The heads of the North American Electric Reliability Council (NERC) and the North American Energy Standards Board (NAESB) on Thursday signed a letter of intent that commits the two organizations to coordinate the development of business practice standards and electronic communications protocols by NAESB and the development of wholesale electric reliability standards by NERC.

The agreement commits both organizations to ensure that the business practice and reliability standards are harmonized, that all reasonable efforts are made to eliminate overlap and duplication of effort and that each organization is able to move forward with appropriate standards development activities while keeping the other fully informed of its activities.

This process may include joint standards development, recognizing that standards may have both reliability and business practice elements. The letter of intent was signed by Richard Drouin, NERC’s chairman, and William Boswell, chairman of NAESB.

Agreement on a detailed memorandum of understanding between the two organizations will be the next step in this process.

“The wholesale electric quadrant of NAESB has recently been formed and this agreement provides us with the ability to begin to coordinate our actions with NERC at the outset,” said Boswell. “We recognize that this letter of intent is preliminary in nature and will be supplemented by a more extensive memorandum of understanding that will detail the coordination process after the wholesale electric quadrant of NAESB elects its representatives early next month,” he added.

“A clear need exists to develop standards to enhance energy markets throughout North America,” Drouin emphasized. “I am very pleased that we were able to reach an initial agreement so quickly and I look forward to working with NAESB on both the details of our coordination arrangement and the development of these critically important standards for the electric industry,” he said.

The two organizations said that the agreement is consistent with and supportive of an order by FERC that NERC and NAESB coordinate their standards development efforts.

If conflicts arise that cannot be resolved between the NAESB wholesale electric quadrant and NERC, the letter states that the matter may be submitted to FERC for resolution. NERC and NAESB also have committed to examine the creation of a joint dispute resolution process to avoid taking this action.

FERC in May asked the power industry to provide it with a progress report on efforts to achieve coordination between the development of industry reliability standards and business practices, while also reiterating a prior warning that it would establish its own process to ensure coordination if industry could not agree on an effective mechanism.

Once its standard market design (SMD) proposal has been fleshed out, FERC believes that business practice and communications standards will be needed as soon as possible to support competition in wholesale electric markets. FERC issued its groundbreaking SMD notice of proposed rulemaking in late July.

NAESB, the successor to the Gas Industry Standards Board, recently approved the procedures for its wholesale electricity quadrant, calling for standards in five segments: transmission, generation, marketers/brokers, distribution/load-serving entities and end users.

Wholesale electricity was the final quadrant to be approved by the board of directors. Procedures for the retail electricity and retail natural gas quadrants were approved in March.

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