14008 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

PART 71—DESIGNATION OF CLASS A, 

B, C, D, AND E AIRSPACE AREAS; AIR 

TRAFFIC SERVICE ROUTES; AND 

REPORTING POINTS 

■ 1. The authority citation for 14 CFR 

part 71 continues to read as follows: 

Authority: 49 U.S.C. 106(g), 40103, 40113, 

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– 

1963 Comp., p. 389. 

§ 71.1 [Amended] 

■ 2. The incorporation by reference in 

14 CFR 71.1 of the Federal Aviation 

Administration Order 7400.9S, Airspace 

Designations and Reporting Points, 

signed October 3, 2008, and effective 

October 31, 2008 is amended as follows: 

Paragraph 6005. Class E airspace areas 

extending upward from 700 feet or more 

above the surface of the earth. 

* * * * * 

AWP NV E5 Reno, NV [Modified] 

Reno/Tahoe International Airport, NV 

(Lat. 39°29′57′′ N., long. 119°46′05′′ W.) 

Mustang VORTAC 

(Lat. 39°31′53′′ N., long. 119°39′22′′ W.) 

That airspace extending upward from 700 

feet above the surface beginning at lat. 

40°00′20′′ N., long. 120°00′04′′ W.; thence 

clockwise via the 32.0-mile radius of the 

Reno/Tahoe International Airport to lat. 

40°01′31′′ N., long. 119°40′01′′ W.; to lat. 

39°49′35′′ N., long. 119°34′05′′ W.; thence 

clockwise via the 21.7-mile radius to lat. 

39°25′12′′ N., long. 119°18′45′′ W.; to lat 

39°13′00′′ N., long 119°47′04′′ W.; to lat. 

39°08′20′′ N., long. 119°47′04′′ W.; to lat. 

39°10′20′′ N., long.120°00′04′′ W., to the point 

of beginning. That airspace extending 

upward from 1,200 feet above the surface 

within a 39.1-mile radius of the Mustang 

VORTAC excluding the area east of 

long.119°00′04′′ W., and west of long. 

120°19′04′′ W.; and that airspace northwest of 

the Reno/Tahoe International Airport 

extending from the 39.1-mile radius bounded 

on the northeast by the southwest edge of V– 

452 and on the west by long. 120°19′04′′ W. 

That airspace extending upward from 13,100 

feet MSL beginning at lat. 38°54′56′′ N., long. 

119°22′47′′ W.; thence clockwise via the 39.1- 

mile radius to the eastern edge of V–165, 

thence southbound along the eastern edge of 

V–165 to the northern edge of V–244, thence 

eastbound to lat.38°04′00′′ N., long. 

119°15′24′′ W., to the point of beginning. 

That airspace extending upward from 12,300 

feet MSL beginning at lat. 38°52′20′′ N., long. 

119°35′44′′ W.; to lat. 38°52′20′′ N., 

long.119°47′54′′ W.; to lat. 38°28′00′′ N., long. 

119°52′44′′ W.; to lat. 38°01′30′′ N., 

long.119°51′34′′ W.; to lat. 38°01′00′′ N., 

long.119°38′04′′ W.; to lat. 38°27′30′′ N., 

long.119°33′44′′ W., to the point of beginning. 

* * * * * 

Issued in Seattle, Washington, on March 

19, 2009. 

H. Steve Karnes, 

Acting Manager, Operations Support Group, 

Western Service Center. 

[FR Doc. E9–6994 Filed 3–27–09; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Part 40 

[Docket No. RM08–11–000; Order No. 722] 

Version Two Facilities Design, 

Connections and Maintenance 

Reliability Standards 

Issued March 20, 2009. 

AGENCY: Federal Energy Regulatory 

Commission. 

ACTION: Final rule. 

SUMMARY: Pursuant to section 215 of the 

Federal Power Act, the Commission 

approves three revised Reliability 

Standards developed by the North 

American Electric Reliability 

Corporation (NERC), which the 

Commission has certified as the Electric 

Reliability Organization responsible for 

developing and enforcing mandatory 

Reliability Standards. The three revised 

Reliability Standards, designated by 

NERC as FAC–010–2, FAC–011–2 and 

FAC–014–2, set requirements for the 

development and communication of 

system operating limits of the BulkPower System for use in the planning 

and operation horizons. In addition, the 

Commission approves, with 

modifications, the violation severity 

levels for the three Reliability 

Standards. 

DATES: Effective Date: This rule will 

become effective April 29, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Cory Lankford (Legal Information), 

Office of the General Counsel, Federal 

Energy Regulatory Commission, 888 

First Street, NE., Washington, DC 

20426, (202) 502–6711. 

Cynthia Pointer (Technical 

Information), Office of Electric 

Reliability, Division of Reliability 

Standards, Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426, (202) 502– 

6069. 

SUPPLEMENTARY INFORMATION: 

TABLE OF CONTENTS

Paragraph 

numbers 

I. Background ............................................................................................................................................................................................ 2 

A. Mandatory Reliability Standards ................................................................................................................................................. 2 

B. NERC’s Proposed Version Two FAC Reliability Standards ....................................................................................................... 3 

C. Notice of Proposed Rulemaking ................................................................................................................................................... 5 

II. Discussion ............................................................................................................................................................................................ 9 

A. Load Greater Than Studied ......................................................................................................................................................... 12 

B. Cascading Outages ........................................................................................................................................................................ 17 

C. Loss of Consequential Load ......................................................................................................................................................... 21 

D. Violation Severity Levels ............................................................................................................................................................. 26 

1. General Matters ...................................................................................................................................................................... 32 

2. Assignment of Violation Severity Levels to Sub-Requirements NERC Filing ................................................................... 37 

3. Removal of Unnecessary Violation Severity Level Assignments NERC Filing .................................................................. 47 

4. Compliance With the Commission’s Violation Severity Level Guidelines ........................................................................ 51 

a. Requirement R1 of FAC–010–2 and FAC–011–2 NERC Filing .................................................................................... 54 

b. FAC–010–2 Requirement R4 NERC Filing .................................................................................................................... 60 

c. FAC–011–2, Requirement R3 NERC Filing ................................................................................................................... 66 

d. FAC–011–2, Requirement R4 NERC Filing ................................................................................................................... 72 

e. FAC–014–2, Requirements R1 Through R4 NERC Filing ............................................................................................. 76 

f. FAC–014–2, Requirement R5 NERC Filing .................................................................................................................... 82 

g. FAC–014–2, Requirement R6 NERC Filing ................................................................................................................... 85 

E. Violation Risk Factors .................................................................................................................................................................. 90 

F. WECC Regional Differences ......................................................................................................................................................... 94 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14009 

1 16 U.S.C. 824o. 

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

3NERC designates the version number of a 

Reliability Standard as the last digit of the 

Reliability Standard number. Therefore, version one 

Reliability Standards end with ‘‘–1’’ and version 

two Reliability Standards end with ‘‘–2.’’ 

4Facilities Design, Connections and Maintenance 

Reliability Standards, Order No. 705, 73 FR 1770 

(Jan. 9, 2008), 121 FERC ¶ 61,296 (2007), order on 

reh’g and clarification, 123 FERC ¶ 61,239 (2008). 5The FAC Reliability Standards are not codified 

in the CFR and are not attached to the Final Rule. 

They are, however, available on the Commission’s 

eLibrary document retrieval system in Docket No. 

RM08–11–000 and are available on the ERO’s Web 

site, http://www.nerc.com. 6 Version Two Facilities Design, Connections and 

Maintenance Reliability Standards, 73 FR 63105 

(Oct. 23, 2008), FERC Stats. & Regs. ¶ 32,637 (2008) 

(NOPR). 

7Reliability Standards cannot become effective 

before the effective date of a Commission order 

approving them. See, e.g., Mandatory Reliability 

Standards for Critical Infrastructure Protection, 

Order No. 706, 73 FR 7368 (Feb. 7, 2008), 122 FERC 

¶ 61,040 (2008) at n.190. 

TABLE OF CONTENTS—Continued 

Paragraph 

numbers 

G. Effective Date ................................................................................................................................................................................ 101 

III. Information Collection Statement ...................................................................................................................................................... 102 

IV. Environmental Analysis ..................................................................................................................................................................... 104 

V. Regulatory Flexibility Act ................................................................................................................................................................... 105 

VI. Document Availability ....................................................................................................................................................................... 108 

VII. Effective Date and Congressional Notification ................................................................................................................................ 111 

Before Commissioners: Jon 

Wellinghoff, Chairman; Suedeen G. 

Kelly, Marc Spitzer, and Philip D. 

Moeller. 

1. Pursuant to section 215 of the 

Federal Power Act,1 the Commission 

approves three revised Reliability 

Standards concerning Facilities Design, 

Connections and Maintenance (FAC) 

that were developed by the North 

American Electric Reliability 

Corporation (NERC), which the 

Commission has certified as the Electric 

Reliability Organization (ERO) 

responsible for developing and 

enforcing mandatory Reliability 

Standards. The three revised Reliability 

Standards, designated by NERC as FAC– 

010–2, FAC–011–2, and FAC–014–2, set 

requirements for the development and 

communication of system operating 

limits of the Bulk-Power System for use 

in the planning and operation horizons. 

In addition, the Commission approves, 

with modifications, the violation 

severity levels for the three Reliability 

Standards. 

I. Background 

A. Mandatory Reliability Standards 

2. Section 215 of the FPA requires a 

Commission-certified ERO to develop 

mandatory and enforceable Reliability 

Standards, which are subject to 

Commission review and approval. Once 

approved, the Reliability Standards may 

be enforced by the ERO, subject to 

Commission oversight, or by the 

Commission independently.2

B. NERC’s Proposed Version Two FAC 

Reliability Standards 

3. In Order No. 705, the Commission 

approved three ‘‘version one’’ FAC 

Reliability Standards, FAC–010–1, 

FAC–011–1, and FAC–014–1,3 which 

require planning authorities and 

reliability coordinators to establish 

methodologies to determine system 

operating limits for the Bulk-Power 

System in the planning and operation 

horizons.4 In addition, the Commission 

directed the ERO to develop 

modifications to the Reliability 

Standard; and remanded the ERO’s 

proposed definition of ‘‘Cascading 

Outage.’’ 

4. On June 30, 2008, in response to 

the Commission’s directives in Order 

No. 705, NERC submitted for 

Commission approval three revised FAC 

Reliability Standards: 5 System 

Operating Limits Methodology for the 

Planning Horizon—FAC–010–2, System 

Operating Limits Methodology for the 

Operations Horizon—FAC–011–2, and 

Establish and Communicate System 

Operating Limits—FAC–014–2. NERC 

requests that FAC–010–2 be made 

effective on July 1, 2008, FAC–011–2 on 

October 1, 2008, and FAC–014–2 on 

January 1, 2009, consistent with the 

implementation dates of version one of 

these Reliability Standards. 

C. Notice of Proposed Rulemaking 

5. On October 16, 2008, the 

Commission issued a notice of proposed 

rulemaking (NOPR) proposing to 

approve the revised FAC Reliability 

Standards.6 In addition, the 

Commission expressed concern with 

several of NERC’s proposed assignments 

of violation severity levels and proposed 

modifications. Further, the Commission 

proposed to apply the violation risk 

factors associated with the version one 

FAC Reliability Standards to the version 

two Reliability Standards approved 

here. 

6. In the NOPR, the Commission 

required that comments be filed within 

30 days after publication in the Federal 

Register, or November 24, 2008. Five 

parties filed comments in response to 

the FAC NOPR: NERC, the Midwest 

Independent System Operator, Inc. 

(Midwest ISO), the Bonneville Power 

Administration (BPA), the United States 

Department of the Interior, Bureau of 

Reclamation (Bureau of Reclamation), 

and the Independent Electric System 

Operator of Ontario (IESO). The 

Commission addresses these comments 

below. 

7. On October 15, 2008, NERC filed 

violation risk factors for the version two 

FAC Reliability Standards and a 

regional difference for the Western 

Interconnection. The violation risk 

factors filed by NERC are identical to 

the violation risk factors assigned to the 

version one FAC Reliability Standards. 

8. Notice of NERC’s October 15, 2008 

filing was published in the Federal 

Register, 74 FR 8082 (2009), with 

comments due on March 5, 2009. None 

was filed. 

II. Discussion 

9. As discussed below, the 

Commission finds the three FAC 

Reliability Standards to be just, 

reasonable not unduly discriminatory or 

preferential, and in the public interest. 

Further, the proposed Reliability 

Standards are consistent with our 

directives in Order No. 705. The 

Commission therefore approves 

Reliability Standards FAC–010–2, FAC– 

011–2, and FAC–014–2, effective 30 

days after publication of this final rule 

in the Federal Register.7

10. In addition, as discussed below, 

we approve the ERO’s proposed 

violation severity levels and violation 

risk factors for the three FAC Reliability 

Standards and direct the ERO to make 

certain modifications to the violation 

severity levels within 30 days of the 

effective date of this final rule. 

11. In the sections below, we address 

each of the proposed revisions to the 

FAC Reliability Standards as well as 

comments received in response to the 

FAC NOPR. 


sroberts on PROD1PC70 with RULES
14010 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

8Order No. 705, 121 FERC ¶ 61,296 at P 70. 

9 Id. 

10NOPR, FERC Stats. & Regs. ¶ 32,637 at P 10 

(citing Order No. 705, 121 FERC ¶ 61,296 at P 69). 

11 Id. (citing Order No. 705, 121 FERC ¶ 61,296 at 

P 68, which states that ‘‘transmission operators are 

required to modify their plans whenever they 

receive information or forecasts that are different 

from what they used in their present plans. 

Furthermore, variations in weather forecasts that 

result in load forecast errors are more properly 

addressed through operating reserve 

requirements.’’). 

12Order No. 705, 121 FERC ¶ 61,296 at P 111. 

13NOPR, FERC Stats. & Regs. ¶ 32,637 at P 13. 

14 Identical language appears in FAC–011–1, 

Requirement R2.3. 

15 Mandatory Reliability Standards for the BulkPower System, Order No. 693, 72 FR 16416 (Apr. 

4, 2007), FERC Stats. & Regs. ¶ 31,242 at P 1788, 

order on reh’g, Order No. 693-A, 120 FERC ¶ 61,053 

(2007). 

16Order No. 705, 121 FERC ¶ 61,296 at P 53. 

A. Load Greater Than Studied 

12. Sub-requirement R2.3.2 of FAC– 

011–1 (the ‘‘version 1’’ standard) 

provided that the system’s response to 

a single contingency may include, inter 

alia, ‘‘[i]nterruption of other network 

customers, only if the system has 

already been adjusted, or is being 

adjusted, following at least one prior 

outage, or, if the real-time operating 

conditions are more adverse than 

anticipated in the corresponding 

studies, e.g., load greater than studied.’’ 

NERC asserted that a significant gap 

between actual and studied conditions 

(such as a large error in load forecast) 

could be treated as though it were a 

contingency under the version 1 of 

FAC–011–1 Reliability Standard. 

13. In Order No. 705, the Commission 

disagreed with NERC’s explanation of 

FAC–011–1, sub-Requirement R2.3.2 

and use of the phrase ‘‘load greater than 

studied.’’ 8 However, the Commission 

found that the meaning of Requirement 

R2.3 and sub-Requirement R2.3.2 was 

clear without the phrase. The 

Commission therefore approved FAC– 

011–1, but directed the ERO to revise 

the Reliability Standard through the 

Reliability Standards development 

process. The Commission suggested that 

NERC could address the Commission’s 

concern by deleting the phrase, ‘‘e.g., 

load greater than studied.’’ 9

NERC Filing 

14. In response to the Commission’s 

directive, NERC revised the Reliability 

Standard to remove the phrase ‘‘e.g. 

load greater than studied’’ from 

Requirement R2.3.2. NERC described 

the phrase as an example and stated that 

its removal does not materially change 

the requirement. 

NOPR Proposal 

15. In the NOPR, the Commission 

proposed to approve NERC’s removal of 

the phrase ‘‘e.g., load greater than 

studied’’ from sub-requirement R2.3.2 of 

FAC–011–2. The Commission noted that 

NERC’s revision in FAC–011–2 

appeared reasonable and did not appear 

to change or conflict with the stated 

requirements set forth in the version one 

Reliability Standards approved in Order 

No. 705. 

Commission Determination 

16. The Commission approves the 

ERO’s removal of the phrase ‘‘e.g., load 

greater than studied’’ from subrequirement R2.3.2 of FAC–011–2. As 

we explained in the NOPR, while NERC 

described the phrase ‘‘load greater than 

studied’’ as simply an example and its 

removal does not materially change the 

requirement, Order No. 705 found that 

the operating conditions referred to in 

sub-Requirement R2.3.2 exacerbated 

circumstances that were distinct from 

the actual contingency to be addressed 

that is referred to in Requirement R2.3. 

Further, the Commission, in Order No. 

705, did not support treating ‘‘load 

greater than studied’’ as a 

contingency.10 Rather, correcting for 

load forecast error is not accomplished 

by treating the error as a contingency, 

but is addressed under other Reliability 

Standards.11 The removal of the phrase 

‘‘load greater than studied’’ resolves our 

concern and, accordingly, we approve 

the revision. 

B. Cascading Outages 

17. With the version one FAC 

Reliability Standards, NERC proposed to 

add the term ‘‘Cascading Outages’’ to its 

glossary. In Order No. 705, the 

Commission noted that, although the 

glossary did not include a definition of 

Cascading Outages, it included a 

previously-approved definition of 

‘‘Cascading,’’ which seemed to describe 

the same concept. The Commission 

remanded NERC’s proposed definition 

of Cascading Outages because NERC did 

not describe either the need for two 

definitions that seem to address the 

same matter or the variations between 

the two. The Commission also raised 

specific concerns with NERC’s proposed 

definition of Cascading Outages. 

However, the Commission allowed 

NERC to file a revised definition that 

addresses the Commission’s concerns.12

NERC Proposal 

18. In response, NERC proposed to 

withdraw the definition of Cascading 

Outages. Further, NERC revised 

Reliability Standards FAC–010–2 and 

FAC–011–2 by removing the term 

Cascading Outages and replacing it with 

Cascading. 

NOPR Proposal 

19. In the NOPR, the Commission 

proposed to approve NERC’s 

substitution of Cascading for Cascading 

Outage in the FAC Reliability 

Standards.13 The Commission noted 

that NERC’s proposed revisions to FAC– 

010–2 and FAC–011–2 appeared 

reasonable and did not appear to change 

or conflict with the stated requirements 

set forth in the version one Reliability 

Standards approved in Order No. 705. 

Commission Determination 

20. The Commission approves the 

ERO’s decision to withdraw the 

definition of Cascading Outage, and to 

remove the term Cascading Outage from 

the FAC Reliability Standards and 

replace it with the term Cascading. This 

approach is consistent with Order No. 

705 and provides further clarity to the 

FAC Reliability Standards. 

C. Loss of Consequential Load 

21. Reliability Standard FAC–010–1 

(version 1) Requirement R2.3, provided 

that the system’s response to a single 

contingency may include, inter alia, 

‘‘planned or controlled interruption of 

electric supply to radial customers or 

some local network customers 

connected to or supplied by the Faulted 

Facility or by the affected area.’’ 14 In 

response to a question raised by the 

Commission, NERC clarified that the 

provision in FAC–010–1, Requirement 

R2.3 is limited to loss of load that is 

directly connected to the facilities 

removed from service as a direct result 

of the contingency, i.e., consequential 

load loss. 

22. In Order No. 705, the Commission 

reiterated its holding that addressed 

similar language on loss of load in Order 

No. 693, regarding Reliability Standard 

TPL–002–0. In Order No. 693, the 

Commission noted that ‘‘allowing for 

the 30 minute system adjustment 

period, the system must be capable of 

withstanding an N–1 contingency, with 

load shedding available to system 

operators as a measure of last resort to 

prevent cascading failures.’’ 15 Order 

No. 693 directed the ERO to clarify the 

planning Reliability Standard TPL–002– 

0 accordingly. The Commission reached 

the same conclusion in Order No. 705. 

In Order No. 705, the Commission 

approved Reliability Standard FAC– 

010–1, Requirement R2.3 and directed 

the ERO to ensure that the clarification 

developed in response to Order No. 693 

is made to the FAC Reliability 

Standards as well.16


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14011 

17See NOPR, FERC Stats. & Regs. ¶ 32,637 at P 

17 (citing Order No. 705, 121 FERC ¶ 61,296 at P 

53); Order No. 693, FERC Stats. & Regs. ¶ 31,242 at 

P 1788 & n.461. 

18See id. P 53. 

19Order No. 705, 121 FERC ¶ 61,296 at P 137. 

20North American Electric Reliability Corp., 123 

FERC ¶ 61,284 (Violation Severity Level Order), 

order on reh’g, 125 FERC ¶ 61,212 (2008) (Violation 

Severity Level Order on Rehearing and 

Clarification). 

21 Guideline 2 contains two sub-parts: (a) The 

single violation severity level assignment category 

for binary requirements should be consistent and 

(b) violation severity levels assignments should not 

contain ambiguous language. 

22 Id. P 17. 

23NERC June 30, 2008 Filing, Docket No. RM07– 

3–000 at 5 (citing Violation Severity Level Order, 

123 FERC ¶ 61,284 at P 42 (requiring NERC, within 

six months from the issuance of the Violation 

Severity Level Order, to conduct a review of the 

approved violation severity levels pursuant to the 

Commission guidelines, and submit a compliance 

filing)). 

24NOPR, FERC Stats. & Regs. ¶ 32,637 at P 22. 

25The Violation Severity Level Order also, among 

other things, directed that the ERO submit a 

compliance filing within six months certifying that 

it had reviewed each of the violation severity levels 

for consistency with Guidelines 2b, 3, and 4, 

validating the assignments that meet those 

guidelines and proposing revisions to those that do 

not. The Violation Severity Level Order on 

Rehearing and Clarification extended the 

submission of ERO’s compliance filing by six 

months to September 18, 2009. 

NERC Filing 

23. NERC, in its June 30, 2008 filing, 

stated its belief that revisions to the 

term ‘‘loss of consequential load’’ is best 

addressed in its ongoing project to 

modify the transmission planning (TPL) 

group of Reliability Standards. NERC 

explains that the term ‘‘loss of 

consequential load’’ is intrinsic to the 

scope of the project to revise the TPL 

Reliability Standards and will be 

addressed there. 

NOPR Proposal 

24. In the NOPR, the Commission 

proposed to allow the ERO to address 

revisions to the term ‘‘loss of 

consequential load’’ in the modification 

being made to the TPL Reliability 

Standards. The Commission advised 

that such revisions should be consistent 

with the Commission’s prior 

determinations in Order Nos. 693 and 

705.17 The Commission preliminarily 

found that FAC–010–2 and FAC–011–2 

were clearly understood as written and 

clarified in Order No. 705, including its 

holding with respect to ‘‘loss of 

consequential load,’’ 18 and that NERC’s 

proposal to deal with ‘‘loss of 

consequential load’’ in a more related 

project was appropriate. 

Commission Determination 

25. The Commission adopts its NOPR 

proposal approving the ERO’s proposal 

to address revisions to the term ‘‘loss of 

consequential load’’ in the modification 

being made to the TPL Reliability 

Standards. 

D. Violation Severity Levels 

26. In the event of a violation of a 

Reliability Standard, NERC will 

establish the initial value range for the 

corresponding base penalty amount. To 

do so, NERC will assign a violation risk 

factor for each requirement of a 

Reliability Standard that relates to the 

expected or potential impact of a 

violation of the requirement on the 

reliability of the Bulk-Power System. In 

addition, NERC will define up to four 

violation severity levels—Lower, 

Moderate, High, and Severe—as 

measurements for the degree to which 

the requirement was violated in a 

specific circumstance. 

27. In Order No. 705, the Commission 

approved 63 of NERC’s 72 proposed 

violation risk factors for the version one 

FAC Reliability Standards and directed 

NERC to file violation severity level 

assignments before the version one FAC 

Reliability Standards become 

effective.19 Subsequently, NERC 

developed violation severity levels for 

each requirement of the Commissionapproved FAC Reliability Standards, as 

measurements for the degree to which 

the requirement was violated in a 

specific circumstance. 

28. On June 19, 2008, the Commission 

issued an order approving the violation 

severity level assignments filed by 

NERC for the 83 Reliability Standards 

approved in Order No. 693.20 In that 

order, the Commission offered four 

guidelines for evaluating the validity of 

violation severity levels, and ordered a 

number of reports and further 

compliance filing to bring the remainder 

of NERC’s violation severity levels into 

conformance with the Commission’s 

guidelines. The four guidelines are: (1) 

Violation severity level assignments 

should not have the unintended 

consequence of lowering the current 

level of compliance; (2) violation 

severity level assignments should 

ensure uniformity and consistency 

among all approved Reliability 

Standards in the determination of 

penalties; 21 (3) violation severity level 

assignments should be consistent with 

the corresponding requirement; and (4) 

violation severity level assignments 

should be based on a single violation, 

not a cumulative number of 

violations.22 The Commission found 

that these guidelines will provide a 

consistent and objective means for 

assessing, inter alia, the consistency, 

fairness and potential consequences of 

violation severity level assignments. 

The Commission noted that these 

guidelines were not intended to replace 

NERC’s own guidance classifications, 

but rather, to provide an additional level 

of analysis to determine the validity of 

violation severity level assignments. 

NERC Filing 

29. In its initial filing, NERC 

identified violation severity levels for 

FAC–010–2, FAC–011–2, and FAC– 

014–2. NERC acknowledged that it 

developed these violation severity levels 

prior to the issuance of the Violation 

Severity Level Order. NERC asked the 

Commission to accept its violation 

severity levels, as filed, for the version 

two FAC Reliability Standards even 

though it has not yet assessed their 

validity using the four guidelines 

established in the Violation Severity 

Level Order. NERC committed to 

assessing the violation severity levels 

for the FAC Reliability Standards in the 

six-month compliance filing required by 

the Violation Severity Level Order.23

NOPR Proposal 

30. The NOPR proposed to approve, 

with modification, NERC’s proposed 

violation severity levels for FAC–010–2, 

FAC–011–2, and FAC–014–2.24 The 

Commission acknowledged that NERC 

assigned its proposed violation severity 

levels before the Commission 

established the four guidelines for 

evaluating the validity of violation 

severity levels, and preliminarily found 

that certain proposed violation severity 

levels for the version two FAC 

Reliability Standards would not meet 

our guidelines. The Commission 

therefore proposed certain 

modifications to the violation severity 

levels to form a complete set of violation 

severity levels. The Commission 

acknowledged that NERC committed to 

assessing the violation severity levels in 

the compliance filing required by the 

Violation Severity Level Order and 

encouraged NERC to do so.25 If, 

however, NERC did not include an 

assessment of its FAC violation severity 

levels in its six-month evaluation 

following the issuance of the Violation 

Severity Level Order, the Commission 

proposed to direct the ERO to submit an 

assessment of the FAC violation severity 

levels within six months of the effective 

date of the final rule in this docket. 

31. In the sections below, the 

Commission addresses comments and 

approves, with modification, violation 

severity levels for FAC–010–2, FAC– 

011–2 and FAC–014–2. 


sroberts on PROD1PC70 with RULES
14012 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

26 Violation Severity Level Order, 123 FERC 

¶ 61,284 at P 15. 

27See North American Electric Reliability 

Corporation, 120 FERC ¶ 61,145, at P 16 (2007). 

28North American Electric Reliability Corp., 119 

FERC ¶ 61,248 at P 80 (June 2007 Order), order on 

clarification, 120 FERC ¶ 61,239 (2007). 

29Binary requirements of Reliability Standards 

define compliance in terms of ‘‘pass’’ or ‘‘fail.’’ 

30Order No. 705, 121 FERC ¶ 61,296 at P 24. 

31NERC June 30, 2008 Filing, Docket No. RM07– 

3–000, ex. A. 

1. General Matters 

Comments 

32. NERC requests clarification 

regarding the Commission’s direction in 

paragraph 24 of the NOPR. In that 

paragraph, the Commission states that it 

is concerned with several of the 

proposed violation severity levels and 

then provides two examples. NERC asks 

the Commission to clarify whether or 

not this was intended as a generic 

statement to preface later paragraphs of 

the NOPR. NERC also asks if the 

Commission has identified additional 

violation severity levels that need 

revision beyond those identified in the 

body of the NOPR. 

33. As a general matter, IESO supports 

the NERC’s proposed modifications to 

the FAC Reliability Standards, 

including the associated violation risk 

factors and violation severity levels and 

asks the Commission to accept them as 

filed. IESO states that the violation risk 

factors and violation severity levels 

were developed in a stakeholder process 

with active industry participation 

through NERC’s standards development 

process. IESO contends that the 

industry has the resources, technical 

capability, and the experience necessary 

to develop violation risk factors and 

violation severity levels that reflect the 

requirements embedded in the various 

reliability standards. IESO recommends 

that the Commission accept the industry 

developed and balloted violation risk 

factors and violation severity levels 

where these are established by NERC 

and the industry in adherence to a 

timely and due process. 

34. By contrast, the Bureau of 

Reclamation advocates that because the 

violation severity levels require 

refinement, the Commission should not 

approve NERC’s proposed Reliability 

Standards. The Bureau of Reclamation 

states that the Commission relies on 

NERC to develop Reliability Standards 

and in the event a standard is found to 

be inadequate, the Commission should 

remand the standard back to NERC. The 

Bureau of Reclamation asks the 

Commission to rely on the existing 

version until the proposed changes are 

made and resubmitted to the 

Commission for approval. Otherwise, 

the Bureau of Reclamation contends, it 

will be difficult for regulating entities to 

enforce uncertain Reliability Standards. 

Commission Determination 

35. In response to NERC’s comment, 

we clarify that the Commission’s 

statement in paragraph 24 of the NOPR 

that it is concerned with several of the 

proposed violation severity levels was 

intended as a generic statement to 

preface later paragraphs. In general, the 

Commission approves the violation 

severity levels proposed by NERC. As 

discussed in the NOPR, however, the 

Commission identified several violation 

severity levels that appeared either 

unclear or inconsistent with the 

Commission’s guidelines for violation 

severity levels. In this final rule, the 

Commission approves certain violation 

severity levels as proposed by NERC 

and directs certain modifications, as 

discussed below. 

36. The Commission disagrees with 

IESO’s proposal that because the 

violation severity levels proposed by 

NERC in this proceeding were 

developed by industry participants 

through NERC’s standard development 

process, the Commission should 

approve the violation severity levels as 

filed. The Commission has previously 

determined that, similar to violation risk 

factors, violation severity levels are not 

part of the Reliability Standard and, 

thus, are appropriately treated as an 

appendix to NERC’s Rules of 

Procedure.26 Revisions of violation 

severity levels do not modify the 

Reliability Standard. Accordingly, 

NERC is not required to comport with 

the Reliability Standards development 

provisions of Federal Power Act section 

215 when revising a violation severity 

level assignment.27 It is for this reason 

that the Commission also rejects the 

Bureau of Reclamation’s request that the 

Commission not approve the proposed 

Reliability Standards because the 

proposed violation severity levels 

applicable to them require additional 

work. 

2. Assignment of Violation Severity 

Levels to Sub-Requirements 

NERC Filing 

37. NERC did not propose any 

violation severity level assignments for 

sub-requirements. 

NOPR Proposal 

38. The Commission has directed 

NERC to develop violation severity 

levels for each requirement and subrequirement of each Reliability 

Standard.28 The Commission therefore 

proposed to direct the ERO to assign 

binary violation severity levels for all of 

the proposed sub-requirements.29 In 

Order No. 705, the Commission found 

that the binary approach is appropriate 

for certain violation severity level 

assignments.30 In this instance, the 

Commission determined that the binary 

approach is appropriate because the 

violation severity level of the base 

requirement is established by whether a 

sub-requirement is violated or not, not 

to the extent a sub-requirement is 

violated. Thus, the Commission 

preliminarily found that the proposed 

binary requirements satisfy guideline 3, 

which calls for consistency between the 

violation severity level assignments and 

their corresponding requirements. For 

example, FAC–010–2 Requirement R1.1 

states that the planning authority’s 

system operating limit methodology 

shall ‘‘[b]e applicable for developing 

system operating limits used in the 

planning horizon.’’ 31 Because NERC did 

not propose any violation severity levels 

for this sub-requirement, the 

Commission proposed a binary severe 

violation severity level that would be 

triggered when the planning authority 

system operating limit methodology is 

not applicable for developing system 

operating limits in the planning 

horizon. The Commission stated that 

this binary approach for subrequirements provides clear criteria to 

determine the violation severity level 

for a violation of the sub-requirement. 

The Commission proposed to direct the 

ERO to file the revised violation severity 

levels within 30 days of the final rule in 

this proceeding. 

Comments 

39. NERC states that it did not intend 

to assign a penalty or sanction based on 

the violation of each sub-requirement of 

a Reliability Standard separate and 

distinct from the base requirement it 

supports. Where a sub-requirement is 

phrased like a requirement and 

addresses a different reliability objective 

from the base requirement, NERC agrees 

that it is appropriate to assign a 

violation risk factor to the primary 

requirement and to each subrequirement that addresses differing 

reliability objectives. NERC contends, 

though, that the version two FAC 

Reliability Standards do not include any 

sub-requirements serving a reliability 

objective separate from the base 

requirement. NERC states that each of 

these sub-requirements is crafted as an 

integral component of the base 

requirement, and is not intended to be 

assessed for compliance independent of 

the base requirement. NERC states that 

each base requirement is assigned a 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14013 

32See Rules Concerning Certification of the 

Electric Reliability Organization; Procedures for the 

Establishment, Approval and Enforcement of 

Electric Reliability Standards, Order No. 672, 71 FR 

8662 (Feb. 17, 2006), FERC Stats. & Regs. ¶ 31,204 

(2006); order on reh’g, Order No. 672–A, 71 FR 

19814 (Apr. 18, 2006), FERC Stats. & Regs. ¶ 31,212 

(2006). Order No. 672 states that ‘‘[t]he possible 

consequences, including range of possible 

penalties, for violating a proposed Reliability 

Standard should be clear and understandable by 

those who must comply.’’ Order No. 672, FERC 

Stats. & Regs. ¶ 31,204 at P 326. 

33 June 2007 Order, 119 FERC ¶ 61,248 at P 80. 

34 Violation Severity Level Order, 123 FERC 

¶ 61,284 at P 3 (citing June 2007 Order, 119 FERC 

¶ 61,248 at P 74). 

35NERC November 24, 2008 Comments at 6. As 

NERC points out in its comments, some 

requirements assigned to Version 0 Reliability 

Standards included sub-requirements that were 

phrased like a separate requirement and, in fact, 

addressed a separate reliability objective. 

violation risk factor and a set of 

violation severity levels that 

incorporates each sub-requirement, 

irrespective of the number of subrequirements associated with the base 

requirement. Thus, NERC contends, the 

severity of violating the reliability 

objective of the base requirement and its 

associated sub-requirements is best 

assessed on the whole at the base 

requirement level rather than on the 

individual sub-requirement level. 

40. NERC disagrees with the 

Commission’s statement that NERC did 

not propose any violation severity level 

assignments for sub-requirements. 

NERC states that it proposed violation 

severity levels for each sub-requirement 

by reference in the associated base 

requirement of the related subrequirement. NERC also disagrees with 

the Commission’s proposal to direct the 

ERO to assign ‘‘Severe’’ binary violation 

severity levels for all of the proposed 

sub-requirements of the base 

requirement. NERC contends that the 

assignment of ‘‘Severe’’ binary violation 

severity levels for all of the proposed 

sub-requirements of a base requirement 

will create an overlap of violation 

severity levels between the base and 

sub-requirements that will have the 

unintended consequence of confusing 

the application of the NERC sanction 

guidelines to a particular set of 

circumstances that involves compliance 

with a particular sub-requirement as 

part of the base requirement. NERC 

further contends that its proposed 

application of violation severity levels 

relative to base and sub-requirements is 

consistent with the Commission’s 

criterion for approving Reliability 

Standards.32 NERC contends that the 

approach proposed by the Commission 

would create inconsistencies in the 

application of the violation severity 

levels, contrary to the Commission’s 

guidelines in Order No. 672. NERC 

further contends that the Commission’s 

proposed approach fails to acknowledge 

that the purpose of the sub-requirement 

is to support the singular reliability 

objective of, and is a component of, the 

total intent of the base requirement and, 

as such, is not to be assessed 

independently from the base 

requirement. 

41. IESO and Midwest ISO agree with 

NERC that the application of violation 

severity levels should be consistent and 

that the Commission should not require 

the assignment of a violation severity 

level to every sub-requirement. Midwest 

ISO contends that, in the event a subrequirement covers a different reliability 

objective than the base requirement and 

therefore does need its own violation 

severity level, the Commission should 

direct NERC to strike the subrequirement and rewrite it as a separate 

base requirement. Midwest ISO also 

requests Commission confirmation that 

a penalty should be assessed through 

the main requirement rather than 

through the criteria in the subrequirements. Further, Midwest ISO 

contends that, because the violation 

severity levels of these base 

requirements cover the violation of the 

criteria in the sub-requirements, the 

violation risk factors associated with the 

sub-requirements should be removed, 

eliminating the need for additional 

violation severity levels for subrequirements. 

Commission Determination 

42. NERC’s proposal to assign a 

penalty or sanction for a violation of a 

sub-requirement based on the violation 

severity level of the corresponding main 

requirement is not consistent with 

Commission precedent or with NERC’s 

Sanction Guidelines. The Commission 

has directed NERC to develop violation 

severity levels for every requirement 

and sub-requirement.33 In addition, the 

Violation Severity Level Order stated 

that each requirement assigned a 

violation risk factor also must be 

assigned at least one violation severity 

level.34 As set forth in the NERC’s 

Sanction Guidelines, the intersection of 

these two factors is the first step in the 

determination of a monetary penalty for 

a violation of a requirement of a 

Reliability Standard. The ERO and 

Regional Entities may assess penalties 

that relate to violations of particular 

sub-requirements of a requirement, 

where appropriate. For these reasons, 

the Commission disagrees with 

commenters who argue that the 

Commission should not require the 

assignment of violation severity levels 

to every sub-requirement. 

43. The Commission understands that 

the Reliability Standards (Version 0 and 

Version 1) approved in Order No. 693 

are, for the most part, a direct 

translation of the then voluntary NERC 

Operating Policies and Planning 

Standards, which employed a 

numbering hierarchy that does not 

consistently facilitate the assignment of 

violation risk factors and, consequently, 

violation severity levels. This 

numbering hierarchy, carried over 

during the translation, is at the heart of 

the distinction between ‘‘main’’ and 

‘‘sub’’ requirements with respect to 

compliance with mandatory Reliability 

Standards.35

44. The Commission appreciates the 

ERO’s initiative to develop an 

alternative approach to facilitate the 

assignment of factors necessary for its 

compliance and enforcement program. 

As NERC acknowledges, some 

Reliability Standards include 

requirements with sub-requirements 

that address a different reliability 

objective from the main requirement. 

The Commission understands that the 

varied nature of the relationship 

between the main requirements and 

sub-requirements throughout the 

Reliability Standards has created 

concern whether a violation of a subrequirement is also a violation of the 

requirement itself. Due to these 

concerns, the Commission believes that 

it is premature to change its current 

policy in the current proceeding, which 

is limited to the three FAC Reliability 

Standards submitted by NERC. 

45. Rather, the Commission 

encourages the ERO to develop a new 

and comprehensive approach that 

would better facilitate the assignment of 

violation severity levels and violation 

risk factors both prospectively and to 

existing, Commission-approved, 

Reliability Standards. The ERO could 

raise its proposal for an alternative 

approach in a separate filing. This 

would allow the Commission to better 

understand the implications of the 

proposed change in approach, as 

opposed to having to act on an ad hoc 

basis. 

46. The Commission expects that the 

ERO’s filing of its alternative approach 

would include a more detailed 

description of the proposal to assign 

violation severity levels for main 

requirements that would apply to subrequirements, as well as the specific 

conditions under which its application 


sroberts on PROD1PC70 with RULES
14014 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

36The Commission understands that this 

approach would also be applied in the assignment 

of violation risk factors to requirements of 

Reliability Standards. 

37 In particular, the Commission directs clarifying 

revisions to the violation severity levels that the 

Commission proposed to assign to sub-requirements 

R2.1, R2.2 and R2.5 of FAC–010–2 and R2.1 and 

R2.2 of FAC–011–2. In addition, the Commission 

has made several typographical revisions to the 

violation severity levels the Commission proposed 

to assign to other sub-requirements. As noted above, 

these revisions are set forth in full in Attachment 

A to this order. 

38Order No. 705, 121 FERC ¶ 61,296 at P 159. 

39North American Electric Reliability 

Corporation, 119 FERC ¶ 61,145 at P 45 (Violation 

Risk Factor Order), order on reh’g, 120 FERC 

¶ 61,145 (2007) (Violation Risk Factor Order on 

Rehearing and Clarification); Order No. 705, 121 

FERC ¶ 61,296 at P 159. 

would or would not be appropriate.36

The Commission also expects that the 

ERO’s filing would propose 

implementation of its approach 

comprehensively to all requirements of 

approved Reliability Standards and how 

that implementation would be 

accomplished. The ERO’s filing of its 

alternative approach, however, must not 

postpone or preclude the Guideline 2b, 

3, and 4 compliance filing which is due 

in September 2009. Therefore, until the 

Commission has an opportunity to 

review such a proposal, the Commission 

directs the ERO to submit violation 

severity levels for all requirements and 

sub-requirements at issue in this 

proceeding within 30 days from the 

effective date of this final rule, as 

discussed below and as indicated in 

Attachment A. In light of concerns 

raised in the comments, the 

Commission has also made minor 

clarifying edits to the violation severity 

levels for certain of the requirements 

and sub-requirements approved in this 

proceeding.37 These clarifying edits are 

also reflected in Attachment A. 

3. Removal of Unnecessary Violation 

Severity Level Assignments 

NERC Filing 

47. NERC submitted violation severity 

levels for Requirement R2 of FAC–010– 

2 and Requirement R2 of FAC–011–2. 

Requirements R2 of FAC–010–2 and 

FAC–011–2 require planning authorities 

and reliability coordinators to include 

in their system operating limit 

methodology a requirement that the 

system operating limits provide bulk 

electric system performance consistent 

with the terms established in the subrequirements. 

NOPR Proposal 

48. In Order No. 705, the Commission 

found that Requirement R2 of FAC– 

010–1 and Requirement R2 of FAC– 

011–1, without their sub-requirements, 

include no required performance or 

outcome.38 As such, no violation 

severity levels need to be assigned to 

these requirements. The Commission 

therefore proposed to delete the 

proposed violation severity levels for 

Requirement R2 of FAC–010–2 and 

FAC–011–2. 

Comments 

49. NERC disagrees with the 

Commission’s proposal to remove the 

violation severity levels assigned to 

Requirement R2 of FAC–010–2 and 

Requirement R2 of FAC–011–2. NERC 

states that it did not intend to assign a 

penalty or sanction based on the 

violation of each sub-requirement of a 

Reliability Standard. NERC states that 

although it has assigned a violation risk 

factor to every base requirement and 

sub-requirement to comply with a 

Commission directive, it continues to 

expect that the compliance enforcement 

authority will assess each base 

requirement in total, irrespective of the 

number of sub-requirements associated 

with the base requirement. 

Commission Determination 

50. As discussed above, each 

requirement that is assigned a violation 

risk factor also must be assigned at least 

one violation severity level. If the ERO 

does not assign a violation risk factor to 

a requirement, it should not assign 

violation severity levels. The NOPR 

identified requirements belonging to the 

proposed Reliability Standards that do 

not establish a required outcome or 

performance. In the Violation Risk 

Factor Order, the Commission described 

these types of requirements as 

explanatory statements, phrases and/or 

text, and determined that violation risk 

factors need not be assigned to such 

requirements.39 The Commission finds 

that Requirements R2 and R2.6 of FAC– 

010–2 and Requirement R2 of FAC– 

011–2 are such explanatory statements 

as they include no required performance 

or outcome. Accordingly, the 

Commission adopts the NOPR proposal 

and directs the ERO to remove violation 

severity level assignments for 

Requirements R2 and R2.6 of FAC–010– 

2 and Requirement R2 of FAC–011–2. 

The ERO shall submit its revisions to 

the Commission within 30 days from 

the issuance of this final rule, as 

discussed above and as indicated in 

Attachment A. 

4. Compliance With the Commission’s 

Violation Severity Level Guidelines 

51. The Commission offers the 

following clarifications regarding its 

proposals for compliance with the 

guidelines established in the Violation 

Severity Level Order. As an initial 

matter, it has come to the Commission’s 

attention that, in the NOPR, certain 

discussions were based on a draft 

version rather than the filed version of 

the ERO’s proposed violation severity 

levels. As a result, some of the 

Commission’s proposed revisions would 

not be appropriate to adopt here. Upon 

further examination of the ERO’s filed 

violation severity levels, the 

Commission revises its earlier 

statements where appropriate, as 

discussed below. 

52. Since the Commission’s concerns 

in these instances were not discussed in 

the NOPR for comment, the Commission 

approves the violation severity levels for 

those requirements as filed by the ERO. 

However, to ensure that the violation 

severity levels approved for those 

requirements are consistent with the 

guidelines established in the Violation 

Severity Level Order in a timely 

manner, the Commission directs the 

ERO to review those requirements for 

consistency with Violation Severity 

Level Order Guidelines 2b, 3, and 4 and 

submit the results of its review the 

earlier of six months of the effective 

date of the final rule or in its Violation 

Severity Level Order Guideline 2b, 3, 

and 4 compliance filing due in 

September 2009, whichever is earlier. 

53. Not all of the Commission’s 

proposed modifications of the violation 

severity levels were based on an unfiled 

draft of the violation severity levels. 

Where appropriate, the Commission 

clarifies its proposed modifications and 

adopts the NOPR proposal, as discussed 

below. 

a. Requirement R1 of FAC–010–2 and 

FAC–011–2 

NERC Filing 

54. Requirement R1 of FAC–010–2 

and FAC–011–2 require planning 

authorities and reliability coordinators 

to establish a documented system 

operating limit methodology that 

satisfies the elements detailed in the 

sub-requirements. NERC proposed 

violation severity levels for both of these 

requirements based on whether the 

applicable entity has a documented 

system operating limit methodology 

and, if it does, the number of elements, 

from the sub-requirements, the planning 

authority or reliability coordinator was 

missing from its system operating limit 

methodology. 

NOPR Proposal 

55. In the NOPR, the Commission 

commented on a lack of uniformity 

between FAC–010–2 Requirement R1 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14015 

40Based on the record to date, the Commission 

believes that NERC’s proposed violation severity 

level assignment may not be consistent with 

Guideline 3, which requires that violation severity 

levels be consistent with the text of the 

corresponding requirement. The text of 

Requirement R4 states that, ‘‘[t]he planning 

authority shall issue its system operating limit 

methodology, to all of the following prior to the 

effectiveness of the change.’’ To whom the 

methodology must be issued is described in each 

of the sub-requirements R4.1 through R4.3. The 

violation severity levels NERC proposes, however, 

would base compliance, in part, on the number of 

days the planning authority failed to deliver its 

system operating limit methodology to the required 

entities. The Commission believes that, consistent 

with Guideline 3, violation severity levels for 

Requirement R4 should be assigned based on the 

number of R4 sub-requirements that are not met. 

For example, since there are three subrequirements, a ‘‘Moderate’’ violation severity level 

would be triggered if the applicable entity did not 

comply with one of the three required subrequirements; a ‘‘High’’ violation severity level if 

the applicable entity did not comply with two of 

the three sub-requirements; and, a ‘‘Severe’’ 

violation severity level if the applicable entity did 

not comply with any of the sub-requirements. 

and FAC–011–2 Requirement R1. 

Accordingly, the Commission proposed 

to direct the ERO to modify the 

violation severity levels assigned to 

FAC–011–2 Requirement R1 to make 

them consistent with the violation 

severity levels proposed for FAC–010–2 

Requirement R1. The Commission 

reasoned that this uniformity would 

assist in the compliance and 

enforcement of these Reliability 

Standards because it is logical that 

nearly identical requirements should 

have nearly identical violation severity 

level structures. 

Comments 

56. NERC states that the violation 

severity levels it filed with the 

Commission for FAC–010–2 

Requirement R1 matched the set of 

violation severity levels balloted for 

FAC–011–2 Requirement R1. NERC 

therefore contends that the 

Commission’s proposed modification to 

FAC–011–2 is unnecessary. Midwest 

ISO agrees that Requirement R1 of FAC– 

010–2 and Requirement R1 of FAC– 

011–2 were consistent as filed. 

57. Midwest ISO also asks the 

Commission to direct the ERO to 

remove the violation risk factors 

associated with the sub-requirements of 

Requirement R1 of FAC–010–2 and 

Requirement R1 of FAC–011–2. 

Midwest ISO states that these subrequirements represent criteria that the 

system operating limit methodology 

must contain that are already 

considered and encompassed in the 

violation severity levels associated with 

the main requirement. Removing the 

violation risk factors associated with the 

sub-requirements, Midwest ISO 

contends, would eliminate the need for 

additional violation severity levels that 

would be duplicative of the violation 

severity level associated with the main 

requirement. Further, Midwest ISO 

requests that the Commission confirm 

that a penalty should be assessed 

through the main requirement rather 

than through the criteria in the subrequirements. 

Commission Determination 

58. FAC–010–2 Requirement R1 and 

FAC–011–2 Requirement R1 establish 

the same requirements for the planning 

authority and reliability coordinator, 

respectively. Accordingly, the 

Commission believes that the ERO 

should assign similar violation severity 

levels for these requirements, which it 

did. The Commission therefore 

approves the violation severity levels 

assigned to FAC–010–2 Requirement R1 

and FAC–011–2 Requirement R1 as filed 

by the ERO. 

59. Midwest ISO’s request to 

eliminate violation severity levels for 

sub-requirements and assess a penalty 

through the violation severity level and 

violation risk factor assigned to the 

main requirements is similar to NERC’s 

proposed alternative approach for 

assigning violation severity levels, 

which the Commission addresses above. 

For the same reasons discussed above, 

the Commission rejects Midwest ISO’s 

request to remove violation risk factors 

for sub-requirements. Also, for the 

reasons discussed above, the 

Commission finds that Midwest ISO’s 

request is a Reliability Standards 

compliance issue best addressed in the 

context of a Reliability Standards 

compliance proceeding. 

b. FAC–010–2 Requirement R4 

NERC Filing 

60. FAC–010–2 Requirement R4 

requires the planning authority to issue 

its system operating limit methodology, 

and any change to that methodology, to 

several identified entities prior to the 

effectiveness of the change. Subrequirements R4.1 through R4.3 list the 

required entities to which the planning 

authority should provide the system 

operating limit methodology. NERC’s 

proposed violation severity level 

assignments for FAC–010–2 

Requirement R4 measure compliance 

based, in part, on the number of days 

the applicable entity failed to provide it 

system operating limit methodology to 

the required entities. 

NOPR Proposal 

61. The Commission stated that it is 

difficult to discern which conditions 

trigger specific violation severity levels 

assigned to FAC–010–2 Requirement 

R4. The Commission therefore proposed 

to direct the ERO to make modifications 

to clarify those conditions without 

changing the substance of the violation 

severity levels. 

Comments 

62. NERC does not oppose the 

Commission’s proposed change to the 

violation severity levels for FAC–010–2 

Requirement R4, because, NERC states, 

the proposed modifications do not 

change the intent of the categories of the 

violation severity levels. NERC 

contends, however, that the 

Commission’s proposed revisions are 

inconsistent with other violation 

severity levels already approved by the 

Commission. NERC also questions why 

the Commission would identify the 

violation severity levels for FAC–010–2 

in paragraph 23 of the NOPR among 

other proposed assignments that are 

consistent with the Commission’s 

violation severity level guidelines, and 

then propose modification in the 

following paragraph. 

63. IESO states that there is a time 

factor in question with respect to 

Requirement R4 of FAC–010–2 that 

requires a planning authority to issue to 

appropriate entities its system operating 

limit methodology, and any change to 

that methodology, prior to the 

effectiveness of the change. IESO 

contends that NERC’s proposed 

violation severity level for Requirement 

R4 of FAC–010–2 accurately captures 

this requirement. 

Commission Determination 

64. The Commission approves the 

violation severity levels for Requirement 

R4, as filed by NERC because the NOPR 

was silent as to NERC’s proposal. 

However, to ensure that the violation 

severity levels approved for 

Requirement R4 are consistent with the 

guidelines established in the Violation 

Severity Level Order in a timely 

manner, the Commission directs the 

ERO to review the violation severity 

levels assigned to Requirement R4 for 

consistency with Violation Severity 

Level Order Guidelines 2b, 3, and 4 

within six months of the effective date 

of the final rule or in its Violation 

Severity Level Order Guideline 2b, 3, 

and 4 compliance filing, whichever is 

earlier.40

65. Although the Commission 

approves the violation severity levels 

assigned to Requirement R4 as filed by 

NERC, the Commission also adopts the 

NOPR proposal to direct the ERO to 

assign binary violation severity levels to 

each sub-requirement. Sub-requirements 

R4.1 through R4.3 are binary 


sroberts on PROD1PC70 with RULES
14016 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

41 In general, a quartile approach measures 

compliance in 25 percent intervals by either using 

straight percentages around a determined value or 

100 percent or by defining a minimum value and 

applying quartiles between the minimum value and 

100 percent. NERC, Violation Severity Level 

Guidelines Criteria, Project 2007–23 at 18 (2008), 

available at: http://www.nerc.com/docs/standards/ 

sar/VSLDT_Guidelines_Final_Draft_08Jan08.pdf. 

42 Violation Severity Level Order on Rehearing 

and Clarification, 125 FERC ¶ 61,212 at P 25. 

requirements and should be assigned a 

single violation severity level. The ERO 

shall submit its revisions to subrequirements R4.1 though R4.3 to the 

Commission within 30 days from the 

issuance of this final rule, as discussed 

above and as indicated in Attachment 

A. 

c. FAC–011–2, Requirement R3 

NERC Filing 

66. Requirement R3 of FAC–011–2 

requires a reliability coordinator to 

include in its methodology for 

determining system operating limits a 

description of the elements listed in the 

sub-requirements, ranging from R3.1 

through R3.7, along with any reliability 

margins applied for each. NERC 

proposed to assign a ‘‘Severe’’ violation 

severity level if the reliability 

coordinator’s methodology for 

determining system operating limits is 

missing a description of three or more 

of the sub-requirements. At the same 

time, NERC proposed to assign a ‘‘High’’ 

violation severity level if the reliability 

coordinator’s methodology for 

determining system operating limits 

includes a description for all but three 

sub-requirements within the same 

range. 

NOPR Proposal 

67. In the NOPR, the Commission 

pointed out that, under NERC’s 

proposed violation severity level 

assignments, if a reliability 

coordinator’s methodology for 

determining system operating limits is 

missing a description of three subrequirements, the resulting violation 

could be assigned both a ‘‘High’’ and a 

‘‘Severe’’ violation severity level. To 

eliminate this overlap, the Commission 

proposed to direct the ERO to assign a 

‘‘Severe’’ violation severity level to 

Requirement R3 of FAC–011–2 where 

the reliability coordinator is missing a 

description of four or more subrequirements, within the range of R3.1 

through R3.7, from its methodology for 

determining system operating limits. 

Comments 

68. NERC states that it agrees with the 

Commission’s proposed modification to 

the violation severity level for 

Requirement R3 of FAC–011–2. 

69. Although Midwest ISO states that 

the Commission’s proposal is 

reasonable, Midwest ISO requests that 

the Commission direct the ERO to 

assign violation severity levels for 

Requirement R3 based on the quartile 

approach.41 Midwest ISO argues that 

NERC’s internal violation severity level 

development guidelines encourage a 

multi-component or quartile 

methodology for assigning violation 

severity levels where the requirement 

has multiple sub-components or subrequirements that direct the responsible 

entity to comply with a multiple 

number of sub-requirements or sub-subrequirements. Accordingly, Midwest 

ISO requests that the Commission direct 

the ERO to modify the violation severity 

levels for Requirement R3 of FAC–011– 

2 as detailed in the table below. 

Requirement Lower Moderate High Severe 

FAC–011–2 

R3.

The Reliability Coordinator 

has a methodology for determining [system operating 

limits] that includes a description for all but one or 

two of the following: 3.1 

through R3.7.

The Reliability Coordinator 

has a methodology for determining [system operating 

limits] that includes a description for all but three of 

the following: 3.1 through 

R3.7.

The Reliability Coordinator 

has a methodology for determining [system operating 

limits] that includes a description for all but four or 

five of the following: 3.1 

through R3.7.

The Reliability Coordinator 

has a methodology for determining [system operating 

limits] that includes a description for all but six or 

seven of the following: 3.1 

through R3.7. 

Commission Determination 

70. The Commission directs the ERO 

to modify Requirement R3 of FAC–011– 

2 to assign a ‘‘Severe’’ violation severity 

level to Requirement R3 of FAC–011–2 

where the reliability coordinator is 

missing a description of four or more 

sub-requirements, within the range of 

R3.1 through R3.7, from its methodology 

for determining system operating limits. 

71. The Commission finds that 

Midwest ISO proposed violation 

severity levels are not appropriate for 

this requirement. In the Violation 

Severity Level Order, the Commission 

expressed concern that, in some 

instances, although consistent with 

NERC’s guidelines, the quartile 

approach could result in the arbitrary 

assignment of violation severity levels 

and a reduction of the current levels of 

compliance.42 The assignment of 

violation severity levels is arbitrary 

when based on nothing other than 

ensuring an even distribution of the full 

range of missed sub-requirements to 

each of the four violation severity level 

categories under the premise of 

applying NERC’s quartile approach. The 

Commission therefore adopts the NOPR 

proposal agreed to by NERC and directs 

the ERO to file revised violation severity 

levels for FAC–011–2, Requirement R3 

within 30 days of the issuance of this 

final rule, as discussed above and as 

indicated in Attachment A. 

d. FAC–011–2, Requirement R4 

NERC Filing 

72. Requirement R4 requires the 

reliability coordinator to issue its 

system operating limit methodology and 

any changes to that methodology, prior 

to the effectiveness or change of the 

methodology to all of the required 

entities identified in sub-requirements 

R4.1 through 4.3. NERC’s proposed 

violation severity levels for the subject 

requirement incorporate as a measure of 

compliance the number of days the 

applicable entity failed to issue its 

system operating limits methodology 

and any changes to that methodology, 

prior to the effectiveness or change of 

the methodology to the required 

entities. 

NOPR Proposal 

73. The Commission did not discuss 

this requirement in the NOPR. 

Commission Determination 

74. The Commission approves the 

violation severity levels for Requirement 

R4, as filed by the ERO because the 

NOPR was silent as to NERC’s proposal. 

However, to ensure that the violation 

severity levels approved for 

Requirement R4 are consistent with the 

guidelines established in the Violation 

Severity Level Order in a timely 

manner, the Commission directs the 

ERO to review the violation severity 

levels assigned to Requirement R4 for 

consistency with Violation Severity 

Level Order Guidelines 2b, 3, and 4 and 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14017 

43Based on the record to date, the Commission 

believes that NERC’s proposed violation severity 

level assignment for FAC–011–2 Requirement R4 

may not be consistent with Guideline 3, which 

requires that violation severity levels be consistent 

with the text of the corresponding requirement. The 

text of Requirement R4 states that, ‘‘[t]he planning 

authority shall issue its system operating limit 

methodology, to all of the following prior to the 

effectiveness of the change.’’ To whom the 

methodology must be issued is described in each 

of the sub-requirements R4.1 through R4.3. The 

violation severity levels NERC proposes, however, 

would base compliance, in part, on the number of 

days the reliability coordinator failed to deliver its 

system operating limit methodology to the required 

entities. The Commission believes that, consistent 

with Guideline 3, violation severity levels for 

Requirement R4 should be assigned based on the 

number of R4 sub-requirements that are not met. 

For example, since there are three subrequirements, a ‘‘Moderate’’ violation severity level 

would be triggered if the applicable entity did not 

comply with one of the three required subrequirements; a ‘‘High’’ violation severity level if 

the applicable entity did not comply with two of 

the three sub-requirements; and, a ‘‘Severe’’ 

violation severity level if the applicable entity did 

not comply with any of the sub-requirements. 

44Based on the record to date, the Commission 

believes that the violation severity levels assigned 

by NERC to Requirement R1 through R4 of FAC– 

014–2 may not be consistent with Guideline 4 

because they evaluate compliance based on a 

cumulative number of violations instead of on a 

single violation. Since the Commission believes 

compliance with this requirement hinges on 

whether or not the applicable entity established its 

system operating limits and interconnection 

reliability operating limits consistent with its 

methodology (‘‘pass’’) or did not do so (‘‘fail’’), a 

binary approach is most appropriate for this 

requirement. By contrast, Requirement R10 of 

Reliability Standard VAR–001–1 requires each 

transmission operator to correct violations of 

interconnection reliability operating limits or 

system operating limits resulting from reactive 

resources deficiencies (interconnection reliability 

operating limit violations must be corrected within 

30 minutes) and complete the required 

interconnection reliability operating limit or system 

operating limit violation reporting. 

In the Violation Severity Level Order, the 

Commission directed revisions to VAR–001–1 

Requirement R10 that assigned violation severity 

levels based on the percentage of interconnection 

reliability operating limit and system operating 

Continued 

submit the results of the review either 

within six months of the effective date 

of the final rule or in its Violation 

Severity Level Order Guideline 2b, 3, 

and 4 compliance filing, whichever is 

earlier.43

75. Although the Commission 

approves the violation severity levels 

assigned to Requirement R4 as filed by 

NERC, the Commission also adopts the 

NOPR proposal to direct the ERO to 

assign binary violation severity levels to 

each sub-requirement. Sub-requirements 

R4.1 through R4.3 are binary 

requirements and should be assigned a 

single violation severity level. The ERO 

shall submit its revisions to subrequirements R4.1 through R4.3 to the 

Commission within 30 days from the 

issuance of this final rule, as discussed 

above and as indicated in Attachment 

A. 

e. FAC–014–2, Requirements R1 

Through R4 

NERC Filing 

76. Requirements R1 through R4 of 

FAC–014–2 address the development of 

system operating limits and 

interconnection reliability operating 

limits consistent with the 

methodologies outlined in FAC–010–2 

and FAC–011–2. NERC proposed to 

assign violation severity levels to these 

requirements based on a quartile 

division of the total number of 

inconsistencies between the assigned 

system operating limits and the system 

operating limits that would be produced 

using the methodologies outlined in 

FAC–010–2 and FAC–011–2. For 

example, NERC proposed to assign a 

‘‘Lower’’ violation severity level where 

1 to 25 percent of a registered entity’s 

system operating limits are inconsistent 

with the applicable entity’s system 

operating limit methodology. 

NOPR Proposal 

77. In the NOPR, the Commission 

expressed its belief that each time a 

system operating limit is inconsistent 

with the applicable entity’s system 

operating limit methodology, the 

applicable entity violates the pertinent 

requirement of FAC–014–2. The 

Commission stated that its fourth 

guideline for evaluating violation 

severity levels makes clear that violation 

severity level assignments should be 

based on a single violation, not on a 

cumulative number of violations. To 

remedy this deficiency, the Commission 

proposed to direct the ERO to modify its 

violation severity levels for FAC–014– 

02 Requirement R1 through R4 based on 

the percentage of deviation from the 

system operating limit methodology for 

each violation. 

Comments 

78. NERC contends that the 

Commission’s application of Guideline 

4 is confusing and inconsistent. NERC 

points to the approved violation severity 

levels for Reliability Standard VAR– 

001–1, where the Commission allowed 

NERC to use percentage ranges relating 

to the number of violations of system 

operating limits to define the violation 

severity levels. By contrast, NERC states, 

the Commission proposed in the NOPR 

to require every single violation of 

system operating limit to have a single 

penalty. 

79. Midwest ISO agrees with NERC 

that referencing percentage ranges 

relating to the number of violations of 

system operating limits is consistent 

with Guideline 4. Midwest ISO also 

contends that the use of percentage 

ranges facilitates enforcement. Because 

an entity may have tens of thousands of 

system operating limits, Midwest ISO 

contends that it is not practical to set a 

single penalty for every single violation 

of a system operating limit. Midwest 

ISO contends that a requirement with 

multiple sub-components or 

requirements should have a quartile 

approach applied to the violation 

severity levels, considering the full 

range of missed sub-components or 

requirements possibilities. 

80. In addition, NERC states that the 

Commission’s proposed modifications 

to the violation severity levels for 

Requirements R1 through R4 of FAC– 

014–02 are inconsistent with the 

modifications indicated in Attachment 

A to the NOPR. NERC states that the 

Commission’s proposed modifications 

to the violation severity levels, set forth 

in Attachment A to the NOPR, includes 

some typographical errors. For example, 

NERC states that there appears to be an 

errant ‘‘75%’’ in the text of the ‘‘Severe’’ 

category for Requirement R1. NERC also 

points out that the ‘‘Severe’’ category for 

Requirement R4 includes both the 

NERC-proposed text and the 

Commission-inserted text. NERC 

requests that the Commission clarify its 

direction on these points. If the 

Commission decides to direct the ERO 

to modify its violation severity levels for 

FAC–014–2 Requirements R1 through 

R4 based on the percentage of deviation 

from system operating limit 

methodology for each violation, NERC 

requests additional clarification on the 

specific methodology to be used to 

determine the percentage of deviation 

from the system operating limit. 

Commission Determination 

81. The Commission approves the 

violation severity levels for Requirement 

R1 through R4, as filed by the ERO 

because the NOPR was silent as to 

NERC’s proposal. However, to ensure 

that the violation severity levels 

approved for Requirement R1 through 

R4 are consistent with the guidelines 

established in the Violation Severity 

Level Order in a timely manner, the 

Commission directs the ERO to review 

the violation severity levels assigned to 

the subject requirements for consistency 

with Violation Severity Level Order 

Guidelines 2b, 3, and 4 and submit the 

results of its review either within six 

months of the effective date of the final 

rule or in its Violation Severity Level 

Order Guideline 2b, 3, and 4 

compliance filing, whichever is 

earlier.44


sroberts on PROD1PC70 with RULES
14018 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

limit violations that the applicable entity did not 

correct and/or report. Since a reactive resource 

deficiency may result in more than one violation of 

an interconnection reliability operating limit and 

system operating limit, the Commission believes the 

aggregate treatment, in this instance, of 

interconnection reliability operating limit and 

system operating limit violations attributable to a 

single deficiency in reactive resources for the 

purpose of assigning violation severity levels is 

appropriate. This treatment is consistent with the 

provisions of NERC’s Sanction Guidelines, which 

states at section 3.21, ‘‘[s]ome Reliability Standards 

may not support the assessment of penalties on a 

‘per day, per violation’ basis, but instead should 

have penalties calculated based on an alternative 

penalty frequency or duration.’’ With regard to 

Reliability Standard FAC–014–2 Requirements R1 

through R4, the Commission believes that each 

instance that the applicable entity did not establish 

a system operating limit or interconnection 

reliability operating limit consistent with the 

applicable entity’s methodology would be a 

violation. Thus, the Commission’s adherence to 

Guideline 4 has been consistent as applied to the 

Commission’s revisions of violation severity levels 

assigned to VAR–001–1 Requirement R10 and its 

concerns with the violation severity levels NERC 

assigned to FAC–014–2 Requirement R1 through 

R4. 

45NERC did not propose a ‘‘Moderate’’ violation 

severity level for requirement R6. 

46NERC, Violation Severity Level Guidelines 

Criteria, Project 2007–23 at 19 (2008), available at: 

http://www.nerc.com/docs/standards/sar/ 

VSLDT_Guidelines_Final_Draft_08Jan08.pdf. The 

NERC Guidelines indicate that a Moderate violation 

severity level should be selected when the 

responsible entity’s coordination/communication is 

non-compliant with respect to at least one 

significant element within the requirement. In this 

case, the significant element is the failure to notify 

the Reliability Coordinator. 

f. FAC–014–2, Requirement R5 

NERC Filing 

82. Requirement R5 requires that the 

reliability coordinator, planning 

authority, and transmission planner 

shall each provide its system operating 

limits and interconnection reliability 

operating limits to those entities that 

have a reliability related need for those 

limits and provide a written request that 

includes a schedule for delivery of those 

limits as described in sub-Requirements 

5.1 through 5.4. NERC’s proposed 

violation severity levels for the subject 

requirements factor in, as measure of 

compliance, the number of days the 

applicable entity failed to issue its 

system operating limits methodology 

and any changes to that methodology, 

prior to the effectiveness or change of 

the methodology to the required 

entities. 

NOPR Proposal 

83. The Commission did not comment 

on this requirement in the NOPR. 

Commission Determination 

84. The Commission finds that the 

consideration of the time period for 

which an entity failed to issue its 

system operating limits methodology, as 

it relates to Requirement R5 of FAC– 

014–2, is not consistent with the text of 

the requirement and, thus, not 

consistent with Guideline 3. The 

Commission believes that the violation 

severity levels for Requirements R5 

should be assigned based on the number 

of required elements, as identified in the 

relevant sub-requirements, with which 

the applicable entity did not comply. 

Sub-requirements R4.1 through R4.3 

and sub-requirements R5.1 through R5.4 

are binary requirements and should be 

assigned a single violation severity 

level. Since the Commission’s proposals 

for this requirement were not discussed 

in the NOPR for comment, the 

Commission approves the violation 

severity levels for Requirement R4, as 

filed by the ERO. To ensure that the 

violation severity levels approved for 

Requirement R4 are consistent with the 

guidelines established in the Violation 

Severity Level Order in a timely 

manner, the Commission directs the 

ERO to review the violation severity 

levels assigned to Requirement R4 for 

consistency with Violation Severity 

Level Order Guidelines 2b, 3, and 4 and 

submit the results of its review either 

within six months of the effective date 

of the final rule or in its Violation 

Severity Level Order Guideline 2b, 3, 

and 4 compliance filing, whichever is 

earlier. 

g. FAC–014–2, Requirement R6 

NERC Filing 

85. Requirement R6 of FAC–014–2 

requires a planning authority to identify 

the subset of multiple contingencies (if 

any) from Reliability Standard TPL–003, 

which results in stability limits. Subrequirements R6.1 and R6.2 require that 

the planning authority provide the list 

to the reliability coordinator, or if no 

multiple contingencies exist, to notify 

the reliability coordinator, respectively. 

NERC assigned violation severity levels 

based on a combination of compliance 

scenarios relevant to sub-requirements 

R6.1 and R6.2. 

NOPR Proposal 

86. In the NOPR, the Commission 

expressed concern that the violation 

severity levels assigned to FAC–014–2 

Requirement R6 do not address a 

scenario where the planning authority 

fails to provide a complete subset of 

contingencies to the reliability 

coordinator and proposed a revision of 

the violation severity level assignments. 

The Commission expressed concern that 

this omission could prevent the 

reliability coordinator from having the 

information it needs for its situational 

awareness that system operating limits 

and interconnection reliability operating 

limits that impact the reliable operation 

of the Bulk-Power System are being 

exceeded. The Commission therefore 

proposed to direct the ERO to add the 

following ‘‘Lower’’ violation severity 

level: ‘‘The Planning Authority failed to 

provide a complete subset of 

contingencies to the reliability 

coordinator in accordance with R6.’’ 

The Commission also proposed to direct 

the ERO to reassign NERC’s current 

‘‘Lower’’ violation severity level as the 

new ‘‘Moderate’’ violation severity level 

to emphasize the need to notify the 

reliability coordinator.45 The 

Commission stated that the proposed 

revisions would make the violation 

severity level assignments for 

Requirement R6 consistent with NERC’s 

own guidelines for the development of 

violation severity levels related to 

communication or coordination 

requirements.46

Comments 

87. NERC disagrees with the 

Commission’s assertion that the 

proposed violation severity levels for 

Requirement R6 of FAC–014–2 do not 

identify a situation where a planning 

authority fails to provide a complete 

subset of contingencies to the reliability 

coordinator. NERC contends that the 

‘‘High’’ and ‘‘Severe’’ violation severity 

levels for Requirement R6 of FAC–014– 

2 satisfy the Commission’s concerns by 

stating that the planning authority 

identified the subset of multiple 

contingencies which result in stability 

limits but did not provide the list of 

multiple contingencies and associated 

limits to one or more reliability 

coordinators that monitor the facilities 

associated with these limits. NERC 

contends that a planning authority will 

fail to comply with sub-requirement 

R6.1 of FAC–014–2 if they do not 

provide the complete set of 

contingencies to the reliability 

coordinator. 

88. The Bureau of Reclamation and 

IESO separately take issue with the 

Commission’s proposed revisions to 

violation severity levels applicable to 

Requirement R6 of FAC–014–2. The 

Bureau of Reclamation contends that the 

Commission’s proposal would require 

auditors to perform studies independent 

from the planning authority in order to 

determine whether all contingencies 

were considered. IESO contends that 

both the ‘‘High’’ and ‘‘Severe’’ violation 

severity levels address the planning 

authority’s failure to communicate 

multiple contingency scenarios to the 

reliability coordinator. IESO, however, 

agrees with the Commission that there 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14019 

47NOPR, FERC Stats. & Regs. ¶ 32,637 at P 31 

(citing Order No. 705, 121 FERC ¶ 61,296 at P 137). 

48NOPR, FERC Stats. & Regs. ¶ 32,637 at P 32 

(citing Order No. 705, 121 FERC ¶ 61,296 at P 146). 

49 Id. 

should not be a gap in the violation 

severity levels and states that the 

‘‘Lower’’ violation severity level for 

FAC–014–2 Requirement R6 should be 

assigned a ‘‘Moderate’’ violation 

severity level. 

Commission Determination 

89. The Commission agrees with 

NERC that a planning authority’s 

requirement to provide the reliability 

coordinator with a complete set of 

contingencies is addressed in the 

‘‘High’’ and ‘‘Severe’’ violation severity 

levels assigned to Requirement R6 of 

FAC–014–2. However, the Commission 

also believes that it is appropriate to 

apply a binary, pass/fail approach to the 

violation severity levels because a 

planning authority either will or will 

not satisfy this requirement. As 

proposed by NERC, violations of the 

sub-requirements are addressed only in 

the violation severity levels assigned to 

the main requirement. In keeping with 

the Commission’s decision that the ERO 

must assign a violation severity level to 

every sub-requirement, the Commission 

adopts the NOPR proposal and directs 

the ERO to assign binary violation 

severity levels to Requirement R6 and 

sub-requirements R6.1 and R6.2. 

Although the enforcement of 

Requirement R6, and its subrequirements, may require the use of 

auditors, this is a compliance issue best 

addressed on a case-by-case basis in the 

context of a compliance proceeding. The 

Commission directs the ERO to file 

revised violation severity levels for 

Reliability Standard FAC–014–2 

Requirement R6 within 30 days of the 

effective date of this final rule, as 

discussed above and indicated in 

Attachment A. 

E. Violation Risk Factors 

90. NERC did not submit violation 

risk factors for the version two FAC 

Reliability Standards in its original 

filing. On October 15, 2008, NERC filed 

violation risk factors for the version two 

FAC Reliability Standards. 

NOPR Proposal 

91. In the NOPR, the Commission 

noted that the Commission approved 

the majority of NERC’s proposed 

violation risk factors for the version one 

FAC Reliability Standards in Order No. 

705.47 On April 1, 2008, NERC filed 

revised violation risk factors for the 

version one FAC Reliability Standards. 

These were accepted by delegated 

authority on May 29, 2008. The 

Commission proposed to direct the ERO 

to apply those same violation risk 

factors to the version two FAC 

Reliability Standards approved in the 

final rule in this proceeding. With 

respect to the Western Interconnection 

regional difference, the Commission 

proposed to direct Western Electricity 

Coordinating Council (WECC) to apply 

the NERC violation risk factors to the 

Western Interconnection regional 

difference until after WECC develops its 

own violation risk factors and they are 

approved by the ERO and the 

Commission. 

NERC’s Violation Risk Factor Filing 

92. On October 15, 2008, NERC filed 

violation risk factors for the proposed 

version two FAC Reliability Standards. 

These violation risk factors were 

identical to the version one violation 

risk factors. NERC asked the 

Commission to apply the violation risk 

factors and violation severity levels filed 

for FAC–010–2, Requirements R2.4 and 

R2.5, and FAC–011–2, Requirement 

R3.3, to the Western Interconnection 

regional differences for these same 

requirements. 

Commission Determination 

93. The Commission approves the 

violation risk factors filed by NERC for 

the version two FAC Reliability 

Standards. Because these violation risk 

factors are identical to the violation risk 

factors approved for the version one 

FAC Reliability Standards, this approval 

is consistent with our direction in the 

NOPR. 

F. WECC Regional Differences 

NERC Filing 

94. Although NERC submitted 

requirements for FAC–010–2 and FAC– 

011–2 that address the Western 

Interconnection regional difference, 

NERC did not submit violation severity 

levels or violation risk factors for these 

requirements in its initial filing. On 

October 15, 2008, NERC filed violation 

risk factors for the version two FAC 

Reliability Standards and asked the 

Commission to accept the violation risk 

factors and violation severity levels filed 

for FAC–010–2, Requirements R2.4 and 

R2.5, and FAC–011–2, sub-requirement 

R3.3, to apply to the WECC regional 

difference. 

NOPR Proposal 

95. The Commission proposed to 

adopt the proposed regional differences 

for FAC–010–2 and FAC–011–2. The 

Commission also proposed to direct 

NERC to modify the violation severity 

levels assigned to the national versions 

of FAC–010–2 and FAC–011–2 to 

accommodate the regional differences. 

The Commission noted that, in Order 

No. 705, the Commission approved 

version one of the FAC Reliability 

Standards and directed WECC to 

develop and submit violation risk 

factors and violation severity levels that 

apply to the Western Interconnection 

regional difference.48 In the interim, the 

Commission approved WECC’s proposal 

to assign the same violation risk factors 

to the WECC regional difference as are 

assigned to NERC sub-requirement R2.4 

and R2.5 in FAC–010–1 and subrequirement R3.3 in FAC–011–1. The 

Commission directed WECC to file its 

violation risk factors and violation 

severity levels no later than the effective 

date of the applicable version one 

Reliability Standard. FAC–010–1 

became effective on July 1, 2008 and 

FAC–011–1 became effective on October 

1, 2008 without violation severity levels 

or violation risk factors. 

96. To remedy this deficiency, the 

Commission proposed modifications to 

the violation severity level assignments 

assigned to FAC–010–2 and FAC–011– 

2 that address the Western 

Interconnection regional differences. 

Consistent with our decision in Order 

No. 705, the Commission also proposed 

to direct WECC to apply the NERC 

violation risk factors to the Western 

Interconnection regional difference until 

after WECC develops its own violation 

risk factors for the difference and they 

are approved by the ERO and the 

Commission.49 The Commission noted 

that WECC is still obligated to comply 

with the Commission’s directives in 

Order No. 705 to file violation risk 

factors and violation severity levels 

addressing the Western Interconnection 

regional difference. 

Comments 

97. BPA requests that the Commission 

direct the ERO to designate the regional 

differences section of FAC–011–2 as 

section ‘‘E.’’ BPA points out that the 

requirement makes multiple references 

to the regional differences section for 

the Western Interconnection as section 

‘‘E,’’ but there is no corresponding 

designation of the regional differences 

section as section ‘‘E.’’ 

Commission Determination 

98. The Commission agrees with 

BPA’s comment relevant to designating 

the Regional Differences section of 

FAC–011–2 as section ‘‘E’’ and directs 

the ERO to file this revision within 30 

days of the effective date of this final 

rule. 


sroberts on PROD1PC70 with RULES
14020 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

50This direction is consistent with NERC’s 

October 15, 2008 proposal. 

51 5 CFR 1320.11. 

52 44 U.S.C. 3507(d). 

53Regulations Implementing the National 

Environmental Policy Act, Order No. 486, 52 FR 

47897 (Dec. 17, 1987), FERC Stats. & Regs. ¶ 30,783 

(1987). 

54 18 CFR 380.4(a)(5). 

55 5 U.S.C. 601–612. 

56The definition of ‘‘small entity’’ under the 

Regulatory Flexibility Act refers to the definition 

provided in the Small Business Act, which defines 

a ‘‘small business concern’’ as a business that is 

independently owned and operated and that is not 

dominant in its field of operation. See 15 U.S.C. 

632. 

57According to the Department of Energy’s (DOE) 

Energy Information Administration (EIA), there 

99. As discussed above, the 

Commission approves the violation risk 

factors filed by NERC for the version 

two FAC Reliability Standards. These 

violation risk factors are identical to 

those approved for the version one FAC 

Reliability Standards. The Commission 

also adopts the NOPR proposal with 

respect to the Western Interconnection 

regional difference and directs WECC to 

apply the violation risk factors approved 

for FAC–010–1 Requirements R2.4 and 

R2.5 and FAC–011–1 Requirement R3.3 

to the WECC regional difference version 

of FAC–010–2 Requirements 1.1 

through 1.3 and FAC–011–2 

Requirement 1.1 through 1.3.50 With 

regard to the WECC regional differences 

FAC–010–2 Requirement 1 and 

Requirement 1.4 and FAC–011–2 

Requirement 1 and 1.4, the Commission 

believes that these requirements are 

explanatory statements and that a 

violation risk factor need not be 

assigned. 

100. The Commission finds that each 

of the WECC regional difference 

requirements is a binary requirement 

and, therefore, a single violation 

severity level is appropriate. 

Accordingly, until such time as WECC 

develops and submits violation severity 

levels for the version two FAC 

Reliability Standards, the Commission 

adopts the NOPR proposal and directs 

WECC to assign a ‘‘Severe’’ violation 

severity level to the WECC regional 

difference FAC–010–2 Requirement 1.1 

and FAC–011–2 Requirement 1.1. In 

addition, the Commission directs WECC 

to apply a ‘‘Severe’’ violation severity 

level to the WECC regional difference 

FAC–010–2 Requirement 1.2 through 

1.3 and FAC–011–2 Requirements 1.2 

through 1.3. These revisions will create 

a complete and consistent penalty 

setting mechanism for the WECC 

regional difference requirements. The 

Commission directs the ERO to file 

revised violation risk factors and 

violation severity levels for the regional 

difference within 30 days of the 

effective date of this final rule, as 

discussed above and indicated in 

Attachment A. 

G. Effective Date 

101. NERC requested that the 

Commission make the version two FAC 

Reliability Standards effective according 

to a staggered schedule, consistent with 

the implementation dates of the version 

one FAC Reliability Standards. NERC’s 

proposed effective dates have all since 

passed. Accordingly, the version two 

FAC Reliability Standards shall become 

effective April 29, 2009. 

III. Information Collection Statement 

102. The Office of Management and 

Budget (OMB) regulations require that 

OMB approve certain reporting and 

recordkeeping (collections of 

information) imposed by an agency.51

The information contained here is also 

subject to review under section 3507(d) 

of the Paperwork Reduction Act of 

1995.52 As stated above, the 

Commission previously approved, in 

Order No. 705, each of the Reliability 

Standards that are the subject of the 

current rulemaking. The modifications 

to the Reliability Standards are minor 

and, therefore, they do not add to or 

increase entities’ reporting burden. 

Thus, the modified Reliability 

Standards do not materially affect the 

burden estimates relating to the earlier 

version of the Reliability Standards 

presented in Order No. 705. 

Title: Version Two Facilities Design, 

Connections and Maintenance 

Reliability Standards. 

Action: Proposed Collection. 

OMB Control No.: 1902–0247. 

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

institutions. 

Frequency of Responses: On 

Occasion. 

Necessity of the Information: This 

final rule approves three modified 

Reliability Standards that pertain to 

facilities design, connections and 

maintenance. The Reliability Standards 

will require planning authorities and 

reliability coordinators to establish 

methodologies to determine system 

operating limits for the Bulk-Power 

System in the planning and operation 

horizons. This final rule finds the 

Reliability Standards and 

interpretations just, reasonable, not 

unduly discriminatory or preferential, 

and in the public interest. 

103. Interested persons may obtain 

information on the reporting 

requirements by contacting: Federal 

Energy Regulatory Commission, Attn: 

Michael Miller, Office of the Executive 

Director, 888 First Street, NE., 

Washington, DC 20426, Tel: (202) 502– 

8415, Fax: (202) 273–0873, e-mail: 

michael.miller@ferc.gov, or by 

contacting: Office of Information and 

Regulatory Affairs, Attn: Desk Officer 

for the Federal Energy Regulatory 

Commission (Re: OMB Control No. 

1902–0247), Washington, DC 20503, 

Tel: (202) 395–4650, Fax: (202) 395– 

7285, e-mail: 

oira_submission@omb.eop.gov. 

IV. Environmental Analysis 

104. 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.53 The Commission has 

categorically excluded certain actions 

from this requirement as not having a 

significant effect on the human 

environment. The actions directed 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.54

Accordingly, neither an environmental 

impact statement nor environmental 

assessment is required. 

V. Regulatory Flexibility Act 

105. The Regulatory Flexibility Act of 

1980 55 generally requires a description 

and analysis of final rules that will have 

significant economic impact on a 

substantial number of small entities. 

Most of the entities, i.e., planning 

authorities, reliability coordinators, 

transmission planners and transmission 

operators, to which the requirements of 

this final rule apply do not fall within 

the definition of small entities.56

106. As indicated above, based on 

available information regarding NERC’s 

compliance registry, approximately 250 

entities will be responsible for 

compliance with the three revised 

Reliability Standards. It is estimated 

that one-third of the responsible 

entities, about 80 entities, would be 

municipal and cooperative 

organizations. The approved Reliability 

Standards apply to planning authorities, 

transmission planners, transmission 

operators and reliability coordinators, 

which tend to be larger entities. Thus, 

the Commission believes that only a 

portion, approximately 30 to 40 of the 

municipal and cooperative 

organizations to which the approved 

Reliability Standards apply, qualify as 

small entities.57 The Commission does 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14021 

were 3,284 electric utility companies in the United 

States in 2005, and 3,029 of these electric utilities 

qualify as small entities under the SBA definition. 

Among these 3,284 electric utility companies are: 

(1) 883 cooperatives of which 852 are small entity 

cooperatives; (2) 1,862 municipal utilities, of which 

1842 are small entity municipal utilities; (3) 127 

political subdivisions, of which 114 are small entity 

political subdivisions; and (4) 219 privately owned 

utilities, of which 104 could be considered small 

entity private utilities. See Energy Information 

Administration Database, Form EIA–861, DOE 

(2005), available at http://www.eia.doe.gov/cneaf/ 

electricity/page/eia861.html. 

not consider this a substantial number. 

Moreover, as discussed above, the 

approved Reliability Standards will not 

be a burden on the industry since most 

if not all of the applicable entities 

currently perform system operating 

limit calculations and the approved 

Reliability Standards will simply 

provide a common methodology for 

those calculations. Accordingly, the 

Commission certifies that the approved 

Reliability Standards will not have a 

significant adverse impact on a 

substantial number of small entities. 

107. Based on this understanding, the 

Commission certifies that this rule will 

not have a significant economic impact 

on a substantial number of small 

entities. Accordingly, no regulatory 

flexibility analysis is required. 

VI. Document Availability 

108. 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 p.m. Eastern time) at 888 First 

Street, NE., Room 2A, Washington, DC 

20426. 

109. 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. 

110. User assistance is available for 

eLibrary and the FERC’s Web site during 

normal business hours from FERC 

Online Support at 202–502–6652 (toll 

free at 1–866–208–3676) or e-mail at 

ferconlinesupport@ferc.gov, or the 

Public Reference Room at (202) 502– 

8371, TTY (202) 502–8659. E-mail the 

Public Reference Room at 

public.referenceroom@ferc.gov. 

VII. Effective Date and Congressional 

Notification 

111. These regulations are effective 

April 29, 2009. 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. 

By the Commission. 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 

Attachment A 

BILLING CODE 6717–01–P 


sroberts on PROD1PC70 with RULESER30MR09.108</GPH>
14022 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER30MR09.109</GPH>
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14023 


sroberts on PROD1PC70 with RULESER30MR09.110</GPH>
14024 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER30MR09.111</GPH>
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14025 


sroberts on PROD1PC70 with RULESER30MR09.112</GPH>
14026 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER30MR09.113</GPH> ER30MR09.114</GPH>
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14027 


sroberts on PROD1PC70 with RULESER30MR09.115</GPH>
14028 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER30MR09.116</GPH>
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14029 


sroberts on PROD1PC70 with RULESER30MR09.117</GPH> ER30MR09.118</GPH>
14030 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER30MR09.119</GPH> ER30MR09.120</GPH>
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14031 


sroberts on PROD1PC70 with RULESER30MR09.121</GPH>
14032 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER30MR09.122</GPH>
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14033 


sroberts on PROD1PC70 with RULESER30MR09.123</GPH>
14034 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER30MR09.124</GPH> ER30MR09.125</GPH>
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14035 


sroberts on PROD1PC70 with RULESER30MR09.126</GPH>
14036 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER30MR09.127</GPH>
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14037 


sroberts on PROD1PC70 with RULESER30MR09.128</GPH> ER30MR09.129</GPH>
14038 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER30MR09.130</GPH> ER30MR09.131</GPH>
Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14039 


sroberts on PROD1PC70 with RULESER30MR09.132</GPH>
14040 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

[FR Doc. E9–6823 Filed 3–27–09; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF THE TREASURY 

Alcohol and Tobacco Tax and Trade 

Bureau 

27 CFR Part 9 

[Docket No. TTB–2008–0001; T.D. TTB–74; 

Re: Notice No. 81] 

RIN 1513–AB45 

Establishment of the Haw River Valley 

Viticultural Area (2007R–179P) 

AGENCY: Alcohol and Tobacco Tax and 

Trade Bureau, Treasury. 

ACTION: Final rule; Treasury decision. 

SUMMARY: This Treasury decision 

establishes the 868-square mile ‘‘Haw 

River Valley’’ viticultural area in 

Alamance, Caswell, Chatham, Guilford, 

Orange, and Rockingham Counties, 

North Carolina. We designate 

viticultural areas to allow vintners to 

better describe the origin of their wines 

and to allow consumers to better 

identify wines they may purchase. 

DATES: Effective Dates: April 29, 2009. 

FOR FURTHER INFORMATION CONTACT: N.A. 

Sutton, Regulations and Rulings 

Division, Alcohol and Tobacco Tax and 

Trade Bureau, 925 Lakeville St., No. 


sroberts on PROD1PC70 with RULESER30MR09.133</GPH> ER30MR09.134</GPH>