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Kelliher: FERC Won't Rubber Stamp 'Version Zero' Reliability Standards

FERC Chairman Joseph Kelliher told an audience of power industry officials last Wednesday that the Commission will not "blindly approve" existing so-called "Version Zero" reliability standards adopted by the North American Electric Reliability Council (NERC) and then work to improve them over time, assuming that those standards are ultimately submitted to FERC.

"I think there was that expectation in some quarters. That's not how the Commission's going to proceed," he told Infocast's "Reliability Summit 2005" in Virginia. He said if the Version Zero standards fall short of the statutory test, "I expect that they will be rejected or set for hearing." The goal "is to get reliability standards right the first time," Kelliher said.

Earlier this year, NERC's board of trustees unanimously agreed to adopt a comprehensive set of reliability standards for the bulk electric system. The Version Zero reliability standards took effect on April 1.

Through a notice of proposed rulemaking, FERC recently proposed criteria for the establishment of an electric reliability organization (ERO) that will enforce reliability standards under the regulatory review and oversight of the Commission. The NOPR is just one of several actions FERC is taking in the wake of the recently enacted Energy Policy Act of 2005.

NERC plans to file a bid to become the certified ERO once the final rules are set by FERC related to certification of the ERO and related procedures for the establishment, approval and enforcement of electric reliability standards.

"We're operating under the assumption that version zero standards will be the standards that are proposed in a few months," Kelliher noted. He said FERC "is conducting an internal review of version zero standards. What we're trying to do is identify those standards that may not meet the statutory test, as well as those that probably do. It's possible that we may ultimately...need to remand some of the version zero standards if they are what are proposed, or set some for hearing."

FERC is also "looking to identify the need for reliability standards that are outside the scope of version zero," such as an operator training standard, the FERC chairman told the conference. FERC wants to be poised to direct the ERO to develop those standards, once it's certified.

Summing up what he thinks is the Commission's current posture on version zero standards, Kelliher said FERC is "poised to review the version zero standards. We're not poised to rubber stamp them."

FERC is currently weighing whether the Commission "should have some kind of public process to review some version zero standards in advance of the filing of reliability standards. The goal again is to accelerate the review and establishment of enforceable reliable standards."

David Cook, general counsel at NERC, appeared on a panel at the conference addressing implementation of mandatory reliability rules.

"I think the Commission is going to provide very active oversight to reliability standards development," he said. "I think that was clear from Chairman Kelliher's remarks. The Commission takes its new responsibility very seriously."

Cook confirmed that NERC will be filing an application to be designated the ERO once FERC's reliability-related rules become final. Under the new energy law, those rules must be finalized by the first week of February 2006.

"We do expect to include with our application the current version of effective standards," Cook noted. "We're in discussions now with Commission staff about where things are..." He fully expects FERC to evaluate each standard on an individual basis.

But Cook said he thinks FERC will "recognize that these standards are interrelated. That is, you can't just sort of pull one out without perhaps having consequences for other parts of the standards. That will be our job, and the job of the rest of the industry, as we go forward with this application. To make the case for the standards in their current form. If they can be improved -- yes, we need to improve them -- but what NERC has in place now are the body of standards that we use and the industry uses to plan and operate the system. This is what we need to move forward with. We will certainly look for support from all in the industry as we make the case on how we go forward."

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