6282 Federal Register / Vol. 74, No. 24 / Friday, February 6, 2009 / Notices 

1 16 U.S.C. 824o(c)(2)(C) and 824o(e)(4) (2006). 

2North American Electric Reliability Corp., 119 

FERC ¶ 61,060, at P 41 (2007). 

3The Commission disclosed these observation 

audits in the 2008 Report on Enforcement (Docket 

No. AD07–13–001) at 26 (issued October 31, 2008). 

4North American Electric Reliability Corp., 122 

FERC ¶ 61,245, at P 42 n.29 (2008). NERC currently 

so provides in CMEP section 3.1. The Commission 

further clarified the matter recently by requiring 

that in CMEP section 3.1, NERC substitute the term 

‘‘Generally Accepted Auditing Standards’’ for 

‘‘Generally Accepted Accounting Standards.’’ North 

American Electric Reliability Corp., 125 FERC 

¶ 61,330, at P 14 n.11 (2008). 

5For example, NERC staff will lead any audit 

team conducting a compliance audit of the 

reliability coordinator function of the Western 

Electricity Coordinating Council (WECC), a 

Regional Entity. North American Electric Reliability 

Corp., 119 FERC ¶ 61,059, at P 35, 39 (2007). 

6This guidance does not apply to compliance 

audits that NERC leads for other reasons, such as 

when NERC personnel have specialized technical 

knowledge of particular standards. 

7Cf. Guidance on Filing Reliability Notices of 

Penalty, 124 FERC ¶ 61,015, at P 21 (2008) (Notice 

of Penalty Guidance Order) (observing that the 

format and content of compliance staff forms and 

questionnaires directly influence the quality and 

relevance of the information and documentation 

elicited in response). 

8We recently highlighted the importance of 

ascertaining whether a mitigation plan has been 

completed on time, including adequate review of 

documentation or self-certifications submitted by a 

registered entity, so as to bring the registered entity 

into compliance with applicable requirements. 

Notice of Penalty Guidance Order at P 35–37. 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

[Docket No. AD09–3–000] 

Compliance With Mandatory Reliability 

Standards; Guidance Order on 

Compliance Audits Conducted by the 

Electric Reliability Organization and 

Regional Entities 

Issued January 15, 2009. 

Before Commissioners: Joseph T. Kelliher, 

Chairman; Suedeen G. Kelly, Marc Spitzer, 

Philip D. Moeller, and Jon Wellinghoff 

1. In this order, the Commission 

provides guidance on conducting 

compliance audits to the North 

American Electric Reliability 

Corporation (NERC), the certified 

Electric Reliability Organization (ERO), 

and the eight Regional Entities to which 

NERC has delegated responsibility for 

enforcing Commission-approved 

Reliability Standards within the United 

States. 

2. NERC and Regional Entities 

conduct compliance audits of registered 

entities subject to mandatory Reliability 

Standards approved by the Commission. 

They conduct these audits pursuant to 

procedures approved by the 

Commission under FPA sections 

215(c)(2)(C) (certification of the ERO) 

and 215(e)(4) (approval of delegation 

agreements), which, among other things, 

require that the ERO and Regional 

Entities provide fair and impartial 

procedures for enforcement of reliability 

standards.1 This order provides 

guidance to the ERO and Regional 

Entities with respect to implementation 

of Section 3.1 of NERC’s Compliance 

Monitoring and Enforcement Program 

(CMEP), which the Commission 

approved on April 19, 2007 pursuant to 

FPA sections 215(c)(2) and 215(e)(4).2

This guidance stems from Commission 

staff observations of audits that NERC 

and the Regional Entities have 

conducted into whether particular 

users, owners and operators of the BulkPower System are complying with 

Reliability Standards.3

3. We require that NERC and Regional 

Entities ‘‘base their compliance audit 

processes in the U.S. on professional 

auditing standards recognized in the 

U.S., such as Generally Accepted 

Accounting Standards, Generally 

Accepted Government Auditing 

Standards, and standards sanctioned by 

the Institute of Internal Auditors.’’ 4 We 

allow flexibility for NERC and the 

Regional Entities to implement their 

compliance audit programs in that they 

are to base their audit processes on 

these auditing standards. 

4. Nevertheless, our staff has observed 

that additional consistency in 

compliance audit processes among 

NERC and the Regional Entities within 

the United States would be beneficial. 

We expect NERC and Regional Entities 

to implement the following guidance, as 

appropriate, in ongoing compliance 

audits and in all compliance audits that 

commence on or after the date of this 

order. 

A. Audit Team Leadership and 

Training 

5. In order to resolve possible 

perceptions that a Regional Entity’s 

compliance staff is not sufficiently 

independent from the audited entity, 

such as the Regional Entity itself or its 

affiliate, NERC staff sometimes leads 

compliance audit teams in which 

Regional Entity staff participates. This is 

intended to assess compliance in an 

unbiased or professional manner.5 In 

these audits, Regional Entity staff 

should serve as subject matter experts, 

rather than lead the audit or advise on 

its conduct or scope. NERC staff should 

control the scope and conduct of a 

NERC-led audit and refrain from seeking 

advice from or involving Regional Entity 

staff on the direction or findings of the 

audit. NERC and Regional Entity staff 

should assume these roles from the 

beginning of the pre-audit stage of such 

a NERC-led audit until the completion 

of the final audit report.6

6. CMEP section 3.1.5 requires that for 

all compliance audits conducted after 

January 1, 2008, each audit team 

member must successfully complete all 

NERC or NERC-approved Regional 

Entity auditor training applicable to the 

audit. We suggest that NERC and 

Regional Entities ensure that this audit 

training include skills in interviewing, 

choosing samples of matters to be 

audited, and evaluating evidence. 

B. Pre-Audit Procedures 

7. We suggest that NERC, in the 

context of developing, reviewing and 

updating its pre-audit questionnaires, 

ensure that audit team requests for 

information and documents about 

specific matters are as consistent as 

possible among the Regional Entities.7

For organizing requests for data and 

information, all compliance audit teams 

should use a database consisting of a 

spreadsheet that serves as a checklist for 

all requirements of Reliability Standards 

that are to be audited. 

8. Compliance audit teams should 

request that registered entities: (1) 

organize responses to data requests and 

other audit evidence into the format that 

the audit team will use to match 

evidence to compliance with particular 

requirements; and (2) cross-reference 

the information provided to the audit 

team to specific requirements of the 

Reliability Standards being audited. 

Registered entities’ responses should 

label all information that is responsive 

to a particular audit team request 

relating to specific requirements. 

9. Each audit team should allot 

sufficient time to complete its review of 

responses to pre-audit data requests 

before beginning site visits or similar 

efforts. During pre-audit preparation, 

audit teams should identify and 

examine any mitigation plans and 

associated documentation pertaining to 

standard requirements to be audited, 

including assessing, as relevant, 

whether mitigation plan milestones 

have been met, mitigation plans have 

been completed in a timely manner and 

whether completion of a mitigation plan 

was sufficient to bring the registered 

entity into compliance with applicable 

requirements.8

C. Procedures During the Compliance 

Audit 

10. A compliance audit should 

ascertain that the registered entity is in 

compliance with a requirement or that 

there is evidence that a violation of the 


dwashington3 on PROD1PC60 with NOTICES
Federal Register / Vol. 74, No. 24 / Friday, February 6, 2009 / Notices 6283 

9This separation of roles is consistent with our 

own staff’s practice. See 2008 Report on 

Enforcement at 26–27. 

10Compliance with Statutes, Regulations, and 

Orders, 125 FERC ¶ 61,058 (2008). 

11See NERC Rule of Procedure 401.6 and CMEP 

section 3.1.4. 1 20 FERC ¶ 62,415 (1982). 

requirement has occurred. A 

compliance audit team should not 

consider or discuss whether a monetary 

penalty or some other sanction would 

be appropriate if the Regional Entity 

finds that the registered entity has 

violated the requirement. Nor should a 

compliance audit team base its decision 

regarding whether evidence of a 

violation exists upon the resources or 

time needed for litigation or settlement 

of a related notice of alleged violation.9

The Commission would look with 

disfavor on the conclusions of a 

compliance audit that is based in any 

way on these considerations. 

11. We emphasize that NERC and 

Regional Entities need to be as 

consistent as possible about the level of 

evidence or documentation that is 

needed to demonstrate compliance for 

particular requirements. 

12. A compliance audit conducted by 

NERC or a Regional Entity should 

include an assessment of the registered 

entity’s Reliability Standards 

compliance program. We suggest that 

NERC and the Regional Entities discuss 

how NERC’s audit guidelines and audit 

data requests and questionnaires could 

better elicit information on the factors 

discussed in our recent Policy 

Statement on Compliance.10

13. If an audit team learns about a 

situation that does not appear to involve 

a current or ongoing violation of a 

Reliability Standard requirement, but 

instead represents an area of concern 

that could become a violation, we 

expect the team to notify the registered 

entity of the situation, discuss it with 

the entity, and document such 

discussions in the compliance audit 

report. We remind audit teams that they 

are expected to fully test compliance 

with any non-actively monitored 

standard if the teams find evidence 

during the audit of non-compliance 

with such a standard.11

14. We believe implementation of this 

guidance will improve the consistency 

of compliance audits relating to 

Reliability Standards and result in 

greater compliance with them. 

By the Commission. 

Kimberly D. Bose, 

Secretary. 

[FR Doc. E9–2527 Filed 2–5–09; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

[Docket No. CP09–51–000 ] 

Natural Gas Pipeline Company of 

America LLC; Notice of Request Under 

Blanket Authorization 

January 29, 2009. 

Take notice that on January 22, 2009, 

Natural Gas Pipeline Company of 

America LLC (Natural), 3250 Lacey 

Road, Suite 700, Downers Grove, Illinois 

60515, filed in Docket No. CP09–51– 

000, an application pursuant to sections 

157.205, 157.208, 157.211 and 157.212 

of the Commission’s Regulations under 

the Natural Gas Act (NGA) as amended, 

to construct, install, own, operate, and 

maintain facilities necessary to deliver 

natural gas to the Southwest Louisiana 

Lateral (Southwest Loop), which is 

partially owned by Transcontinental 

Gas Pipe Line Corporation (Transco), 

and to Bridgeline Holdings, L.P. 

(Bridgeline), both located in Johnson 

Bayou, Cameron Parish, Louisiana, 

under Natural’s blanket certificate 

issued in Docket No. CP82–402–000,1

all as more fully set forth in the 

application which is on file with the 

Commission and open to the public for 

inspection. 

Natural proposes to construct, install, 

own, operate, and maintain a metering 

platform, dual metering facilities, taps, 

and such other appurtenant facilities 

required to effect the interconnects to 

deliver up to 200,000 Dth/day of natural 

gas to the Southwest Loop or to deliver 

up to 200,000 Dth/day of natural gas to 

Bridgeline. Natural states that it would 

cost an estimated $11,900,000 to 

construct the proposed facilities. 

Any questions concerning this 

application may be directed to Bruce H. 

Newsome, Vice President, Regulatory 

Products and Services, Natural Gas 

Pipeline Company of America LLC, 

3250 Lacey Road, 7th Floor, Downers 

Grove, Illinois 60515–7918, or via 

telephone at (630) 725–3070, or by email 

bruce_newsome@kindermorgan.com. 

This filing is available for review at 

the Commission or may be viewed on 

the Commission’s Web site at http:// 

www.ferc.gov, using the ‘‘eLibrary’’ link. 

Enter the docket number excluding the 

last three digits in the docket number 

filed to access the document. For 

assistance, please contact FERC Online 

Support at FERC 

OnlineSupport@ferc.gov or call toll-free 

at (866) 206–3676, or, for TTY, contact 

(202) 502–8659. Comments, protests and 

interventions may be filed electronically 

via the Internet in lieu of paper. See, 18 

CFR 385.2001(a)(1)(iii) and the 

instructions on the Commission’s Web 

site under the ‘‘e-Filing’’ link. The 

Commission strongly encourages 

intervenors to file electronically. 

Any person or the Commission’s staff 

may, within 60 days after issuance of 

the instant notice by the Commission, 

file pursuant to Rule 214 of the 

Commission’s Procedural Rules (18 CFR 

385.214) a motion to intervene or notice 

of intervention and pursuant to Section 

157.205 of the regulations under the 

NGA (18 CFR 157.205), a protest to the 

request. If no protest is filed within the 

time allowed therefore, the proposed 

activity shall be deemed to be 

authorized effective the day after the 

time allowed for filing a protest. If a 

protest is filed and not withdrawn 

within 30 days after the allowed time 

for filing a protest, the instant request 

shall be treated as an application for 

authorization pursuant to Section 7 of 

the NGA. 

Kimberly D. Bose, 

Secretary. 

[FR Doc. E9–2523 Filed 2–5–09; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

[Docket No. PR08–17–000] 

Bay Gas Storage Company, Ltd.; 

Notice of Staff Panel 

January 30, 2009. 

Take notice that the Commission will 

convene a staff panel in the abovereferenced proceeding on Thursday, 

February 26, 2009, at 9:30 a.m. (EDT), in 

a room to be designated at the offices of 

the Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426. 

This Staff Panel will review the 

factual basis for Bay Gas’s 2008 annual 

adjustment to its Lost And Unaccounted 

For (LAUF) gas tracker/true-up 

mechanism. A previous Commission 

Order in this docket, 126 FERC ¶ 61,018 

(January 12, 2009), ordered this Staff 

Panel to gather evidence in order to 

determine whether the updated LAUF 

recovery percentages reflected in Bay 

Gas’s petition are fair and equitable. 

FERC conferences are accessible 

under section 508 of the Rehabilitation 

Act of 1973. For accessibility 

accommodations please send an e-mail 

to accessibility@ferc.gov or call toll free 


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