FERC Permits Zero Penalties for Minor NERC Infractions

On March 15, 2012, in Docket Nos. RC11-6 et al., FERC issued an order (138 FERC ¶ 61,193) accepting, with limited conditions, NERC’s proposal to use informational filings in a Find, Fix, Track and Report (FFT) spreadsheet to report lesser-risk possible violations of NERC Reliability Standards.  The conditions in FERC’s order apply prospectively and NERC is not required to re-file any of the monthly FFT filings  it has already submitted since its initial request for FFT approval in September 2011.

Under NERC’s proposal, FFT informational filings would be used to report remediated possible violations that pose minimal to moderate risk to the bulk power system such as certain administrative, documentation, maintenance or testing program implementation failures.  There would be no penalty and no formal mitigation plan required for matters resolved through the FFT process.  NERC would use six factors to determine the risk of a possible violation including the Reliability Standard at issue, the potential and actual risk to reliability and the entity’s compliance history.

FERC’s order accepted NERC’s FFT proposal with the following prospective conditions and directives:

1. Only possible violations that pose a “minimal risk” to the bulk power system will be eligible for FFT treatment.
2. In order to receive FFT treatment, an entity must first submit not only a statement certifying that remediation is complete, but also an affidavit, signed by an officer with knowledge of the remediation, certifying that the statement is true and correct.
3. If a possible violation that receives FFT treatment is not mitigated as certified, then it will be treated as a continuing possible violation and will not be eligible for FFT treatment.
4. Possible violations receiving FFT treatment will be included as part of an entity’s compliance history.
5. FFT filings must publicly identify the name of the entity with a possible violation unless disclosure relates to a Cybersecurity Incident or would jeopardize the security of the bulk power system.
6. FERC will consider an FFT matter closed 60 days after the FFT filing is submitted unless FERC provides notice within the 60 day period that it will review the matter or FFT treatment was obtained based on a material misrepresentation of facts underlying the FFT matter.

The order also noted that a possible violation does not pose “minimal risk” simply because there was no actual harm to the bulk power system and cannot pose only “minimal risk” if it reveals a serious shortcoming in the entity’s reliability-related processes.  FERC also explained that FFT filings must be based on facts at the time of the possible violation, not assumptions or facts that develop later. 

In the order, FERC emphasized its belief that self-reporting of violations should be a factor that NERC considers in designating a possible violation as an FFT matter, including when it considers an entity’s compliance history.

The order required NERC to submit two informational reports regarding its experience with the FFT program and a compliance filing 60 days after the order explaining how an entity’s compliance history will be evaluated and how that history will be considered in FFT determinations.  FERC also invited NERC and other interested parties to propose mechanisms to identify and remove any NERC Reliability Standards that may be unnecessary or redundant.