Document ID: FERC-2009-1605-0001
Agency: ferc
Document Type: Notice
Title: North American Electric Reliability Corporation; Order Addressing Applicability of Section 215
Posted Date: 2009-10-21T04:00Z

[Federal Register: October 21, 2009 (Volume 74, Number 202)]
[Notices]               
[Page 54033-54038]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21oc09-45]                         

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. NP09-26-000]

 
North American Electric Reliability Corporation; Order Addressing 
Applicability of Section 215 of the Federal Power Act to Federal 
Entities

October 15, 2009.
    1. On June 24, 2009, the North American Electric Reliability 
Corporation (NERC) filed a Notice of Penalty for a self-certified 
violation of a Commission-approved Reliability Standard by the U.S. 
Army Corps of Engineers (Corps)-Tulsa District. In that filing, NERC 
requested that the Commission issue a decision addressing the 
jurisdictional issue of whether, pursuant to section 215 of the Federal 
Power Act (FPA), federal entities that use, own, or operate the Bulk-
Power System, such as the Corps-Tulsa District, must comply with 
mandatory Reliability Standards.
    2. The Corps-Tulsa District did not seek Commission review of the 
Notice of Penalty, which took effect on the 31st day after filing 
pursuant to section 215(e)(2) of the FPA.\1\ In this order, we affirm 
that, pursuant to section 215 of the FPA, the Corps-Tulsa District and 
other federal entities that use, own, or operate the Bulk-Power System 
must comply with mandatory Reliability Standards.
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    \1\ 16 U.S.C. 824o(e)(2) (2006).
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Background

A. Statutory Framework

    3. Section 215 of the FPA authorizes the Commission to certify and 
oversee an electric reliability organization (ERO), which is 
responsible for developing and enforcing mandatory Reliability 
Standards that are applicable to owners, users, and operators of the 
Bulk-Power System.\2\ Section 215(e) authorizes the ERO, as well as the 
Commission on its own motion or on complaint, to assess penalties for 
violation of Reliability Standards.\3\ Exercising this statutory 
authority, the Commission certified NERC as the ERO \4\ and initially 
approved 83 Reliability Standards.\5\ Further, consistent with the 
statute, NERC as the ERO delegated to eight Regional Entities, 
including Texas Regional Entity, authority to, inter alia, enforce 
mandatory Reliability Standards.\6\
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    \2\ 16 U.S.C. 824o(c) (2006).
    \3\ Id. Sec.  824o(e).
    \4\ North American Electric Reliability Corp., 116 FERC ] 
61,062, order on reh'g and compliance, 117 FERC ] 61,126 (2006), 
order on compliance, 118 FERC ] 61,030, order on compliance, 118 
FERC ] 61,190, order on reh'g, 119 FERC ] 61,046 (2007), aff'd sub 
nom. Alcoa Inc. v. FERC, 554 F.3d 1342 (D.C. Cir., 2009).
    \5\ Mandatory Reliability Standards for the Bulk-Power System, 
Order No. 693, FERC Stats & Regs. ] 31,242, order on reh'g, Order 
No. 693-A, 120 FERC ] 61,053 (2007).
    \6\ North American Electric Reliability Corp., 119 FERC ] 
61,060, order on reh'g, ] 61,260 (2007).
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    4. Users, owners, and operators of the Bulk-Power System are 
required to register with NERC.\7\ NERC's Compliance Registry 
identifies all entities subject to compliance with the approved 
Reliability Standards. Further, NERC has developed a statement of 
Registry Criteria that is employed by NERC and the Regional Entities to 
determine which organizations should be registered because they are 
material to the reliability of the Bulk-Power System.\8\ In cases where 
an entity is registered involuntarily by NERC, that entity has an 
opportunity to timely appeal its registration status in accordance with 
Rule 504 and Appendix 5 to NERC's Rules of Procedure.
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    \7\ 18 CFR 39.2(c) (2009).
    \8\ The Commission accepted the NERC Registry Criteria in Order 
No. 693, FERC Stats. & Regs. ] 31,242 at P 93-95.
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    5. NERC must file a Notice of Penalty with the Commission before a 
Regional Entity or NERC penalty assessment for the violation of a 
Reliability Standard takes effect.\9\ Each penalty determination is 
subject to Commission review, on its own motion or by an application 
for review by the recipient

[[Page 54034]]

of a penalty, within thirty days from the date NERC files the 
applicable Notice of Penalty.\10\ In the absence of the filing of an 
application for review of a penalty or motion or other action by the 
Commission, each penalty filed by NERC is affirmed by operation of law 
upon the expiration of the applicable thirty-day period.
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    \9\ Rules Concerning Certification of the Electric Reliability 
Organization; and Procedures for the Establishment, Approval, and 
Enforcement of Electric Reliability Standards, Order No. 672, FERC 
Stats. & Regs. ] 31,204 at P 506, order on reh'g, Order No. 672-A, 
FERC Stats. & Regs. ] 31,212 (2006).
    \10\ 16 U.S.C. 824o(e)(2) (2006).
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B. Notice of Penalty

1. Corps-Tulsa District Violation
    6. The Corps-Tulsa District owns a hydropower project called the 
Denison Project Generator, located on the Red River in Bryan County, 
Oklahoma and Grayson County, Texas. The Denison project has two main 
generators with a maximum plant capacity of 80 megawatts. Texas 
Regional Entity registered the Corps-Tulsa District in June 2007 as a 
generator owner. According to NERC, the Corps-Tulsa District was 
provided notice of the registration and did not appeal its registration 
status.
    7. On June 24, 2009, NERC submitted a Notice of Penalty 
incorporating the findings and justifications set forth in a Notice of 
Confirmed Violation and Proposed Penalty or Sanction issued on February 
20, 2008, by the Texas Regional Entity.\11\ According to NERC, the 
Corps-Tulsa District self-certified on October 3, 2007, non-compliance 
with Reliability Standard PRC-005-1 Requirements R1.1 and R2 for its 
Denison Project Generator.\12\ NERC states that, in the self-
certification, the Corps-Tulsa District argued that, as a governmental 
entity, it was not required to comply with section 215 of the FPA. 
According to NERC, the Corps stated that, because of this uncertainty, 
it was not in a position to register with the Regional Entity, but that 
it would strive to meet the electric Reliability Standards established 
pursuant to section 215 of the FPA, subject to the availability of 
funds appropriated by Congress and project operation requirements.
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    \11\ Texas Regional Entity is an independent division of the 
Electric Reliability Council of Texas, Inc. (ERCOT).
    \12\ PRC-005-1 requires that all generation protection systems 
affecting the reliability of the bulk electric system be maintained 
and tested. Requirement R1 requires each generator owner that owns a 
generation protection system to have a protection system maintenance 
and testing program for protection systems that affect the 
reliability of the Bulk-Power System. Requirement R1.1 requires that 
this program include maintenance and testing intervals and their 
basis. Texas Regional Entity subsequently determined that the Corp-
Tulsa District did not violate PRC-005-1, Requirement R2 and it 
dismissed that violation.
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    8. On October 31, 2007, Texas Regional Entity issued an Initial 
Notice of Alleged Violation and, subsequently, a Notice of Alleged 
Violation and Proposed Penalty or Sanction (NAVAPS). NERC states that 
the Corps-Tulsa District responded to the NAVAPS on November 20, 2007, 
but did not make the required election of agreeing with/not contesting 
or contesting the alleged violations and/or penalty. Instead, according 
to NERC, the Corps-Tulsa District asserted that the self-reporting data 
it provided on October 3, 2007 to Texas Regional Entity was provided on 
a voluntary basis, that the submission did not constitute entity 
registration or a recognition of jurisdiction by the Corps, and that 
the Corps is not in a position to register with the Corps-Tulsa 
District's respective reliability organization. NERC states that the 
Corps-Tulsa District further stated that, in order ``[t]o avoid 
substantial changes to preliminary mitigation plans as a result of the 
[Corps'] forthcoming national policy, a mitigation plan for this non-
compliance will not be submitted until this national policy has been 
completed,'' and that it will ``voluntarily conform to the reliability 
standards * * * [t]o the extent [its] current appropriations allow [it] 
to comply with the Act.'' \13\
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    \13\ NERC June 24, 2009 Filing, attachment b (COE-Tulsa District 
response to the Notice of Alleged Violation and Proposed Penalty and 
Sanction, November 20, 2007).
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    9. NERC states that on January 17, 2008, Texas Regional Entity 
issued a letter to the Corps-Tulsa District directing it to submit an 
acceptable mitigation plan within ten days. The Corps-Tulsa District 
responded asserting that it was unclear whether it is subject to the 
requirements of section 215 of the FPA, but that it intended to make 
all reasonable efforts to voluntarily comply with the Reliability 
Standards while remaining within the funding level provided by 
Congress. The Corps-Tulsa District stated that it was awaiting receipt 
of national policy guidance regarding submission of mitigation plans, 
and projected that it would be able to provide a final regional 
mitigation plan by October 2008.
    10. NERC states that on January 30, 2008, the Corps-Tulsa District 
submitted a mitigation plan to Texas Regional Entity but again 
reiterated its belief that section 215 of the FPA does not apply to the 
Corps-Tulsa District because it does not contain a clear, unequivocally 
expressed waiver of sovereign immunity, which, the Corps-Tulsa District 
argues, is necessary for any entity to exercise jurisdiction over a 
federal agency. The Corps-Tulsa District also reiterated that it 
intended to make all reasonable efforts to voluntarily comply with NERC 
Reliability Standards so long as it can do so within the funding levels 
authorized to it by Congress.
    11. Texas Regional Entity proposed a zero dollar penalty. After 
NERC review, NERC submitted the Notice of Penalty to the Commission on 
June 24, 2009. The penalty became effective by operation of law on July 
27, 2009, and the Commission issued notice to that effect.\14\ The 
Commission noted that the Corps-Tulsa District has challenged the 
applicability of mandatory Reliability Standards under section 215 of 
the FPA, that the Commission has sought comments on the applicability 
of mandatory Reliability Standards to the U.S. Army Corps of Engineers 
and other federal agencies, and that it would address this issue 
separately.\15\
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    \14\ North American Electric Reliability Corp., 128 FERC ] 
61,088 (2009).
    \15\ Id. at n.1.
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2. NERC Request for Decision on Jurisdictional Matter
    12. In the Notice of Penalty, NERC states that the Corps-Tulsa 
District ``has challenged NERC's jurisdiction (and therefore that of 
the Commission) under section 215 of the FPA.'' \16\ NERC, however, 
believes that the Corps-Tulsa District is subject to mandatory 
Reliability Standards under section 215 and requests that the 
Commission, regardless of whether the Corps-Tulsa District seeks 
Commission review of the Notice of Penalty, issue a decision on the 
scope of NERC's and the Commission's jurisdiction under section 215 of 
the FPA.
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    \16\ Notice of Penalty at 7.
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    13. In support of its position, NERC states that section 215 (b)(1) 
of the FPA provides that ``[t]he Commission shall have jurisdiction * * 
* over * * * all users, owners, and operators of the bulk-power system, 
including but not limited to the entities described in section 201(f), 
for purposes of approving reliability standards established under this 
section and enforcing compliance with this section.'' NERC argues that 
section 201(f) of the FPA describes agencies or instrumentalities of 
the United States and thus these entities are expressly included within 
the term ``users, owners, and operators of the bulk-power system'' in 
section 215 and made subject to the Commission's jurisdiction to both 
approve and enforce Reliability Standards.
    14. In further support, NERC states that Congress, in the Energy 
Policy Act

[[Page 54035]]

of 2005,\17\ made technical and conforming amendments to the FPA that 
were necessitated by the substantive changes to the FPA, including the 
addition of section 215. As part of these changes, FPA section 201(b), 
which establishes the applicability of Part II of the FPA, was amended 
to expressly add ``section 215'' to the list of sections of the FPA 
enumerated in section 201(b)(2) and to add ``[n]otwithstanding section 
201(f)'' to the beginning of section 201(b)(2). NERC argues that the 
specific provisions of section 201(b)(2) override the general language 
of section 201(f), which excludes the United States from the 
application of Part II of the FPA. Thus, NERC argues that section 
201(b)(2) provides further confirmation that the United States is 
subject to section 215 and to Commission jurisdiction both for carrying 
out the provisions of sections 215 and for enforcing those provisions.
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    \17\ Energy Policy Act of 2005 (EPAct 2005), Pub. L. No 109-58, 
Title XII, Subtitle A, 119 Stat. 594, 941 (2005).
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    15. Finally, NERC looks to the legislative history of the Energy 
Policy Act of 2005 and in particular, to the debate surrounding the 
Thomas amendment, which was adopted by the United States Senate in 2002 
and which was a precursor to FPA section 215. NERC points to an 
explanation offered by Senator Thomas, the author of that amendment, 
stating ``[t]he new reliability organization will have enforcement 
powers with real teeth to ensure reliability. The amendment provides 
that mandatory reliability rules will apply to all users of the 
transmission grid. There are no loopholes. No one will be exempt.'' 
\18\ NERC notes that Senator Bingaman also stated that ``[t]he 
reliability system needs to apply to all users.'' In addition, NERC 
quotes a later analysis of substantively similar reliability 
legislation by the General Accounting Office acknowledging the 
applicability of reliability rules to federal entities: ``All users, 
owners and operators of the bulk-power system would have to comply with 
the reliability standards. * * * We understand this would include both 
private entities and Federal entities (such as the Tennessee Valley 
Authority, the Bonneville Power Administration, and other federal 
marketing agencies), among others.'' \19\
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    \18\ Citing Cong. Rec. 1874 (March 14, 2002).
    \19\ Citing General Accounting Office, Draft Legislation 
Concerning an Electric Reliability Organization, at 3, n.5 (March 
18, 2003).
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Notice of Filing and Comments

    16. Notice of NERC's June 24, 2009 filing was published in the 
Federal Register, 74 FR 32,153 (2009), with comments due on or before 
July 24, 2009. By notice published July 24, 2009, the comment period 
was extended to August 24, 2009.
    17. The Corps filed a motion to intervene and comments regarding 
the applicability of Reliability Standards under section 215 of the 
FPA.
    18. In addition, Western Electricity Coordinating Council (WECC), 
Tex-La Electric Cooperative of Texas, Inc., SERC Reliability 
Corporation, and the Midwest Reliability Organization filed motions to 
intervene. Mid-West Electric Consumers Association and the Southwestern 
Power Resources Association (collectively, Federal Power Customers), 
Texas Regional Entity, the National Rural Electric Cooperative 
Association (NRECA), the United States Department of Energy (DOE), 
ReliabilityFirst Corporation (ReliabilityFirst), the Southeastern 
Federal Power Customers, Inc. (Southeastern Customers) and the United 
States Department of the Interior (Interior) filed motions to intervene 
and comments. The Department of the Army, Office of the Assistant 
Secretary for Civil Works (Department of the Army), filed comments. The 
Southwest Transmission Dependent Utility Group (Southwest Utility 
Districts), Tri-State Generation and Transmission Association, Inc. 
(Tri-State) filed motions to intervene and protests.
    19. On September 8, 2009, NERC filed reply comments. On September 
23, 2009, the Corps filed an objection to NERC's motion for leave to 
file reply comments. On October 7, 2009, DOE filed a response to NERC's 
reply comments. On October 7, 2009, DOE also filed a motion for a stay 
to suspend enforcement activity only in those cases where a civil fine 
against a DOE entity is at issue.\20\
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    \20\ The Commission recognizes that the DOE has a concern that 
the possibility of civil penalties for federal entities may cause 
litigation in a number of proceedings; however, given that the issue 
of civil fines is beyond the scope of this proceeding, we do not 
discuss DOE's motion here. See infra P 32.
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A. The Corps' Comments

    20. The Corps states that it currently operates 75 hydropower 
plants nationwide and they account for three percent of the nation's 
total electrical capacity. The Corps states that the Denison 
powerhouse, the subject of NERC's Notice of Penalty, is operated as a 
peaking plant with approximately 37 percent plant annual capacity 
factor. The Corps also states that although there are two transmission 
lines going into the Denison switchyard, only the transmission line 
going into Texas is being utilized for transmission of power from the 
Denison powerhouse. The other line is energized up to an open breaker 
and associated disconnecting switch in the switchyard. According to the 
Corps, while it is possible to transmit power both into Oklahoma and 
Texas simultaneously using individual units, the two systems can never 
be connected together without resulting in equipment damage. A ``bus 
tie'' breaker is used to separate the two units for this type of 
operation. Therefore, the Corps asserts that this switchyard is treated 
as a radial transmission line with no critical connection to the ERCOT 
system. The Corps further asserts that since no power is ``wheeled'' 
through the switchyard to serve another load, NERC has not alleged that 
if the switchyard equipment fails, there will be an adverse effect on 
the reliability of the Bulk Power System.
    21. The Corps contends that section 215 does not grant the 
Commission or NERC jurisdiction over Corps-owned hydroelectric 
generating facilities at its Civil Works projects.\21\ The Corps adds 
that NERC's analysis is flawed in that the Corps has numerous 
hydropower projects and in order to respond to NERC's filing, which is 
essentially a request for declaratory judgment, the Corps must address 
the unique configurations of each of its facilities, although only one 
was involved in the Notice of Penalty. The Corps asserts that this 
violates its due process rights because only the Denison Generator 
Project has been cited. The Corps also asserts that Congress has not 
waived the Corps' sovereign immunity, and thus, NERC cannot issue 
monetary penalties against the Corps. Further, the Corps asserts that 
the legal dispute should be submitted to the Attorney General, not 
through the Commission's notice and comment process.
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    \21\ According to the Corps' January 31, 2007 Civil Works 
Information Paper, all 75 of its hydropower plants are Civil Works 
projects. U.S. Army Corps of Engineers, Civil Works Program 
Statistics (January 31, 2007) available at http://140.194.76.129/cw/
cecwb/GWiz07.pdf.
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B. Other Comments and Protests

    22. The Department of the Army, NRECA, Southwest Utility Districts, 
and Interior raise procedural issues. The Department of the Army states 
that the Department of Justice's Office of Legal Counsel, and not the 
Commission's adjudicatory process, is the proper forum for resolving 
the disagreement on implementation of section 215 of the FPA. NRECA 
states that it supports NERC's need for clarity regarding the scope of 
its jurisdiction under section 215 but does not believe a specific

[[Page 54036]]

penalty proceeding is appropriate for resolving this broad issue 
involving multiple federal agencies and one or more cabinet-level 
departments. NRECA states that it would be more appropriate for the 
Commission to temporarily suspend the procedural schedule in this 
docket and confer with the Corps and other federal agencies. Interior 
states that the proceeding should be stayed to allow for prompt 
interagency resolution of the relevant jurisdictional issues. Southwest 
Utility Districts state that the Commission should create a list of 
specific issues and seek supplemental briefing of the parties who do 
intervene in this proceeding and of federal agencies that do not 
intervene but could file subsequent comments.
    23. Texas Regional Entity, WECC, and ReliabilityFirst agree with 
NERC's conclusion that federal entities such as the Corps-Tulsa 
District are subject to mandatory Reliability Standards under section 
215 of the FPA, including its penalty and sanction provisions. Texas 
Regional Entity reiterates the information described in NERC's Notice 
of Penalty and requests that the Commission affirm jurisdiction by the 
Commission and NERC over the Corps-Tulsa District under section 215 of 
the FPA. ReliabilityFirst asserts that a determination that exempts 
federal entities from the Commission's section 215 jurisdiction would 
have far-reaching implications for the reliability of the Bulk-Power 
System. According to ReliabilityFirst, federal entities are an 
important part of the users, owners, and operators of the Bulk-Power 
System in ReliabilityFirst's region and they have an even more 
substantial presence in other regions. Thus, according to 
ReliabilityFirst, exempting federal entities from compliance with 
mandatory Reliability Standards would impair the reliability and the 
resilience of the electric grid.
    24. ReliabilityFirst identifies a number of potential consequences 
if federal entities are not required to comply with mandatory 
Reliability Standards. It states that such an exclusion ``would provide 
a disincentive to the interaction between users, owners, and operators 
that is necessary to preserve reliability.'' \22\ It adds that not only 
do some Reliability Standards depend on the timely exchange of 
information and directives between registered entities, but the 
effectiveness of some Reliability Standards, in particular the Critical 
Infrastructure Protection standards, depends in large part on system-
wide compliance. ReliabilityFirst further states that several 
Reliability Standards require reliability coordinators to issue 
directives to other registered entities so that necessary steps are 
taken to preserve reliability. It adds that if a federal entity 
fulfilling a transmission operator or generator operator function is 
exempt from the Commission's jurisdiction and refuses to acknowledge 
this reliability coordinator authority in an emergency situation, 
cascading outages or other manifestations of severe grid instability 
could result. Similarly, according to ReliabilityFirst, failure to heed 
a reliability coordinator's directive to return the system to within an 
Interconnection Reliability Operating Limit could have disastrous 
results for system reliability. Likewise, the failure of generators to 
notify their corresponding transmission operators and balancing 
authorities if they experience a protective relay or equipment failure 
may prevent the transmission operator from learning of this failure in 
time to take appropriate corrective action, thereby endangering system 
reliability.
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    \22\ ReliabilityFirst Comments at 5.
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    25. Finally, ReliabilityFirst asserts that the application of 
Reliability Standards to federal entities is meaningless without the 
power to enforce those Reliability Standards. ReliabilityFirst states 
that without enforcement power, compliance would be voluntary, the 
situation that existed before the passage of section 215 of the FPA. 
ReliabilityFirst urges the Commission to conclude that federal entities 
are subject to section 215, including the penalty and sanction 
provisions and states that this is the plain meaning of the statute and 
to decide otherwise would contravene the intent of Congress and 
undermine all of the Commission's efforts to ensure the reliability of 
the Bulk-Power System and prevent a cascading blackout.
    26. DOE, Interior, Tri-State and Southeastern Customers argue that 
federal agencies must comply with NERC's Reliability Standards but 
should not be subject to monetary penalties. DOE argues that the plain 
language of section 215(b)(1) makes it clear that the Commission has 
jurisdiction over ``all users, owners, and operators of the bulk-power 
system, including but not limited to the entities described in section 
201(f) for purposes of approving Reliability Standards established 
under this section and enforcing compliance with this section.'' \23\ 
DOE adds that the clear inclusion of federal entities described in 
section 201(f) is consistent with Congress's intent to ensure 
reliability nationwide. DOE further contends that section 201(b)(2) 
limits the Commission's section 215 jurisdiction over federal entities 
to the purposes described in section 215, providing:
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    \23\ 16 U.S.C. 824o(b)(1) (2006).

    Notwithstanding section 201(f), the provisions of section * * * 
215 * * * shall apply to the entities described in such provisions 
and such entities shall be subject to the jurisdiction of the 
Commission for purposes of carrying out the enforcement authorities 
of this Act with respect to such provisions. Compliance with any 
order or rule of the Commission under the provisions of section * * 
* 215 * * * shall not make an electric utility or other entity 
subject to the jurisdiction of the Commission for any purposes other 
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than the purposes specified in the preceding sentence.

    DOE argues that section 201(b)(2) supports Commission jurisdiction 
over DOE entities under section 215 and section 215 alone; it does not 
authorize the Commission to punish violations of section 215 by 
assessing criminal penalties or levying monetary civil fines under any 
other section of the FPA. DOE also asserts that the term ``penalty'' is 
not defined with sufficient clarity in section 215(e) to support the 
imposition of punitive monetary penalties on DOE entities under that 
section.
    27. Tri-State argues that it is vital that all users, owners and 
operators, including federal agencies, obey the same mandatory 
Reliability Standards to ensure the reliability of the Bulk-Power 
System. Southeastern Customers state that the Commission has already 
determined that in the Southeast the Corps was appropriately registered 
as the transmission operator and the Corps did not challenge this 
application of the Reliability Standards.\24\ Both Tri-State and 
Southeastern Customers, argue, however, that federal agencies should 
not be subject to monetary penalties for violation of Reliability 
Standards. Tri-State argues that federal agencies rely on appropriated 
funds from the U.S. Treasury to finance their statutory obligations and 
generally do not have the authority to pay civil penalties because they 
have limited discretion in allocating these funds. Tri-State adds that 
even where a court has found a claim to be valid under the law, the 
claim may not be paid unless Congress has enacted an appropriation 
available for that purpose.\25\ In addition, both Tri-State and 
Southeastern Customers argue that the Anti-Deficiency Act prohibits a 
federal agency from paying monetary penalties because it may not spend 
or

[[Page 54037]]

obligate more capital than was appropriated through the congressional 
funding process for that particular purpose.\26\ Likewise, Southwest 
Utility Districts argue that assessing a fine against a federal agency 
is much more complicated than assessing it against a private utility, 
in particular because the funds received by a federal agency are 
received with specific statutory instructions and limitations.
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    \24\ Citing Southeastern Power Administration, 125 FERC ] 
61,294, at P 24 (2008).
    \25\ Citing Office of Pers. Management v. Richmond, 496 U.S. 
414, 424-25 (1990); Cincinnati Soap Co. v. United States, 301 U.S. 
308, 321 (1937).
    \26\ Citing the Anti-Deficiency Act, 31 U.S.C. 1341(a)(1)(A) 
(2006).
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    28. Federal Power Customers state that their members are purchasers 
of energy generated and/or marketed by federal agencies, specifically, 
the Corps, the U.S. Bureau of Reclamation, the Western Area Power 
Administration, and the Southwestern Power Administration. Federal 
Power Customers comment that it is unclear whether potential penalties 
assessed by NERC and the Commission against the aforementioned federal 
agencies may become subsumed in the costs passed on to Federal Power 
Customers or their members. Federal Power Customers request that, in 
reaching a jurisdictional determination, such determination not contain 
any inference regarding the federal agencies' ability to pass through 
penalties to customers.

Discussion

A. Procedural Matters

    29. Pursuant to Rule 214 of the Commissions Rules of Practice and 
Procedure, 18 CFR 385.214 (2009), the timely unopposed motions to 
intervene serve to make the entities that filed them parties to this 
proceeding. Rule 213(a)(2) of the Commission's Rules of Practice and 
Procedure, 18 CFR 385.213(a)(2) (2009), prohibits an answer to an 
answer unless otherwise ordered by the decisional authority. We are not 
persuaded to accept NERC's or DOE's answers and will, therefore, reject 
them.

B. Commission Determination

    30. As discussed below, we conclude that, pursuant to section 215 
of the FPA, federal entities such as the Corps-Tulsa District that are 
users, owners, or operators of the Bulk-Power System must comply with 
mandatory Reliability Standards. The issue of whether a specific entity 
is a user, owner, or operator of the Bulk-Power System is a factual 
matter that is, in the first instance, determined by the ERO and the 
relevant Regional Entity in NERC's compliance registration process.\27\ 
Thus, to the extent that the Corps raises concerns whether specific 
Corps facilities are Bulk-Power System facilities or a specific Corp 
District is a user, owner, or operator of the Bulk-Power System, these 
matters are appropriately raised in the first instance with the 
relevant Regional Entity pursuant to NERC's compliance registry 
procedures. In this order, we are not making factual determinations 
regarding specific entities or facilities. Rather, we address the legal 
applicability of section 215 of the FPA to federal entities such as the 
Corps-Tulsa District.
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    \27\ See, e.g., Order No. 693, FERC Stats. & Regs. ] 31,242 at P 
93-96. Pursuant to NERC's Rules of Procedure, an entity that 
disagrees with the ERO's registration determination can seek 
Commission review of that decision.
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1. Procedural Arguments
    31. At the outset, we disagree with comments suggesting that the 
Commission's process is the incorrect forum for determining the 
implementation of section 215, or that the proceedings should be stayed 
to allow for interagency resolution. Pursuant to section 215(b) of the 
FPA, all users, owners, and operators of the Bulk-Power System must 
comply with mandatory Reliability Standards that are developed by the 
ERO and approved by the Commission. We have in the first instance the 
authority to determine the scope of our jurisdiction.\28\ Our authority 
to make this determination is not dependent on the ultimate outcome of 
the determination. Accordingly, we address here the issue of the 
Commission's authority pursuant to section 215 of the FPA to require 
that federal entities such as the Corps-Tulsa District comply with 
mandatory, Commission-approved Reliability Standards.
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    \28\ See, e.g., Nine Mile Point Nuclear Station LLC v. Niagara 
Mohawk Power Corp., 110 FERC ] 61,033, at P 30 & n.31 (2005), aff'd, 
452 F.3d 822 (D.C. Cir. 2006); accord New York v. FERC, 535 U.S. 1, 
22-23 (2002) (holding the Commission was within its authority to 
establish a seven-factor test to determine which facilities are 
local distribution facilities that fall outside of the Commission's 
jurisdiction pursuant to FPA section 201). Cf. Western Massachusetts 
Electric Co., 61 FERC ] 61,182, at 61,661 (1992), aff'd, 165 F.3d 
922, 926 (D.C. Cir. 1999) (concluding the Commission may examine 
contracts relating to transactions which may be subject to its 
jurisdiction prior to making its determination as to jurisdiction).
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    32. The Corps and several commenters address the additional 
question of whether federal entities are subject to monetary penalties 
for non-compliance with mandatory Reliability Standards. We view this 
as a separate and distinct issue. We need not and do not address it 
here.
2. Section 215 Jurisdiction Over Users, Owners, and Operators
    33. With regard to the Commission's section 215 jurisdiction, FPA 
section 215(b)(1) states, in relevant part,

    Jurisdiction and applicability: (1) The Commission shall have 
jurisdiction * * * over * * * all users, owners and operators of the 
bulk-power system, including but not limited to the entities 
described in section 201(f), for purposes of approving reliability 
standards established under this section and enforcing compliance 
with [section 215]. All users, owners and operators of the bulk-
power system shall comply with reliability standards that take 
effect under this section.\29\

    \29\ 16 U.S.C. 824o(b)(1) (2006). Section 215 defines the Bulk-
Power System as ``(A) facilities and control systems necessary for 
operating an interconnected electric energy transmission network (or 
any portion thereof); and (B) the electric energy from generation 
facilities needed to maintain transmission system reliability.'' 16 
U.S.C. 824o(a)(1) (2006).

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    FPA section 201(f) states, in relevant part,

    No provision in [Part II of the FPA] shall apply to, or be 
deemed to include, the United States, a State or any political 
subdivision of a state, * * * or any agency, authority, or 
instrumentality of any one or more of the foregoing * * * unless 
such provision makes specific reference thereto.

    34. The language of section 215(b) refers to entities within the 
Commission's section 215 jurisdiction as ``including but not limited to 
the entities described in section 201(f).'' In turn, section 201(f) 
specifically refers to ``the United States, a State or any political 
subdivision of a state, * * * or any agency, authority, or 
instrumentality of any one or more of the foregoing.'' FPA section 
215(b) is clear that the Commission shall have jurisdiction over those 
described entities ``for purposes of approving reliability standards 
established under this section and enforcing compliance with this 
section.'' Had Congress intended, by its reference to section 201(f), 
to extend the section 201(f) exemption to section 215, there would have 
been no need to include the reference at all. Section 201(f) is in 
place, absent a specific reference to the contrary. Congress instead 
specifically included within the Commission's section 215 jurisdiction 
each entity described in section 201(f) that is a user, owner, or 
operator of the Bulk-Power System. Based on the expanded jurisdictional 
reach of the statute, the Commission concludes that Congress intended 
section 215 to be comprehensive; excluding federal agencies would 
create a significant gap

[[Page 54038]]

in the ERO's and the Commission's reliability oversight.
    35. Further, section 201(b)(2) adds additional weight to the 
argument, which we find persuasive, that Congress intended to include 
federal entities under the Commission's jurisdiction. Such section, as 
amended by the Energy Policy Act of 2005, states under the heading 
``Declaration of Policy; Application of Part'':

    Notwithstanding section 201(f), the provisions of sections * * * 
215 * * * shall apply to the entities described in such provisions, 
and such entities shall be subject to the jurisdiction of the 
Commission for purposes of carrying out such provisions and for 
purposes of applying the enforcement authorities of this Act with 
respect to such provisions.

    Prior to the Energy Policy Act of 2005, few provisions of Part II 
of the FPA applied to governmental and other non-public utility 
entities. Previously, section 201(b)(2) referred only to entities 
subject to FPA sections 210, 211, and 212. The Energy Policy Act of 
2005 added new provisions that use broad terms such as ``all users, 
owners and operators,'' and these provisions apply to governmental as 
well as private entities. In turn, EPAct 2005 amended section 201(b)(2) 
to make clear that the Commission's jurisdiction over otherwise exempt 
public utilities under certain substantive provisions of the FPA, 
including the reliability provision, is only for the narrow purposes of 
implementing and enforcing those provisions. When Congress amended 
201(b)(2), it also specifically added the phrase ``[n]otwithstanding 
section 201(f),'' at the beginning of the provision to make clear that 
entities (including governmental entities) otherwise exempted from 
Commission regulation by virtue of section 201(f) are indeed subject to 
limited Commission regulation for purposes of certain FPA provisions. 
Had Congress not intended section 215 to apply to governmental and 
other exempt public utility entities, there would have been no reason 
to add the reference to section 215 in section 201(b)(2).
    36. Finally, as NERC points out,\30\ the legislative history of FPA 
section 215 supports the conclusion that Congress intended FPA section 
215 to require that all users, owners, and operators of the Bulk-Power 
System, including federal entities, comply with Commission-approved 
Reliability Standards. FPA section 215 can be traced to the Thomas 
amendment and Senator Thomas, the author of that amendment stated that 
mandatory reliability rules will apply to all users of the transmission 
grid. There are no loopholes. No one is exempt.''\31\
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    \30\ See supra P 15.
    \31\ In addition, the General Accounting Office stated that 
``[a]ll users, owners and operators of the bulk-power system would 
have to comply with the reliability standards.'' and ``We understand 
this would include both private entities and federal entities (such 
as the Tennessee Valley Authority, the Bonneville Power 
Administration, and other federal power marketing agencies), among 
others.'' General Accounting Office, Draft Legislation Concerning an 
Electric Reliability Organization, at 3, n.5 (March 18, 2003), 
available at http://www.gao.gov/decisions/other/360241.pdf.
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    37. Further, the legislative history makes clear that, among other 
things, the reliability provision was added to the FPA to prevent 
cascading blackouts. The debate during consideration of the Conference 
Report on the proposed bill states that mandatory, enforceable 
reliability rules began in response to the 1996 blackouts in the 
Pacific Northwest and gained more urgency with the Northeast blackout 
of 2003.\32\ Exclusion of federal entities from the reliability 
provision would run counter to this legislative purpose as it would 
create significant gaps in an otherwise comprehensive program to apply 
mandatory Reliability Standards to better assure the reliability of the 
Bulk-Power System. As ReliabilityFirst attests, excluding federal 
entities from the requirements of the Reliability Standards raises 
serious potential consequences for the reliability of the Bulk-Power 
System. Thus, it stands to reason that Congress intended that all 
users, owners, and operators of the Bulk-Power System, including 
federal entities, be required to comply with the Reliability Standards. 
It would be contrary to Congressional intent and likely ineffective to 
return to a voluntary system based on individual discretion as the 
Corps proposes with respect to federal entities.\33\
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    \32\ See, e.g., 151 Cong. Rec. House 6943-44 (July 28, 2005) 
(statement of Rep. Hastings); 151 Cong. Rec. Senate 9344 (July 29, 
2005) (statement of Sen. Maria Cantwell).
    \33\ NERC June 24, 2009 Notice of Penalty at 2-3 (citing October 
3, 2007 Letter from Department of the Army, Southwestern Division, 
Corps of Engineers, to ERCOT).
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    38. Accordingly, we find that, pursuant to section 215 of the FPA, 
federal entities such as the Corps-Tulsa District that are registered 
by the ERO as users, owners, and operators of the Bulk-Power System 
must comply with mandatory Reliability Standards as to facilities that 
fall within the Bulk-Power System.

The Commission Orders

    (A) The Commission grants NERC's request for a decision that, 
pursuant to section 215 of the FPA, federal entities that use, own, or 
operate the Bulk-Power System, must comply with mandatory Reliability 
Standards, as discussed in the body of this order.
    (B) The Secretary is directed to publish a copy of this order in 
the Federal Register.

    By the Commission. Commissioner Kelly is not participating.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. E9-25224 Filed 10-20-09; 8:45 am]

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