on the role 

NERC should have in initiating the designation of or directing others to initiate the 

designation of sub-100 kV facilities, or any other facilities, necessary for the operation of 

 200 E.g., ELCON Comments at 8. 
Docket Nos. RM12-6-000 and RM12-7-000 - 157 -

the interconnected transmission network for inclusion in the bulk electric system.201 The 

Commission also requested comment on the role NERC should have in designating sub100 kV facilities, and other facilities, for inclusion in the bulk electric system, directing 

Regional Entities or others to conduct such reviews, or itself nominating an element to be 

included in the bulk electric system.

Comments

271. NERC states that inherent in its oversight of the Regional Entities is the ability to 

request a Regional Entity or others to propose inclusion of sub-100 kV facilities, and 

other facilities in the bulk electric system. NERC further states that the Rules of 

Procedure do not limit its ability to perform this function and such action is fully 

consistent with NERC’s obligations and authority as the ERO.

272. Dominion believes that if NERC wants to nominate a sub-100 kV facility, it could 

do so through the broad powers assigned to NERC through its Rules of Procedure and/or 

regional delegation agreements. TAPS maintains that if, through its investigations, risk 

assessments, or analysis of events, NERC identifies facilities that should be included in 

(or excluded from) the bulk electric system, it would be appropriate for NERC to have 

the authority to make such a proposal through the exception process, provided that it 

implements due process safeguards such as the designation of decisional and nondecisional staff.

 201 NOPR, 139 FERC ¶ 61,247 at P 111.
Docket Nos. RM12-6-000 and RM12-7-000 - 158 -

273. Several commenters state that NERC should have the ability to nominate a facility 

for inclusion. SmartSenseCom believes NERC should have authority to initiate an 

exception request because, even with a bright line standard, there remains the possibility 

of inconsistent interpretation and application of the definition. ISO-NE states that NERC 

should have the ability to nominate a facility for inclusion, but the Regional Entities 

along with planning authorities, reliability coordinators, transmission operators, 

transmission planners and balancing authorities should be provided an opportunity to 

review and comment on this nomination. 

274. AEP believes that RTOs or Regional Entities “are equipped to facilitate the efforts 

to be effective with the exception process.”202 AEP also suggests that NERC and the 

Commission could assign review of sub-100 kV facilities to the RTOs. AEP states that 

the RTO processes could be modified to address the exceptions. AEP defers to the 

judgment of the Commission and NERC in regions where there are currently no 

functioning RTOs.

275. Other commenters do not support a NERC role as contemplated in the NOPR. 

SoCal Edison believes that NERC should not initiate exception requests to include 

facilities within the bulk electric system. Rather, SoCal Edison posits that NERC’s role 

is to communicate to the Regional Entities their obligation to review systems in their area 

that operate in parallel with the bulk electric system and to include such systems in the 

 202 AEP Comments at page 11.
Docket Nos. RM12-6-000 and RM12-7-000 - 159 -

bulk electric system. APPA supports consideration of a NERC role in Phase 2 of the 

project to identify specific reliability gaps but objects to NERC being able to step into the 

shoes of the Regional Entity. 

Commission Determination

276. NERC states that, as the ERO, and in its oversight of the Regional Entities, it has 

the ability to request a Regional Entity or others to propose inclusion of sub-100 kV 

facilities, and other facilities, in the bulk electric system. NERC believes that nothing in 

the proposed Rules of Procedure limits its oversight obligations and authority as the 

ERO. The Commission finds NERC’s approach to be reasonable. Section 215(e)(4)(C) 

of the FPA authorizes the Commission to issue regulations authorizing the ERO to enter 

into an agreement to delegate authority to Regional Entities if the agreement promotes 

effective and efficient administration of Bulk-Power System reliability.203 Subsequently, 

the Commission approved delegation agreements between NERC and the eight Regional 

Entities.204 Pursuant to the delegation agreements, NERC may issue guidance or 

directions as to the manner in which a Regional Entity performs delegated functions and 

related activities.205 Thus, the Commission agrees with NERC that, as the ERO, NERC 

 203 16 U.S.C. 824o (2006). 

204 North American Electric Reliability Corp., 119 FERC ¶ 61,060, order on reh’g, 

120 FERC ¶ 61,260 (2007).

205 See, e.g., section 8(d) of the Amended and Restated Delegation Agreement 

between NERC and Midwest Reliability Organization (...the NERC Board (or a Board 

committee to which the Board has delegated authority) may issue guidance or directions 

(continued...)
Docket Nos. RM12-6-000 and RM12-7-000 - 160 -

has the authority to request a Regional Entity or other eligible submitting entity to 

propose inclusion of sub-100 kV facilities, or other facilities, in the bulk electric system. 

277. TAPS supports NERC having the ability to initiate the designation of facilities or 

elements as part of the bulk electric system, provided that NERC implements due process 

safeguards such as the designation of appropriate decisional and non-decisional staff. We 

agree that, to avoid actual or appearance of impropriety, NERC must develop appropriate 

safeguards.

278. In response to AEP, the Commission will not direct modifications to provide 

RTOs and ISOs the authority to address exception requests. RTOs and ISOs can submit 

exception requests in their capacity as planning authorities, reliability coordinators, 

transmission operators, transmission planners, and/or balancing authorities. 

3. Commission Role in Identifying Necessary Elements

NOPR Proposal

279. In the NOPR, the Commission requested comment on the role the Commission 

should have with respect to the designation of sub-100 kV facilities, or other facilities, 

necessary for the operation of the interconnected transmission network for inclusion in 

the bulk electric system. The Commission observed that “there may be circumstances 

(like the September 2011 Blackout Report) where the Commission, through the 

performance of its statutory functions, may conclude that certain sub-100 kV facilities 

 

as to the manner in which Midwest Reliability Organization and, if applicable, other 

Regional Entities, shall perform delegated functions and related activities.”).
Docket Nos. RM12-6-000 and RM12-7-000 - 161 -

not already included in the bulk electric system are necessary for the operation of the 

interconnected transmission network and thus should be included in the bulk electric 

system.”206 The Commission stated that it expected that Regional Entities and others 

“will take affirmative steps to review and include sub-100 kV elements and facilities, and 

other facilities, necessary for the operation of the interconnected transmission system in 

the bulk electric system,” and requested comment as to how the Commission could 

ensure that such facilities are considered for inclusion in the bulk electric system.207 The 

Commission also requested comment on instances when the Commission itself should 

designate or direct others to designate sub-100 kV facilities, or other facilities, necessary 

for the operation of the interconnected transmission grid for inclusion in the bulk electric 

system. 

Comments 

280. NERC notes that the Commission has authority pursuant to FPA section 215(d)(5) 

to initiate a Reliability Standards development process that “addresses a specific matter.” 

According to NERC, for the Commission to play a more active role in the designation of 

such facilities would be inconsistent with its role as the adjudicator of disputes.

 206 NOPR, 139 FERC ¶ 61,247 at P 112.

207 NOPR, 139 FERC ¶ 61,247 at P 112. 
Docket Nos. RM12-6-000 and RM12-7-000 - 162 -

281. Some commenters assert that the Commission has the authority to designate a 

facility as part of the bulk electric system.208 SmartSenseCom states that, if the 

Commission is concerned that a facility is necessary for the operation of the 

interconnected transmission system, it possesses authority to order NERC or a Regional 

Entity to address that matter. Specifically, SmartSenseCom points to section 215(b) and 

section 215(d)(5) where the Commission has plenary authority over the ERO and “all 

users, owners, and operators of the bulk-power system” for the purposes of approving 

reliability standards and enforcing compliance with those standards.209 SmartSenseCom 

states that, pursuant to the statutory authority, the Commission could, on its own motion, 

“order [NERC] to submit... a modification to a reliability standard that addresses a 

specific matter if the Commission considers such...modified reliability standard 

appropriate to carry out this section.”210 

282. Furthermore, SmartSenseCom states that the Commission should be able to review 

NERC exceptions decisions. SmartSenseCom asserts that NERC decisions should be 

subject to the discretionary review of the Commission and the Commission should retain 

the ability to remand or reject an exception determination, pursuant to the Commission’s 

FPA section 215 statutory authority to approve, disapprove, or remand NERC-proposed 

 208 E.g., Dominion and SmartSenseCom. 

209 SmartSenseCom Comments at 14, quoting 16 U.S.C. 824o(b).

210 Id. at 14, quoting 16 U.S.C. 824o(d)(5).
Docket Nos. RM12-6-000 and RM12-7-000 - 163 -

Reliability Standards. While the Commission should give NERC’s exception decision 

“due weight” as required by section 215, SmartSenseCom asserts that the availability of

review would ensure reliable operation of existing and future Bulk-Power System 

facilities. SmartSenseCom also suggests that Commission review of exception decisions 

would provide industry stakeholders with valuable precedent and clarity on the treatment 

of certain facilities. 

283. Other commenters claim that the Commission does not possess the authority to 

designate elements as part of the bulk electric system. ISO New England contends that 

the Commission, as the ultimate decision making authority, should not have a role in 

nominating facilities for inclusion in the bulk electric system. APPA does not believe 

that the FPA gives the Commission authority to designate specific elements for inclusion 

in the bulk electric system. Rather, according to APPA, the Commission’s role is to 

review NERC decisions. APPA states that policy considerations and Congressional 

intent also “militate against direct [Commission] identification of specific facilities or 

classes of facilities to be included in the [bulk electric system] definition.”211 APPA 

asserts that, during the course of a Part 1b investigation or other inquiry, the Commission 

may identify facts that indicate that a registered entity has not properly applied the 

definition. APPA points to FPA section 215(e)(3) which provides that, after notice and 

opportunity for hearing, the Commission may enforce compliance by a particular user, 

 211 APPA Comments at 20. 
Docket Nos. RM12-6-000 and RM12-7-000 - 164 -

owner or operator of the Bulk-Power System with a Reliability Standard, which could 

include application of the definition within the context of a specific reliability standard. 

APPA argues, that section 215 contemplates a standard development and enforcement 

framework in which rules of general applicability, i.e., Reliability Standards, are 

developed by the ERO on a continent-wide, and are subject to Commission approval

prior to the enforcement of such Reliability Standards. In contrast, APPA argues that 

section 215 contemplates the delegation of enforcement authority by the ERO to 

Regional Entities that are organized to accomplish this specific purpose. APPA 

concludes that the Commission, like NERC, should focus its resources on ensuring that 

Regional Entities enforce compliance with the definition and the Rules of Procedure.

284. SoCal Edison does not support active Commission involvement in designating 

facilities for inclusion in the bulk electric system. According to SoCal Edison, because 

the Commission has the authority to review NERC’s decisions in the exceptions 

procedure, the Commission’s role should be limited to providing to NERC information 

that the Commission develops on facility categories that should potentially be included in 

the bulk electric system. Further, SoCal Edison states that NERC should be responsible 

for communicating that information to Regional Entities for further action and ensuring 

that those Regional Entities take the appropriate action with respect to such information, 

and the Commission should ensure that NERC and the regional authorities act upon the 

information provided by the Commission with respect to such facilities. 
Docket Nos. RM12-6-000 and RM12-7-000 - 165 -

Commission Determination

285. For the reasons discussed below, we conclude that the Commission has the 

authority to designate an element as part of the bulk electric system pursuant to our 

authority set forth in sections 215(a)(1) and (b)(1) of the FPA. We are cognizant of the

concerns stated by SoCal Edison and other commenters regarding the appellate role of 

the Commission, and the desire to allow registered entities and Regional Entities to take 

the lead in identifying sub-100 kV elements, and other elements, that should be included 

in the bulk electric system. As explained above, we expect entities to identify and 

include sub-100 kV elements, and other elements, that are necessary for operating the 

interconnected transmission network in the bulk electric system. Nonetheless, we believe 

that in appropriate circumstances, for example, where an event analysis of a system 

disturbance indicates the operational importance of sub-100 kV elements, and other 

elements, to bulk electric system reliability, the Commission may find it necessary for the 

reliable operation of the interconnected transmission network to designate facilities to be 

included in the bulk electric system. We anticipate that such circumstances will be rare. 

Consistent with the approach discussed in the NOPR, the Commission would provide 

public notice and opportunity for public comment before designating facilities as part of 

the bulk electric system.212 

 212 NOPR, 139 FERC ¶ 61,247 at P 112, n.127.
Docket Nos. RM12-6-000 and RM12-7-000 - 166 -

286. Commenters are mistaken in characterizing the Commission’s designation of 

facilities as bulk electric system as a modification to the bulk electric system definition or 

other Reliability Standard. Rather, our authority to designate facilities is based on the 

statutory definition of Bulk-Power System and the jurisdictional authority vested in the 

Commission pursuant to section 215 of the FPA. Specifically, section 215(b)(1) of the 

FPA provides that “the Commission shall have jurisdiction, within the United States, 

over...all users, owners and operators of the bulk-power system...for purposes of 

approving Reliability Standards established under this section and enforcing compliance 

with this section.”213 Section 215(a)(1) of the FPA, in turn, defines “Bulk-Power 

System” to mean “facilities and control systems necessary for operating an 

interconnected electric energy transmission network (or any portion thereof); and electric 

energy from generation facilities needed to maintain transmission system reliability.”214 

If an entity owns or operates sub-100 kV elements, or other elements, “necessary for 

operating an interconnected electric energy transmission network,” the Commission has 

jurisdiction pursuant to FPA section 215(b)(1) to “enforc[e] compliance with this 

section,” and to ensure that the approved definition is being implemented properly. 

287. For example, an entity may operate sub-100 kV elements, or other elements, that 

are, pursuant to the modified definition approved in this Final Rule, not treated as part of 

 213 16 U.S.C. 824o(b)(1).

214 16 U.S.C. 824o(a)(1). 
Docket Nos. RM12-6-000 and RM12-7-000 - 167 -

the bulk electric system. However, an event analysis may reveal that such facilities are 

“necessary for operating an interconnected electric energy transmission network.” As an 

appropriate prospective remedy, pursuant to the FPA section 215(b)(1) authority to 

“enforc[e] compliance with this section,” the Commission could designate the facilities as 

part of the bulk electric system. This approach is consistent with Commission precedent 

regarding unregistered entities whose facilities are involved in a violation of Reliability 

Standards. The Commission determined that, in such situations, the appropriate remedy 

is to register the entity so that, prospectively, the entity must comply with the relevant 

Reliability Standards based on the functions performed by that entity.215

288. The Commission would not modify the language of the definition of bulk electric 

system or the specific inclusions and exclusions. Rather, the Commission would initiate 

the designation of elements to ensure that the definition is properly applied. To be clear, 

when, for example, a system disturbance or other event demonstrates the necessity of 

sub-100 kV elements, or other elements, for reliable operations, we expect in the normal 

course that registered entities, Regional Entities and NERC will proactively identify and 

include sub-100 kV elements, or other elements, in the bulk electric system. The

Commission’s strong preference is that registered entities review their facilities to 

determine which are needed for operating the interconnected transmission network and 

 215 See Reliability Standard Compliance and Enforcement in Regions with 

Regional Transmission Organizations or Independent System Operators, 122 FERC 

¶ 61,247, at P 19 (2008).
Docket Nos. RM12-6-000 and RM12-7-000 - 168 -

include them in the bulk electric system. However, when it is recognized that an element 

is necessary for the operation of the interconnected transmission network and no other 

entity steps forward to designate the element as included in the bulk electric system for 

purposes of section 215, the Commission has the authority to do so. We anticipate that 

such instances will be rare. Should the Commission find it necessary and appropriate to 

exercise this authority, we anticipate that the Commission would, for example, issue 

either a notice or order proposing to designate a specific element or elements as part of 

the bulk electric system, and explain the rational for the proposal. The Commission 

would make a final determination after providing notice and opportunity for comment by 

interested parties. 

4. Technical Review Panel

NOPR Proposal

289. NERC’s exception process provides that the Regional Entity shall not recommend 

disapproval of the exception request without review by a technical review panel. The 

Regional Entity is not bound by the opinion of the panel, but the panel’s evaluation 

becomes part of the record associated with the exception request and provided to NERC. 

In the NOPR, the Commission stated that it saw value in the Regional Entity receiving 

the opinion of a qualified technical review panel. The Commission observed that NERC 

did not explain why the proposed exception process only requires a technical review 

panel to provide an opinion where the Regional Entity recommends disapproval of an 

exception request. Accordingly, the Commission requested comment from NERC 

explaining why the review is only required when a Regional Entity disapproves a request 
Docket Nos. RM12-6-000 and RM12-7-000 - 169 -

and whether NERC should modify the exception process to require Regional Entities to 

submit all proposed determinations to a technical review panel regardless of the 

recommendation and receive the panel’s opinion on each request.

Comments

290. NERC stated that it considered obtaining the opinion of a technical panel for all 

Regional Entity recommendations; however, NERC concluded that a review should only 

be required when a Regional Entity disapproves a request due to concerns regarding 

administrative efficiency. NERC determined that negative technical reviews would be 

sufficient to promote consistency and that the additional costs and work of a review of all 

proposed determinations would outweigh the benefits. NERC further states the record of 

every request is reviewed by a panel of experts at the NERC level as part of the decision 

making process. 

291. Several entities support NERC’s explanation.216 ELCON believes NERC’s 

approach will avoid the burden, inefficiency and delay inherent in unnecessary referrals 

to a technical review panel. ELCON notes that the exception process already calls for 

submission of in-depth technical information through the Detailed Information Form, 

initial review by the Regional Entity, and subsequent review and final decision by NERC. 

ELCON believes that considerable technical expertise will, therefore, be available to both 

the Regional Entity and to NERC as they assess exception requests. 

 216 E.g., Idaho Power, ELCON, and G&T Cooperatives.
Docket Nos. RM12-6-000 and RM12-7-000 - 170 -

292. In contrast, some entities believe that a technical panel be convened for either

approval or denial of all exceptions.217 They believe that using a panel for all requests 

will ensure that the requests receive adequate consideration and vetting before a final 

decision is rendered. WPPC requests that the Commission obtain additional information 

from NERC with respect to why the Technical Review Panels are not required to review 

all exception requests that are rejected on procedural grounds. 

Commission Determination

293. The Commission accepts NERC’s explanation that requiring a technical panel 

review of all Regional Entity recommendations will likely cause an additional 

administrative burden on Regional Entities, delaying final recommendations to NERC. 

While the Commission sees benefits in utilizing a technical review panel for all requests, 

we are not persuaded that these benefits will outweigh the costs associated with the 

increased administrative burden likely to be imposed. Additionally, if the Technical 

Review Panel does not provide an opinion on all exception requests, the exception 

process is not without other levels of technical review. On the contrary, the exceptions 

process provides multiple levels of technical review before a final determination is made 

by NERC, including a substantive review by the Regional Entity and a subsequent review 

by a panel of technical experts at the NERC level. For these reasons, the Commission 

approves the Technical Review Panel as proposed by NERC.

 217 E.g., ISO New England and BPA. 
Docket Nos. RM12-6-000 and RM12-7-000 - 171 -

294. In response to WPPC’s request, the Commission declines to seek further 

information from NERC with respect to why the Technical Review Panels are not 

required to review all exception requests that are rejected on procedural grounds. Section 

5.1.5(a) of Appendix 5C to the Rules of Procedure requires a Regional Entity to reject an 

exception request if it is not from an eligible submitting entity and/or it does not contain 

all the required information specified in section 4.0. The Commission does not believe a 

Technical Review Panel needs to determine if an exception request was properly 

submitted by an eligible entity and/or contains all the required information. Additionally, 

as WPPC states in its comments, submitting entities may appeal Regional Entity 

rejections of exception requests to NERC through the procedure provided in section 7.0 

of the exception process. Requiring Technical Review Panel review of all rejections of 

exception requests, as well as all recommendations of disapprovals, would unnecessarily 

impose administrative burdens as if the Technical Review Panel was required to review 

all exception request recommendations. For these reasons, the Commission declines 

WPPC’s request to obtain further information from NERC on this matter. 

5. Use of Industry Subject Matter Experts

NOPR Proposal

295. Section 8 of the proposed exception process sets forth the procedures for NERC’s 

review of a Regional Entity’s recommendation. The NERC President will appoint a team 

of at least three persons with the relevant technical background to evaluate an exception 

request. NERC contemplated that its review teams would be drawn from NERC staff 

resources, supplemented by contractors as necessary, but situations may arise in which 
Docket Nos. RM12-6-000 and RM12-7-000 - 172 -

NERC may need to call on industry subject matter experts to participate as members of 

review teams. In the NOPR the Commission supported NERC’s proposal to use staff 

resources, supplemented by contractors as necessary, to make up the exception request 

review teams. We stated that consistent appointment of the same NERC staff and 

contractor resources, based on subject matter expertise, will promote a more uniform and 

consistent review of the Regional Entities’ exception request recommendations.

Comments

296. No comments were received on this issue. 

Commission Determination

297. The Commission agrees with NERC’s proposal to use staff resources, 

supplemented by contractors as necessary, and potentially industry subject matter experts 

to make up the exception request review teams. The Commission believes that ensuring 

that members of the NERC review teams have the required technical background 

necessary to evaluate exception requests, review supporting technical documents, and 

assess technical recommendations, is essential to providing consistent technically sound 

determinations on exception requests. The Commission believes that consistent 

appointment of the same NERC staff, contractor resources and industry subject matter 

experts, based on subject matter expertise, will promote a more uniform and consistent 

review of the Regional Entities’ exception request recommendations. 
Docket Nos. RM12-6-000 and RM12-7-000 - 173 -

6. NERC’s Detailed Information Form 

NOPR Proposal

298. NERC developed the Detailed Information Form that the Regional Entity and 

NERC can use in evaluating whether or not the elements that are the subject of an 

exception request are necessary for operating the interconnected transmission network. 

In the NOPR, the Commission stated that this information will provide consistency with 

respect to the technical information provided with all exception requests and is an equally 

efficient and effective approach to developing a substantive set of technical criteria for 

granting and rejecting exception requests and proposed to approve the Detailed 

Information Form.

Comments

299. ELCON supports the Detailed Information Form and agrees that it is “more 

feasible to develop a common set of data and information that could be used by the 

Regional Entities and NERC to evaluate exception requests” than to develop the detailed 

criteria and that the information specified in the form is relevant and appropriate for 

exception requests.

300. Holland and Alameda state that there should be some basic guidelines to evaluate 

an exception request. Alameda states that having no technical criteria provides entities 

with no guidance considering a request for exception. Alameda submits that parties 

should have a reasonable basis for determining the outcome of a potential exception 

request in advance of taking the time and effort to make the request. Alameda suggests 

that the Commission direct NERC to develop appropriate technical exception criteria, 
Docket Nos. RM12-6-000 and RM12-7-000 - 174 -

recognizing that each criterion may not apply to all requests and that the criterion may 

even change over time as specific requests are evaluated in detail. Alameda also seeks 

clarification that parties may seek exceptions for proposed facilities, and not just for 

existing facilities as allowing exceptions to be requested for proposed facilities would 

provide an opportunity for entities to make reasoned decisions about planned system 

improvements. 

Commission Determination

301. We approve the Detailed Information Form and find that it will provide 

consistency with respect to the technical information provided with all exception requests 

and is an equally efficient and effective approach to developing a substantive set of 

technical criteria for granting and rejecting exception requests. We decline to adopt 

Alameda’s suggestion that the Commission direct NERC to develop appropriate technical 

exception criteria. We accept NERC’s conclusion that it was more feasible to develop a 

common set of data and information that could be used by the Regional Entities and 

NERC to evaluate exception requests than to develop the detailed criteria. NERC's 

proposal provides the needed flexibility to allow Regional Entities to make a 

recommendation of whether or not an element is necessary for the reliable operation of 

the interconnected transmission network. Thus, the detailed criteria that NERC requires, 

plus other information that an entity is free to include in its submission will provide 

applicants a reasonable basis for determining whether an element is necessary for the 

reliable operation of the interconnected transmission network. We also decline to direct 

NERC to determine how to treat exceptions for proposed facilities. 
Docket Nos. RM12-6-000 and RM12-7-000 - 175 -

7. NERC’s Implementation Plan

NOPR Proposal

302. NERC requests that the effective date for revised definition should be the first day 

of the second calendar quarter after receiving applicable regulatory approval, or, in those 

jurisdictions where no regulatory approval is required, the revised bulk electric system 

definition should go into effect on the first day of the second calendar quarter after its 

adoption by the NERC Board. NERC also requested that compliance obligations for all 

newly-identified elements to be included in the bulk electric system based on the revised 

definition should begin twenty-four months after the applicable effective date of the 

revised definition. NERC stated that sufficient time is needed to implement transition 

plans, for exceptions to be filed and processed, for owners of newly-included elements to 

train their personnel on compliance with the Reliability Standards. In the NOPR, the 

Commission supported NERC’s justification for its implementation and proposed to 

approve NERC’s implementation plan. 

Comments

303. A number of commenters support the NOPR proposal.218 ELCON states that the 

twenty-four month time period gives sufficient time to accommodate planning for and 

changes resulting from the new definition, including any exception requests and 

compliance obligations, without causing undue delay. Consumers believes the twenty-

 218 E.g., Consumers Energy, ELCON, and NYISO. 
Docket Nos. RM12-6-000 and RM12-7-000 - 176 -

four month period should be sufficient in most cases but believes that the Commission 

should make specific provision for longer periods to be allowed on a case-by-case basis 

under special circumstances. Barrick and IUU also support the implementation plan but 

believe further clarification is necessary with respect to an entity’s status during the 

exception process. 

Commission Determination

304. We agree with commenters that the twenty-four month time period gives sufficient 

time to accommodate planning for and changes resulting from the new definition, 

including any exception requests and compliance obligations. Therefore, we approve 

NERC’s proposal to implement a twenty-four month implementation plan. In response to 

Consumers’ comment regarding the need for additional time for special circumstances, an 

entity or NERC may petition for an extension of time. In response to the comments 

raised by Barrick and IUU, we clarify that the status of an element remains unchanged 

during the exception process. 

8. NERC List of Facilities Granted Exceptions

NOPR Proposal

305. In the NOPR, the Commission noted that the proposed exception process does not 

include provisions for NERC to maintain a list of facilities that have received exceptions, 

as requested in Order No. 743. In its petition, NERC indicated that this is an internal 

administrative matter for NERC to implement that does not need to be embedded in the 

Rules of Procedure. NERC stated it will develop a specific internal plan and procedures 

for maintaining a list of facilities for which exceptions have been granted and notes that 
Docket Nos. RM12-6-000 and RM12-7-000 - 177 -

Regional Entities will maintain lists of elements within their regions for which exceptions 

have been granted, in order to monitor compliance with the requirement to submit 

periodic certifications. 

306. In the NOPR, the Commission proposed that NERC make an informational filing 

within 90 days of the effective date of a final rule, detailing its plans to maintain a list and 

how it will make this information available to the Commission, Regional Entities, and 

potentially to other interested persons.219 The Commission also requested comment on 

whether NERC’s proposal should be modified to include an obligation for the registered 

entity to inform NERC or the Regional Entity of the entity’s self-determination through 

application of the definition and specific exclusions E1 through E4 that an element is no 

longer part of the bulk electric system. 

Comments

307. NERC confirms that it is continuing to develop details regarding how the list of 

facilities that have received exceptions will be maintained. According to NERC, a 

90-day window of time in which to submit an informational filing is reasonable.

308. Other entities support NERC’s plan.220 AEP cautions that the process of 

submitting a filing must not overstep the confidentiality provisions of Critical Energy 

Infrastructure Information as part of the gathering and dissemination of list(s).

 219 NOPR, 139 FERC ¶ 61,247 at P 123.

220 ELCON and NRECA. 
Docket Nos. RM12-6-000 and RM12-7-000 - 178 -

309. The Massachusetts DPU supports NERC’s keeping a list of exceptions and 

requests that the Commission requires that state regulatory authorities have appropriate 

access to the list. ISO New England proposes that NERC submit a compliance filing 

detailing its internal process for tracking exception requests. ISO New England also 

believes that NERC and/or the Regional Entities should be required to maintain a 

database that lists the bulk electric system elements within their respective footprints and 

should make this data available for affected entities. 

Commission Determination

310. We adopt the NOPR proposal and direct NERC to make an informational filing 

within 90 days of the effective date of this Final Rule detailing its plans to maintain a list 

and how it will make this information available to the Commission, Regional Entities, 

and potentially to other interested persons. We find that the suggestions of the 

Massachusetts DPU and ISO New England are premature as these comments are more 

appropriate for consideration after NERC makes its compliance filing. 

9. Declassification of Facilities 

NOPR Proposal

311. In the NOPR, the Commission observed that, while NERC will maintain a list of 

facilities that have received an exception pursuant to the case-specific exception process, 

NERC does indicate whether it will track an entity’s “declassification” of current bulk 

electric system facilities based on the entity’s self-application of the bulk electric system 
Docket Nos. RM12-6-000 and RM12-7-000 - 179 -

definition.221 The Commission expressed concern particularly when an entity selfdetermines that an element is no longer part of the bulk electric system but the entity is 

large enough to otherwise remain on the NERC Compliance Registry. Accordingly, the 

Commission requested comment on whether NERC’s proposal should be modified to 

include an obligation for the registered entity to inform NERC or the Regional Entity of 

the entity’s self-determination through application of the definition and specific 

exclusions E1 through E4 that an element is no longer part of the bulk electric system.

Comments 

312. NERC asserts that registered entities are obligated to inform the Regional Entity of 

any self-determination that an element is no longer part of the bulk electric system. 

NERC points to section 501 of the currently-effective Rules of Procedure, which 

provides that each registered entity must notify its Regional Entity of any matters that 

affect the registered entities’ responsibilities with respect to Reliability Standards. NERC 

contends that a determination that an element is no longer part of the bulk electric system 

would necessarily affect an entity’s responsibilities with respect to the Reliability 

Standards. Further, NERC states that an entity’s failure to notify would not relieve it of 

any obligations it may have associated with such failure.

313. Idaho Power and National Grid support that registered entities should inform 

NERC or the Regional Entity of elements that have been declassified. National Grid 

 221 NOPR, 139 FERC ¶ 61,247 at P 123.
Docket Nos. RM12-6-000 and RM12-7-000 - 180 -

supports an obligation for each registered entity to inform the respective reliability 

coordinators and Regional Entity of the entity’s self-determination through application of 

the definition and specific exclusions that an element is no longer part of the bulk electric 

system.

314. PSEG Companies do not support requiring self reporting. PSEG Companies point 

out that when the NERC Functional Model was first put in place, registered entities made 

determinations of which facilities should be included and excluded from the bulk electric 

system without any reporting requirements for those decisions. PSEG Companies assert 

that a registered entity should only be contacting its Regional Entity regarding status 

changes if those changes impact the registered entity’s registration (e.g., if a registered 

Transmission Owner disposes of all its 100 kV or higher assets or a generation owner 

acquires its first BES generator). According to PSEG Companies, facility changes that 

impact a facility’s bulk electric system status do not presently require reporting. The 

proposed reporting self-determined exclusions could lead to extensive facility-by-facility 

tracking and reporting of all status changes which would be overly burdensome to 

Registered Entities.

315. AEP believes that it is imperative to keep the process simple in the beginning, and 

thus advocates that no specific information submission requirements be implemented at 

this time. If NERC or the Regional Entities determine this approach is problematic in the 

future, AEP states that any issues can be addressed through a change in the NERC Rules 

of Procedure.
Docket Nos. RM12-6-000 and RM12-7-000 - 181 -

316. ICNU states that if NERC requires an end-use retail customer to provide notice of 

declassification, such notice should not involve extensive or burdensome reporting 

requirements because, as noted above, end-use customers do not have the required 

resources or expertise. On the other hand, ICNU believes that non-registered end-use

retail customers who, based on the new BES definition, determine that they remain 

excluded from the BES should not be listed or required to report such determination to 

NERC or the appropriate Regional Entity.

Commission Determination

317. We agree with NERC that registered entities are obligated to inform the Regional 

Entity of any self-determination that an element is no longer part of the bulk electric 

system. PSEG Companies claim that there is currently no requirement to report the 

change in status of facilities. NERC, however, cites section 501 of the currently-effective 

Rules of Procedure, which provides that each registered entity must notify its Regional 

Entity of any matters that affect the registered entities’ responsibilities with respect to 

Reliability Standards. Section 501 also requires entities to inform the Regional Entity of 

any self-determination that an element is no longer part of the bulk electric system. 

Section 501, Part 1.3.5 provides:

Each Registered Entity identified on the NCR shall notify its 

corresponding Regional Entity(s) of any corrections, 

revisions, deletions, changes in ownership, corporate 

structure, or similar matters that affect the Registered Entity’s 

responsibilities with respect to the Reliability Standards. 

Failure to notify will not relieve the Registered Entity from 

any responsibility to comply with the Reliability Standards or 
Docket Nos. RM12-6-000 and RM12-7-000 - 182 -

shield it from any Penalties or sanctions associated with 

failing to comply with the Reliability

Standards applicable to its associated Registration.

Thus, a registered entity that concludes that an element is no longer part of the 

bulk electric system must notify the Regional Entity of such change. Further, we 

disagree with PSEG Companies that such notification is unnecessary. PSEG 

Companies point out that NERC did not require such notification when the 

Functional Model was first put into place. Regardless of past practice, we find 

that such notification is a necessary feature of the changes being implemented by 

NERC. As explained in the NOPR:

a large utility with hundreds or thousands of transmission 

lines may initially determine that a configuration on its 

system does not qualify for the exclusion E3 local network 

exclusion, but subsequently determines that the configuration 

can be excluded. NERC’s petition does not indicate whether 

an entity in such circumstance is obligated to inform NERC 

or the appropriate Regional Entity of that self-determination. 

It appears that NERC and the Regional Entities would need 

this information for their compliance programs, for audit 

purposes, and to understand the contours of the bulk electric 

system within a particular region. 

Further, the revised definition allows entities the discretion to “declassify” certain 

facilities as part of the bulk electric system, and NERC, Regional Entities and the 

Commission need notification of such instances to assure that the entities are 

appropriately implementing the revised definition. 

318. We affirm ICNU’s assertion that this task does not involve new, extensive or 

burdensome reporting requirements. We view this as an identification and notification 

task so that a Regional Entity and NERC will know what elements are or not part of the 
Docket Nos. RM12-6-000 and RM12-7-000 - 183 -

bulk electric system. This will provide the entities tasked with overseeing the reliable 

operation of the interconnected transmission network with having an adequate level of 

information and transparency to fulfill those obligations. We disagree with PSEG 

Companies that this is an overly burdensome requirement. First, such information 

sharing is already contemplated by the Rules of Procedure. Second, as noted above, we 

do not view this requirement as one that involves anything more than notification. It does 

not require a justification of why the element is being excluded. 

III. Information Collection Statement

319. The Office of Management and Budget (OMB) requires that OMB approve certain 

information collection and data retention requirements imposed by agency rules.222 Upon 

approval of a collection(s) of information, OMB will assign an OMB control number and 

an expiration date. Respondents subject to the filing requirements of a 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.

Public Reporting Burden and Information Collection Costs

320. In the NOPR, the Commission solicited comment on the need for collecting the 

information that is required to be prepared, maintained and/or submitted pursuant to this 

Final Rule, whether the information will have practical utility, the accuracy of the burden 

estimates, ways to enhance the quality, utility, and clarity of the information to be 

collected or retained, and any suggested methods for minimizing respondents’ burden, 

 222 5 CFR 1320.11 (2011).
Docket Nos. RM12-6-000 and RM12-7-000 - 184 -

including the use of automated information techniques. The NOPR also included a chart 

that identified the estimated public reporting burdens for the proposed reporting 

requirements, as well as a projection of the costs of compliance for the reporting 

requirements. The Commission asked that any revised burden estimates submitted by 

commenters be supported by sufficient detail to understand how the estimates are 

generated. The Commission based its burden estimate on the revised definition of bulk 

electric system developed by NERC. 

321. In the NOPR, the Commission stated that the proposal would result in entities 

reviewing systems and creating qualified asset lists, submitting exception requests where 

appropriate, and certain responsible entities having to comply with requirements to 

collect and maintain information in mandatory Reliability Standards with respect to 

certain facilities for the first time. The Commission requested comment on the estimated 

number of entities that will have an increased reporting burden associated with the 

identification of new bulk electric system elements as a result of the modified definition. 

In developing an estimate of the reporting burden associated with the inclusion of 

additional elements, like NERC, the Commission assumed that entities in the NPCC 

Region will be most affected, with a lesser affect in other regions. 

Comments

322. NRECA and APPA do not take a position on the estimates but observe that 

modifications to the proposed definition or directives to NERC may result in substantial 

changes to the burden estimates and the assessment of whether the which would require 

the Commission to re-assess its burden and small business impact determinations. 
Docket Nos. RM12-6-000 and RM12-7-000 - 185 -

Similarly, APPA and WPPC believe that any changes to the proposed definition in the 

Final Rule that would include additional facilities would cause a significant increase in 

the reporting burden on the industry. APPA believes that if the Commission were to 

direct NERC to make revisions to the specific inclusions or exclusions without technical 

justification, the exception process would quickly become overloaded, with burdens on 

those seeking exceptions and those ruling on them.

323. A number of commenters state that the NOPR underestimated the burden of the 

rulemaking in terms of hours required to comply. APPA believes that the Commission 

underestimates the information collection costs and the costs of compliance for small 

utilities. For example, the Commission’s assumption that utility staff would be used to 

conduct an analysis is not merited in the case of many small entities. APPA states that 

many of its smaller members do not have the in-house employees and resources to 

conduct such reliability analyses and would have to rely on outside consultants and legal 

firms. Therefore, APPA estimates that the fees small utilities would pay for each of the 

services, based on information and belief, as follows: Consulting Engineer, $225/hour; 

Record Keeping, $75/hour; and Legal, $500/hour.

324. Idaho Power contemplates five local network exclusions which contain sixty 

100 kV and above lines, and its estimates for the time involved to document these 

exceptions leads it to believe the Commission is underestimating the number of engineer 

hours per entity’s responses. According to Idaho Power, based on an initial review of 

potential exceptions, Idaho Power may seek approximately 9-12 exceptions. Idaho 

Power agrees with the estimate that transmission owners, generator owners, and 
Docket Nos. RM12-6-000 and RM12-7-000 - 186 -

distribution providers will experience more significant reporting burdens than other 

categories of registered entities. 

325. ISO New England believes that there could be a significant burden on planning 

coordinators and transmission planners which is not addressed in the table shown in the 

NOPR. ISO New England states that, while it has not performed a similar analysis, it 

appears that the “Year 1” estimates in the table in the NOPR are significantly understated 

in view of the resources that it believes will be necessary to establish the initial list. 

According to ISO New England, the estimate of approximately $13 million expended 

over the entire system seems overly optimistic. BPA anticipates, based on customer 

feedback, that the BPA footprint alone will experience several hundred exception 

requests in the first two years. BPA estimates the additional workload from evaluating 

the exception requests will be approximately five to six full time equivalents which 

includes one full time coordinator, a customer service engineer for system verification, a 

planner to run studies, an operations engineer, and dispatch personnel for real-time 

system impacts. NYPSC and the Massachusetts DPU contend that the costs of 

compliance with the definition will be excessive. NYPSC cites to a 2009 report from 

NERC and NPCC, that the compliance costs would exceed $280 million. 

Commission Determination 

326. Commenters raise concerns that modifications to the proposed definition or 

directives to NERC may result in substantial changes to the burden estimates. While the 

Commission is requiring one modification to the language in the NERC proposal, the 

Commission finds that it does not need to reassess the burden estimates because the 
Docket Nos. RM12-6-000 and RM12-7-000 - 187 -

change is intended to simply make more explicit what NERC and other commenters 

indicate is the expected application of the proposed definition to a low-voltage, looped 

system as depicted in figures 3 and 5 above. Therefore, we do not anticipate the one 

modification to result in a significant change to what elements are considered part of the 

bulk electric system or applications for case-by-case exceptions. The burden estimates in 

this Final Rule represent the incremental burden changes related only to increased 

reporting burden associated with the identification of new bulk electric system elements 

as a result of the modified definition. Furthermore, we acknowledge that NPCC may be 

subject to additional reporting requirements, however, the burden estimates are averages 

for all of the filers. Idaho Power’s observation that the Commission is underestimating 

the number of engineering hours is not supported by analysis. Similarly, we are not 

persuaded by ISO New England’s position that there may be a significant burden on 

planning coordinators and transmission planners associated with proposed definition 

because it does not offer any analysis to support this assertion. The Commission expects 

any burden for planning coordinators and transmission planners to be de minimis or 

incorporated under their existing responsibilities. In any event, Idaho Power and ISO 

New England did not provide any estimates of the number of hours that it would take to 

determine exceptions, nor suggest alternative estimates. In response to APPA’s hourly 

estimates that are higher than the estimates in the NOPR the Commission notes that its 

hourly rate estimates for the burden estimates are averages for all of the filers and are 

based on national wage data for utilities obtained from the Bureau of Labor Statistics (for 

engineers and legal) and NPCC's assessment of Bulk Electric System Definition (for 
Docket Nos. RM12-6-000 and RM12-7-000 - 188 -

completing implementation plans and compliance), and Commission staff outreach 

(recordkeeping). Thus, the Commission adopts the burden estimates that it set forth in 

the NOPR. 

327. The Commission disagrees with BPA that there may be a large number of 

exception requests generated from entities within its footprint that may have to be 

processed and the significant addition of FTEs. First, BPA has not provided any analysis 

or evidence to support its claim. Nevertheless, the Commission’s expectation, like 

NERC’s, is that application of the definition with its inclusions and exclusions should not 

materially change what is considered part of the bulk electric system today. Thus, the 

number of exception requests should not be excessive. 

328. Some comments address the potential impact the requirements would have on 

small entities but did not provide specific estimates on this impact. Because these 

comments are also the subject of the analysis performed under the Regulatory Flexibility 

Act, the Commission has provided a response under that section of this rulemaking. 

329. We are not persuaded by NYPSC and Massachusetts DPU that the costs for 

compliance will be $280 million. First, NYPSC nor Massachusetts do not dispute or 

address the specific information collection cost estimates in the NOPR. In addition, the 

vast majority (approximately $234 million) of the costs included in the report to which 

the commenters cite appear to be capital costs which are not applicable to an information 

collection estimate. Further, the report does not account for the revised language in the 

definition of bulk electric system and the specific inclusions and exclusions that we are 

approving in this Final Rule. 
Docket Nos. RM12-6-000 and RM12-7-000 - 189 -

330. After consideration of comments, the Commission adopts the NOPR proposal for 

the Public Reporting Burden and the information collection costs as follows. 

Requirement

Number and 

Type of 

Entity223

(1)

Number of 

Responses 

Per Entity

(2)

Average

Number of 

Hours per 

Response

(3)

Total 

Burden 

Hours

(1)*(2)*(3)

System Review 

and List 

Creation224

333 

Transmission 

Owners

1 response 80 (engineer 

hours)

26,640 Yr 1

843 Generator 

Owners

16 (engineer 

hours)

13,488 Yr 1

554 

Distribution 

Providers

24 (engineer 

hours)

13,296 Yr 1

Exception 

Requests225

1,730 total 

Transmission 

Owners, 

.260 responses 

each in Yrs 1 

and 2

94 (60 

engineer hrs, 

32 record 

24,393 hrs in 

Yrs 1 and 2

 223 The “entities” listed in this table are describing a role a company is registered 

for in the NERC registry. For example, a single company may be registered as a 

transmission owner and generator owner. The total number of companies applicable to 

this rule is 1,522, based on the NERC registry. The total number of estimated roles is 

1,730.

224 This requirement corresponds to Step 1 of NERC’s proposed transition plan, 

which requires each U.S. asset owner to apply the revised bulk electric system definition 

to all elements to determine if those elements are included in the bulk electric system 

pursuant to the revised definition. See NERC BES Petition at 38.

225 We recognize that not all 1,730 transmission owners, generator owners, 

and distribution providers will submit an exception request. Rather, from the total 

1,730 entities, we estimate an average of 260 requests per year in the first two years, 

based on a low to high range of 87 to 433 requests per year. Therefore, the estimated 

total number of hours per year for years 1 and 2, using an average of 260 requests 

per year, is 24,393 hours. We estimate 20 requests per year in year 3 and ongoing.
Docket Nos. RM12-6-000 and RM12-7-000 - 190 -

Generator 

Owners and 

Distribution 

Providers

20 responses 

in Yr 3 and 

ongoing

keeping hrs, 

2 legal hrs) 

1,880 hrs in 

Yr 3 and 

ongoing

Regional and 

ERO Handling 

of Exception 

Requests226

NERC and 8 

Regional 

Entities

1 response 1,386.67 hrs 12,480 hrs in 

Yrs 1 and 2

Implementation 

Plans and 

Compliance227

111 NPCC 

Region 

Registered 

Entities228

1 response 700 hrs in 

Yrs 1 and 2

77,700 hrs in 

Yrs 1 and 2 

350 hrs in Yr 

3 and 

ongoing

38,850 hrs in 

Yr 3 and 

ongoing

75 Registered 

Entities from 

7 other 

Regions

1 response 700 hrs in 

Yrs 1 and 2

52,500 hrs in 

Yrs 1 and 2

350 hrs in Yr 

3 and 

ongoing

26,250 hrs in 

Yr 3 and 

ongoing

TOTALS

220,497 hrs 

in Yr 1

167,073 hrs 

in Yr 2 

66,980 hrs in 

Yr 3 and 

ongoing 

 226 Based on the assumption of two full-time equivalent employees added to 

NERC staff and 0.5 full-time equivalent employees added to each region’s staff, each 

full-time equivalent at $120,000/year (salary + benefits). 

227 The Commission does not expect a significant number of registered entities 

outside of the NPCC region to identify new elements under the revised bulk electric 

system definition. NERC also states that the other Regional Entities do not expect an 

extensive amount of newly-included facilities. See NERC BES Petition at 38. 

“Compliance” refers to entities with new elements under the new bulk electric system 

definition required to comply with the data collection and retention requirements in 

certain Reliability Standards that they did not previously have to comply with.

228 The estimated range of affected NPCC Region Registered Entities is from 66 to 

155 entities.
Docket Nos. RM12-6-000 and RM12-7-000 - 191 -

Costs to Comply:

• Year 1: $13,641,200

• Year 2: $10,435,760

• Year 3 and ongoing: $4,343,520. 

For the first two burden categories above, the loaded (salary plus benefits) costs are: 

$60/hour for an engineer; $27/hour for recordkeeping; and $106/hour for legal. The 

breakdown of cost by item and year follows:

• System Review and List Creation (year 1 only): (26,640 hrs + 13,488 

hrs + 13,296 hrs) =53,424 hrs * 60/hr = $3,205,440. 

• Exception Requests (years 1 and 2): (sum of hourly expense per request 

* number of exception requests) = ((60 hrs * $60/hr) + (32 hrs * $27/hr) + 

(2hrs * $106/hr)) * 260 requests) = $1,215,760.

• Exception Requests (year 3): (sum of hourly expense per request * 

number of exception requests) = ((60 hrs * $60/hr) + (32 hrs * $27/hr) + 

(2 hrs * $106/hr)) * 20 requests) = $93,520.

• Regional and ERO handling of Exception Requests: Between NERC and 

Regional Entities we estimate 6 full time equivalent (FTE) engineers will 

be added at an annual cost of $120,000/FTE ($120,000/FTE * 6 FTE = 

$720,000). This cost is only expected in years 1 and 2. 
Docket Nos. RM12-6-000 and RM12-7-000 - 192 -

• Implementation Plans and Compliance229 (years 1 and 2): (hourly 

expense per entity * hours per response * sum of NPCC and non-NPCC 

entities) = ($64/hour * 700 hours per response * 186 responses) = 

$8,332,800. 

• Implementation Plans and Compliance (year 3 and beyond): We 

estimate the ongoing cost for year 3 and beyond, at 50% of the year 1 and 2 

costs, to be $4,166,400.

Title: FERC-725-J “Definition of the Bulk Electric System”230

Action: Proposed Collection of Information

OMB Control No: 1902-0259 

Respondents: Business or other for profit, and not for profit institutions.

Frequency of Responses: On Occasion 

Necessity of the Information: The revision to NERC’s definition of the term bulk electric 

system implements the Congressional mandate of the Energy Policy Act of 2005 to 

develop mandatory and enforceable Reliability Standards to better ensure the reliability 

 229 The cost and hourly burden calculations for this category are based on a past 

assessment (NPCC Assessment of Bulk Electric System Definition, September 14, 

2009.). In that assessment NPCC indicated $8.9 million annually for operations, 

maintenance and additional costs. We estimated that roughly half of that cost actually 

relates to information collection burden. Using the resulting figure, we used a composite 

wage and benefit figure of $64/hour to estimate the hourly burden figures presented in the 

burden table. 

230 All of the information collection requirements for years 1-3 in the proposed 

rule are being accounted for under the new collection FERC-725J.
Docket Nos. RM12-6-000 and RM12-7-000 - 193 -

of the nation’s Bulk-Power System. Specifically, the revised definition ensures that 

certain facilities needed for the operation of the nation’s bulk electric system are subject 

to mandatory and enforceable Reliability Standards.

Internal review: The Commission has reviewed the proposed definition and made a 

determination that its action is necessary to implement section 215 of the FPA. The 

Commission has assured itself, by means of its internal review, that there is specific, 

objective support for the burden estimate associated with the information requirements.

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

contacting the Federal Energy Regulatory Commission, Office of the Executive Director, 

888 First Street, NE, Washington, DC 20426 [Attention: Ellen Brown, e-mail: 

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

332. For submitting comments concerning the collection of information and the 

associated burden estimate, please send your comments to the Office of Management and 

Budget, Office of Information and Regulatory Affairs, Washington, DC 20503 

[Attention: Desk Officer for the Federal Energy Regulatory Commission, phone: 

(202) 395-4718, fax: (202) 395-7285]. For security reasons, comments to OMB should 

be submitted by e-mail to: oira_submission@omb.eop.gov. Comments submitted to 

OMB should include Docket Number RM12-6 and OMB Control Number 1902-0259.
Docket Nos. RM12-6-000 and RM12-7-000 - 194 -

IV. Regulatory Flexibility Act Analysis

333. The Regulatory Flexibility Act of 1980 (RFA)231 generally requires a description 

and analysis of Proposed Rules that will have a significant economic impact on a 

substantial number of small entities. The RFA mandates consideration of regulatory 

alternatives that accomplish the stated objectives of a proposed rule and that minimize 

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

Business Administration’s (SBA) Office of Size Standards develops the numerical 

definition of a small business.232 The SBA has established a size standard for electric 

utilities, stating that a firm is small if, including its affiliates, it is primarily engaged in 

the transmission, generation and/or distribution of electric energy for sale and its total 

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

hours.233

NOPR Proposal

334. In the NOPR, the Commission estimated that approximately 418 of the 1,730 

registered transmission owners, generator owners and distribution service providers may 

fall within the definition of small entities. Further, the Commission estimated that of the 

418 small entities affected there are 50 within the NPCC region that would have to 

comply with the rulemaking. The Commission contemplated that the rulemaking would 

 231 5 U.S.C. 601-612 (2006).

232 13 CFR 121.101.

233 13 CFR 121.201, Sector 22, Utilities & n.1. 
Docket Nos. RM12-6-000 and RM12-7-000 - 195 -

affect more small entities in the NPCC Region than those outside NPCC because there 

are more elements in the NPCC region that would be added to the bulk electric system 

based on the new definition than elsewhere. The Commission estimated the first year 

affect on small entities within the NPCC region to be $39,414.234 This figure is based on 

information collection costs plus additional costs for compliance.235 The Commission 

estimated the average annual affect per small entity outside of NPCC will be less than for 

the entities within NPCC. In the NOPR, the Commission stated that it did not consider 

this to be a significant economic impact for either class of entities because it should not 

represent a significant percentage of the operating budget. 

Comments

335. APPA asserts that the Commission underestimates the costs of compliance for 

small utilities. According to APPA, the Commission’s assumption that utility staff would 

conduct an analysis is not merited in the case of many small entities. APPA states that 

many of its smaller members do not have the in-house employees and resources to 

conduct such reliability analyses and would have to rely on outside consultants and legal 

 234 For companies registered as more than one entity in the NERC compliance 

registry this figure will increase accordingly. That is, if a company is registered as a 

transmission owner and generator owner then the cost burden would be $78,828 

($39,414*2 = $78,828). 

235 We use fifty percent of the first year “number of hours per response” figure in 

the information collection statement for calculation under the assumption that smaller 

entities do not have complicated systems or will not have as many new elements on 

average as larger entities do.
Docket Nos. RM12-6-000 and RM12-7-000 - 196 -

firms. Therefore, APPA estimates that the fees small utilities would pay for each of the 

services as follows, based on information and belief: Consulting Engineer, $225/hour; 

Record Keeping, $75/hour; and Legal, $500/hour. According to APPA, these increased 

dollar estimates alone substantially increase the burden estimates on smaller utilities to 

comply with the Commission’s proposals. WPPC believes that the cost to satisfy 

transmission owner/transmission operator certification alone would be $80,000. WPPC 

points to one small municipally-owned utility paid $40,000 for third party expertise and 

review of the utility’s required compliance. WPPC adds that the municipality had two 

staff members spend a week reviewing a modifying city policies to ensure compliance 

with reliability standards. WPPC points out that these costs only represent the initial 

subject matter review and do not include subsequent implementation, training or material 

purchase costs. WPPC also states that small entities have to divert employees from other 

tasks to compliance tasks which represents a significant burden on staffing.

336. ISO New England does not believe that the NOPR cost estimate captures the cost 

of physical upgrades that might be necessary on the system. The cost estimates do not 

reflect the true financial burden that might be borne by these smaller entities.

337. BPA is concerned that the Commission is underestimating the costs and resources 

associated with reliability compliance. BPA disagrees with the Commission’s estimated 

annual costs of $39,414 for entities that are required to newly comply with Reliability 

Standards as a result of adopting the definition. BPA believes that the Commission’s 

figure vastly underestimates the actual effort and costs associated with compliance. In 

BPA’s experience with its customers, the smallest customer impact is equivalent to at 
Docket Nos. RM12-6-000 and RM12-7-000 - 197 -

least one FTE, and larger customers have indicated they have an even higher burden. 

BPA asserts that the Commission’s estimates also overlook indirect compliance costs and 

their impact on small and large entities alike. BPA disagrees with the Commission’s 

conclusion that the compliance burden is not “a significant economic impact . . . because 

it should not represent a significant percentage of the operating budget.” It is BPA’s 

experience that implementing a fully functioning compliance program requires 

committed personnel, budget, and resources, which is never insignificant.

Commission Determination

338. The Commission disagrees with commenters that challenge the Commission’s 

conclusion that the rule will not have a significant economic impact on a substantial 

number of small entities. We are not persuaded by APPA, BPA and ISO New England’s 

assertions regarding how the Commission’s analysis is erroneous or in what ways the 

Final Rule will have a significant economic impact on a substantial number of small 

entities. As the Commission stated in its NOPR, most transmission owners, transmission 

operators and transmission service providers do not fall within the definition of small 

entities. In addition, the requirement to comply with the definition of bulk electric 

system is not new. The reason for revising the definition of bulk electric system is to 

comply with the Commission’s directives and address the technical and policy concerns 

expressed in Order Nos. 743 and 743-A, which NERC accomplished by eliminating the 

explicit basis of authority for Regional Entity discretion in the current definition, and 

establishing specific threshold criteria rather than general guidelines of facilities operated 

or connected at or above 100 kV. Thus, while the Commission recognizes that some 
Docket Nos. RM12-6-000 and RM12-7-000 - 198 -

small entities within the NPCC territory may have an increased burden due to multiple 

registration classifications or increased compliance with the Reliability Standards due to 

the elimination of the regional discretion, the average annual affect per small entity 

outside of NPCC will be less than for the entities within NPCC and should not materially 

change. The Commission also does not consider this to be a significant economic impact 

for either class of entities because our estimated costs for complying with the revised 

definition should not represent a significant percentage of the operating budget. Further, 

while NYPSC and Massachusetts DPU assert that the costs for compliance will be 

$280 million they make no specific reference to the cost for small businesses and, as 

noted above, their estimate does not account for the revised language in the definition of 

bulk electric system and the specific inclusions and exclusions that we are approving in 

this Final Rule. Accordingly, the Commission certifies that this Final Rule will not have 

a significant economic impact on a substantial number of small entities. 

V. Environmental Analysis

339. 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.236 The Commission has categorically excluded certain 

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

 236 Regulations Implementing the National Environmental Policy Act, Order 

No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. Regulations Preambles 

1986-1990 ¶ 30,783 (1987).
Docket Nos. RM12-6-000 and RM12-7-000 - 199 -

environment. The actions proposed here fall within the categorical exclusion in the 

Commission’s regulations for rules that are clarifying, corrective or procedural, for 

information gathering, analysis, and dissemination.237 Accordingly, neither an 

environmental impact statement nor environmental assessment is required.

VI. Document Availability

340. 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. 

341. 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. 

342. 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 email at ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 

 237 18 C.F.R. § 380.4(a)(5). 
Docket Nos. RM12-6-000 and RM12-7-000 - 200 -

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

public.referencerom@ferc.gov. 

VII. Effective Date and Congressional Notification 

343. These regulations are effective [insert date 60 days from the later of the date 

Congress receives the agency notice or the date the rule is published in the Federal 

Register]. The Commission has determined, with the concurrence of the Administrator of 

the Office of Information and Regulatory Affairs of OMB, that this rule is not a “major 

rule as defined in section 351 of the Small Business Regulatory Enforcement Fairness 

Act of 1996. 

List of subjects in 18 CFR Part 40 

By the Commission. Commissioner Clark is not participating. 

( S E A L )

Nathaniel J. Davis, Sr.,

Deputy Secretary.
Docket Nos. RM12-6-000 and RM12-7-000 - 201 -

Appendix A

American Electric Power Service Corporation (AEP)

American Municipal Power, Inc. (AMP) 

American Public Power Association (APPA)

American Wind Energy Association (AWEA)

Arizona Public Service Company (Arizona Public Service)

Barrick Goldstrike Mines Inc. (Barrick)

Associated Electric Cooperative, Inc., Basin Electric Power Cooperative, Tri-State 

Generation and Transmission Association, Inc. (the G&T Cooperatives)

Bonneville Power Administration (BPA)

City of Alameda, California (Alameda)

City of Anaheim, California (Anaheim)

City of Redding, California (Redding)

City of Riverside, California (Riverside)

Cogeneration Association of California and the Energy Producers and Users 

Coalition

Consumers Energy Company (Consumers)

Dominion Resources Services, Inc. (Dominion)

Dow Chemical Company (Dow)

Duke Energy Corporation (Duke Energy)

Edison Electric Institute (EEI)

Electricity Consumers Resource Council (ELCON)

Exelon Corporation (Exelon)

Florida Reliability Coordinating Council, Midwest Reliability Organization, 

Northeast Power Coordinating Council, Inc., ReliabilityFirst Corporation, 

Southwest Power Pool Regional Entity, SERC Reliability Corporation, Texas 

Reliability Entity, Inc., Western Electricity Coordinating Council (the Regional 

Entities)

City of Holland, Michigan Board of Public Works (Holland)

Hydro One Networks Inc. and the Independent Electricity System Operator (Hydro 

One) 

Hydro Quebec Transenergie (Hydro Quebec)

Idaho Power Company (Idaho Power)

Imperial Irrigation District (IID)

Industrial Customers of Northwest Utilities (ICNU)

Industrial Users of Utah (IUU)

International Transmission Company d/b/a ITC Transmission, Michigan Electric

Transmission Company, LLC, ITC Midwest LLC and ITC Great Plains LLC

(ITC)
Docket Nos. RM12-6-000 and RM12-7-000 - 202 -

ISO New England Inc. (ISO New England)

Kansas City Power & Light Company and KCP&L Greater Missouri (KCP&L)

Large Public Power Council (LPPC)

Massachusetts Department of Public Utilities (Massachusetts DPU)

Midwest Independent Transmission System Operator, Inc. (MISO)

MISO Transmission Owners

National Association of Regulatory Utility Commissioners (NARUC)

National Grid USA (National Grid)

National Rural Electric Cooperative Association (NRECA)

Nevada Power Company and Sierra Pacific Power Company (NV Energy)

New England States Committee on Electricity (NESCOE)

New York Independent System Operator, Inc. (NYISO)

New York State Public Service Commission (NYPSC)

North American Electric Reliability Corporation (NERC)

North Carolina Eastern Municipal Power Agency (“NCEMPA”) and North Carolina 

Municipal Power Agency Number 1 (“NCMPA1”) (together “Power Agencies”)

Oglethorpe Power Corporation, Georgia Transmission Corporation and Georgia 

System Operations Corporation

Old Dominion Electric Cooperative (ODEC)

Occidental Energy Ventures Corp

Pennsylvania Public Utility Commission

Pepco Holdings, Inc., Potomac Electric Power Company, Delmarva Power & Light 

Company, Atlantic City Electric Company (PHI Companies)

Portland General Electric Company (Portland)

Public Service Electric and Gas Company, PSEG Power LLC, and PSEG Energy 

Resources & Trade LLC (PSEG Companies)

SmartSenseCom, Inc. (SmartSenseCom)

Snohomish County PUD No. 1 (Snohomish)

Southern California Edison Company (SoCal Edison)

Southern Company Services, Inc. (Southern Companies)

Springfield Utility Board (Springfield)

Steel Manufacturers Association

Transmission Access Policy Study Group (TAPS)

Utility Services, Inc. 

Valero Services, Inc (Valero) 

Western Public Power Coalition (WPPC) 

White River Electric Association, Inc. (WREA)