Agenda Member Representatives Committee Pre-Meeting ... Highlights nad... · Agenda Items 1. Schedule of Quarterly NERC Meetings and Conference Calls* 2. Topics for the Board of Trustees,

Agenda Member Representatives Committee Pre-Meeting Informational Session Conference Call and Webinar October 7, 2015 | 11:00 a.m. – 1:00 p.m. Eastern Conference Line: 1-855-331-9631 | Conference ID: 29373253 Click here for: Webinar Registration Introduction and Chair’s Remarks NERC Antitrust Compliance Guidelines and Public Announcement* Agenda Items

1. Schedule of Quarterly NERC Meetings and Conference Calls*

2. Topics for the Board of Trustees, Board Committees, and MRC Meetings* - November 4-5, 2015

3. Overview of Items Included in the Policy Input Letter

a. Risk-Based Registration*

b. Compliance Guidance Policy*

c. Clean Power Plan Final Rule: NERC Reliability Assessment Plan (Phase II)*

4. Informational Items

a. CIP Version 5 Implementation*

b. Physical Security Reliability Standard Implementation*

c. NERC Comments on Supply Chain Management*

d. FERC Notice of Proposed Rulemaking on Availability of Certain NERC Databases to FERC*

*Background materials included.

https://cc.readytalk.com/cc/s/registrations/new?cid=h3rpxwztugaw

Antitrust Compliance Guidelines I. General It is NERC’s policy and practice to obey the antitrust laws and to avoid all conduct that unreasonably restrains competition. This policy requires the avoidance of any conduct that violates, or that might appear to violate, the antitrust laws. Among other things, the antitrust laws forbid any agreement between or among competitors regarding prices, availability of service, product design, terms of sale, division of markets, allocation of customers or any other activity that unreasonably restrains competition. It is the responsibility of every NERC participant and employee who may in any way affect NERC’s compliance with the antitrust laws to carry out this commitment. Antitrust laws are complex and subject to court interpretation that can vary over time and from one court to another. The purpose of these guidelines is to alert NERC participants and employees to potential antitrust problems and to set forth policies to be followed with respect to activities that may involve antitrust considerations. In some instances, the NERC policy contained in these guidelines is stricter than the applicable antitrust laws. Any NERC participant or employee who is uncertain about the legal ramifications of a particular course of conduct or who has doubts or concerns about whether NERC’s antitrust compliance policy is implicated in any situation should consult NERC’s General Counsel immediately. II. Prohibited Activities Participants in NERC activities (including those of its committees and subgroups) should refrain from the following when acting in their capacity as participants in NERC activities (e.g., at NERC meetings, conference calls and in informal discussions):

• Discussions involving pricing information, especially margin (profit) and internal cost information and participants’ expectations as to their future prices or internal costs.

• Discussions of a participant’s marketing strategies.

• Discussions regarding how customers and geographical areas are to be divided among competitors.

• Discussions concerning the exclusion of competitors from markets.

• Discussions concerning boycotting or group refusals to deal with competitors, vendors or suppliers.

NERC Antitrust Compliance Guidelines 2

• Any other matters that do not clearly fall within these guidelines should be reviewed with NERC’s General Counsel before being discussed.

III. Activities That Are Permitted From time to time decisions or actions of NERC (including those of its committees and subgroups) may have a negative impact on particular entities and thus in that sense adversely impact competition. Decisions and actions by NERC (including its committees and subgroups) should only be undertaken for the purpose of promoting and maintaining the reliability and adequacy of the bulk power system. If you do not have a legitimate purpose consistent with this objective for discussing a matter, please refrain from discussing the matter during NERC meetings and in other NERC-related communications. You should also ensure that NERC procedures, including those set forth in NERC’s Certificate of Incorporation, Bylaws, and Rules of Procedure are followed in conducting NERC business. In addition, all discussions in NERC meetings and other NERC-related communications should be within the scope of the mandate for or assignment to the particular NERC committee or subgroup, as well as within the scope of the published agenda for the meeting. No decisions should be made nor any actions taken in NERC activities for the purpose of giving an industry participant or group of participants a competitive advantage over other participants. In particular, decisions with respect to setting, revising, or assessing compliance with NERC reliability standards should not be influenced by anti-competitive motivations. Subject to the foregoing restrictions, participants in NERC activities may discuss:

• Reliability matters relating to the bulk power system, including operation and planning matters such as establishing or revising reliability standards, special operating procedures, operating transfer capabilities, and plans for new facilities.

• Matters relating to the impact of reliability standards for the bulk power system on electricity markets, and the impact of electricity market operations on the reliability of the bulk power system.

• Proposed filings or other communications with state or federal regulatory authorities or other governmental entities.

Matters relating to the internal governance, management and operation of NERC, such as nominations for vacant committee positions, budgeting and assessments, and employment matters; and procedural matters such as planning and scheduling meetings.

NERC Fourth Quarter 2015 Meetings Westin Buckhead Atlanta Schedule of Events—Public 3391 Peachtree Road NE November 4-5, 2015 Atlanta GA 30326 All times are Eastern.

Meetings and Conference Calls Prior to November Quarterly Meetings October 22, 2:00–3:00 p.m. Corporate Governance and Human Resources Committee Call—Open

October 28, 1:00–2:00 p.m. Finance and Audit Committee Call—Open

Wednesday, November 4, 2015

8:45–10:15 a.m. Room name: TBD

Standards Oversight and Technology Committee Meeting—Open

10:30 a.m.–12:00 p.m. Room name: TBD

Compliance Committee Meeting—Open

12:00–1:00 p.m. Room Name: TBD

Lunch

1:00–5:00 p.m. Room name: TBD

Member Representatives Committee Meeting—Open

5:30 p.m. Room name: TBD

Reception No arranged dinner Thursday, November 5, 2015

7:30–8:30 a.m. Breakfast

8:30 a.m. – 12:00 p.m. Room name: TBD

Board of Trustees Meeting—Open

Member Representatives Committee (MRC)

Pre-Meeting and Informational WebinarOctober 7, 2015

RELIABILITY | ACCOUNTABILITY2

• Review preliminary agenda topics for November 4 MRC meeting• Review preliminary agenda topics for the Board of Trustees

(Board) and Board committee meetings (November 4-5)• Receive updates on emerging and informational issues as part of

today’s webinar

Objectives – Pre-Meeting and Informational Session


Schedule of Quarterly NERC Meetings and Conference Calls


• Corporate Governance and Human Resources Committee, October 22 (2:00 p.m., Eastern) Approve Board effectiveness and Board Committees’ self-assessment

surveys ERO Enterprise and Corporate Metrics Q3 2015 report Approve Trustee compensation philosophy Annual 401(k) audit Corporate Governance and Human Resources Committee mandate Staffing and recruiting update

• Finance and Audit Committee, October 28 (1:00 p.m., Eastern) Third quarter statement of activities 2017 Business Plan and Budget schedule Finance and Audit Committee mandate

Conference Calls, Prior to Atlanta


• Approve Reliability Standards Development Plan• Standards Oversight and Technology Committee mandate• Reliability Standards quarterly status report and Standards

Committee report• TEAMS update and events analysis results and trends• Enterprise IT application strategy update

Standards Oversight and Technology Committee8:45 a.m. - 10:15 a.m., November 4


• CIP-014 implementation update• CIP version 5 implementation update• Development of compliance metrics• Progress report on implementation of the risk-based compliance

monitoring and enforcement program Regional Entity implementation experience NERC oversight of compliance monitoring activities NERC oversight of enforcement activities

Compliance Committee10:30 a.m.- 12:00 p.m., November 4


• Election of MRC officers for 2016• Schedule for MRC sector nominations and elections• Schedule for RISC nominations• Update from Board of Trustees Nominating Committee• Responses to the Board’s request for policy input Risk-based registration Compliance guidance policy Clean Power Plan final rule: NERC reliability assessment plan (phase II)

• Policy discussion of key items from the Board committees Issues discussed during CGHR, FAC, SOTC, and BOTCC

Member Representatives Committee1:00 p.m. - 5:00 p.m. November 4


• Strategic Planning RISC priorities and 2015 Reliability Leadership Summit results Evolution of essential reliability services 2016-2019 ERO Enterprise Strategic Plan and 2016 ERO Enterprise and

Corporate Metrics ERO Enterprise Longer-Range Strategic Planning Considerations

• FERC Notice of Proposed Rulemaking on availability of certain NERC databases to FERC

• ERO Enterprise Effectiveness Survey• Regulatory update

Member Representatives Committee1:00 p.m. - 5:00 p.m. November 4


• Committee membership and charter revisions• Standards items for adoption/approval Alignment of glossary terms PRC-005-6, BAL-002-2, MOD-031-2, PRC-027-1 Reliability Standards Development Plan

• Accept risk-based registration report and endorse recommendations

• Accept compliance guidance policy and endorse recommendations

• Approve Rules of Procedure amendments

Board of Trustees8:30 a.m. November 5


• Approve strategic plan• Accept RISC annual report• Approve amendment to GADS data request• Approve amendment to TADS data request• Committee, forum, and group reports Approve Compliance and Certification Committee’s 2016 work plan Accept third quarter 2015 unaudited statement of activities

Board of Trustees8:30 a.m. November 5


• Overview of Policy Input Letter items Risk-based registration Compliance guidance policy Clean Power Plan final rule: NERC reliability assessment plan (phase II)

• CIP version 5 implementation• Physical Security Reliability Standard implementation• NERC comments on supply chain management• FERC NOPR on availability of certain NERC databases to FERC

October 7 – MRC Informational Session


• October 7: Policy Input Letter issued• October 21: November Board and MRC agenda packages posted• October 28: Policy Input Letter responses due• October 29: November Board and MRC presentations and policy

input responses posted

Upcoming Dates


Agenda Item 3a MRC Informational Session October 7, 2015

Risk-Based Registration: Phase II Update

Action Information Background In 2014, NERC launched the Risk-Based Registration (RBR) initiative, focused on enhancing the registration program so entities are subject to an appropriate set of applicable NERC Reliability Standards. This will be accomplished by using a consistent registration approach that differentiates entities by different levels of risk to reliability across North America. To provide advice on the RBR policy, design, and implementation plan, NERC organized the RBR Advisory Group (RBRAG) comprised of representatives from NERC, Regional Entities, and industry from both the United States and Canada. Additionally, the RBR Task Force, comprised of industry subject matter experts, was formed to provide technical support. The RBR initiative has been addressed in two phases. This update provides information on the final step of Phase II, the data analysis (attached). To recap the activities: Phase I As part of Phase I of this initiative, an Enhanced Design Framework and Implementation Plan was developed to register and deregister entities commensurate with risk to the Bulk Electric System (BES). As part of Phase I, Purchasing-Selling Entities (PSEs), Interchange Authorities (IAs), and Load Serving Entities (LSEs) were proposed for elimination from the registry along with proposing a modified set of Distribution Providers (DPs). In addition, the formation of a NERC-led panel of Regional Entities was proposed to support consistent assessment of registration trends in the future. On December 11, 2014, NERC filed proposed amendments to its Rules of Procedure (ROP) with FERC to implement the RBR initiative. On March 19, 2015, FERC issued an order approving the majority of NERC’s RBR proposal, but requested additional information prior to the elimination of the functional registration category for Load-Serving Entities (LSE) and issued two directives. NERC’s response to FERC’s order was filed on July 17, 2015. Phase II Update As part of Phase II, NERC explored options to properly align compliance obligations for Generator Owners (GO), Generator Operators (GOP), Transmission Owners (TO), and Transmission Operators (TOP). Following considerable research based on low-risk entity profiles, clearly defined groups of low-risk GOs/GOPs or TOs/TOPs were not identified. As a final step to identify potential groups, NERC staff analyzed event and compliance data, evaluating over 700 events and potential violation history for the aforementioned functions. Based on this analysis, NERC has identified some entities that may be eligible for review by the NERC led-panel, but did not identify any sizable lower risk groups of GO/GOPs or TO/TOPs with similar characteristics that support the development of an alternative set of compliance obligations.

http://www.nerc.com/pa/comp/CAC/riskbasedregistrationdl/Attachment%205_Enhanced%20Framework%20and%20Implementation%20Plan%2010%2028%202014.pdf

Going forward, individual entities can use the FERC-approved Phase I RBR processes to seek a reduced set of compliance obligations, which includes a review by the NERC-led panel. NERC and this panel will monitor requests to identify any trends and experiences that supports the development of groups of lower-risk entities. This recommendation for the path forward, along with reports on the Phase II activities and the data analysis, will be presented to the Board of Trustees in November 2015. Attachment

1. Risk-Based Registration Phase II Data Analysis, September 2015

Risk-based Registration Phase II: Data Analysis September 2015

Table of Contents

Executive Summary ....................................................................................................................................................3

Background .................................................................................................................................................................5

Events ..................................................................................................................................................................5

Violations .............................................................................................................................................................5

Analysis ................................................................................................................................................................8

Observations and Recommendations ..................................................................................................................... 10

NERC | Risk-Based Registration Phase II: Data Analysis | September 2015 2

Executive Summary Phase II of the Risk-Based Registration Initiative (RBR) focused on determining whether there are groups of lower risk Generator Owners (GOs), Generator Operators (GOPs), Transmission Owners (TOs), or Transmission Operators (TOPs) that do not need to be subject to certain NERC Reliability Standards and would qualify for a reduced set of compliance obligations. As part of the Phase II effort, NERC staff held workshops and meetings, with participation by reliability stakeholders including industry subject matter experts, trade associations, committees, Regional Entities and governmental authorities, to identify potential candidates and various options. Members of the RBR Advisory Group (RBRAG) and the RBR Task Force (TF) provided valuable input and advice for the RBR design and implementation plan. However, despite the substantive efforts of NERC staff and these two reliability stakeholder groups, a group of lower risk GOs, GOPs, TOs or TOPs with consistent characteristics that would qualify for a reduced set of compliance obligations were not identified. As a final effort to identify groups of lower-risk organizations, NERC staff reviewed event and enforcement information, including findings of non-compliance resulting in assessed violations and potential violations (hereinafter, PVs).1 Specifically, NERC staff identified entities within the referenced four functions that: (a) have not contributed2 to a Bulk Electric System (BES) event,3 and (b) have never had a potential violation of NERC Reliability Standards (PV), whether related or not as a result of a BES event.4 This report summarizes NERC staff’s analysis of the event and enforcement data. Taking into account all of the analysis and input, NERC staff has determined that, at this time, there is not a consistent set of criteria or system characteristics that defines a group or groups of lower risk registered entities within the four referenced functions. NERC staff has concluded the proper approach is to refer individual potential candidates to the NERC-led review panel, on a case-by-case basis that can account for their individual facts and circumstances, until such time as a consistent pattern emerges that warrants a common sub-set list. Registered entities that have had a PV are not precluded from requesting consideration from the NERC led panel. Moreover, the presence or absence of a possible violation or involvement in a BES event is not a sole determining factor as to whether an entity is eligible for a sub-set list of Reliability Standards. Through this analysis, NERC staff has preliminarily identified two sets of smaller groups of entities that may be initial candidates for consideration by the NERC-led review panel for eligibility of a sub-set list of Reliability Standards. The first group identified by NERC staff includes approximately 28 registered entities designated by the NERC Generating Availability Data System (GADS) definition, as owning and/or operating only gas turbine (GT) units.5 NERC staff determined these entities had not contributed to an event and had not received a PV from 2007 to the present date. NERC staff determined that a Phase II GO/GOP sub-set list is not warranted at this time, because a given entity’s lack of involvement in events and non-compliance history may be due to the limited run times of these units, and not necessarily because the entity does not inherently pose a lower risk to the BES. Indeed, the entity’s units may be critical for the reliability of the Bulk Power System (BPS) during peak times and

1This approach was adopted for this analysis only. It is recognized that registered entities that are finding and reporting instances of non-compliance may pose less risk to the BES than entities that are not identifying possible non-compliance with NERC Reliability Standards.

2 This included entities that had caused, contributed to, exacerbated or prolonged an event. 3 While participation in NERC’s event analysis program is voluntary, NERC staff’s review of the registered entities’ compliance history as an

initial means to limit the pool for purposes of the instant analysis took into account violations that were subject to mandatory reporting obligations under the NERC Reliability Standards, as well as any that were self-identified by registered entities.

4 This analysis considered PVs in any disposition track, except dismissals. A dismissal of a PV may be due to a duplicate of a pending PV or the PV was never a violation of a Reliability Standard.

5 Currently, there are 922 GOs and 879 GOPs on the NERC Compliance Registry.


Executive Summary

emergency situations (e.g., designated black-start resources). However, an individual entity’s facts and circumstances could be considered by the NERC-led review panel.6 The second group of 38 TOs and/or TOPs were identified by NERC staff that had not contributed to an event and had not received a PV from 2007 to the present date. At this time, NERC staff has determined there is not sufficient uniformity among the risk characteristics of these registered entities to create a group or groups with Phase II sub-set list of Reliability Standards for these functions. However, as with the GO/GOP functional entities above, an individual TO/TOP entity’s facts and circumstances could be considered by the NERC-led review panel. If a class emerges as a result of the NERC-led review panel process or otherwise, either within the TO/TOP and GO/GOP functions or other functional registration categories, the Electric Reliability Organization (ERO) Enterprise7 may address such class in accordance within the recently enhanced NERC Rules of Procedure, including Appendices 5A and 5B.

6 Reduction in compliance obligations is considered at the registered entity level, not by unit. 7 The ERO Enterprise is comprised of NERC and the eight Regional Entities who have executed Regional Delegation Agreements with NERC.


Background Events NERC collects event information to analyze and evaluate potential patterns of risk in the BPS through the voluntary Events Analysis Process.8 Reportable events are categorized with levels of severity, ranging from Category 0 – Category 5. As part of the Phase II effort, NERC staff analyzed events that resulted in unintended loss of load,9 System Operating Limit (SOL) or Interconnection Reliability Operating Limit (IROL) violations. These are considered Category 2 events according to the ERO Event Analysis Process. In addition, Category 1 events were also reviewed, including those that caused islanding. Violations NERC staff analyzed violations from a number of perspectives to identify a correlation between size of units and violations. Table 1 provides an overview for the number of entities that did not have any violations compared to the number of entities that have had a PV. Figures 1 – 4 below examines violations pertaining to generating units.

Table 1 – Violations/No Violation by NERC Region (July 14, 2015)

8 Electric Reliability Organization Event Analysis Process – Version 2 . See also n.3 supra. 9 This analysis included loss of load in qualified reportable events.


http://www.nerc.com/pa/rrm/ea/EA%20Program%20Document%20Library/Final_ERO_EA_Process_V2.1.pdf

Background

Figure 1 – Average and Total Unit Output by Fuel Type

Figure 2 – Size Distribution (MW) of Generation Fleet per Entity with No Violations


Background

Figure 3 – Size Distribution (MW) of Generation Fleet per Entity with Violations

Figure 4 – Normalized Distribution of Generation Units with Violations compared to No Violations


Background

Analysis The first step in the analysis was to determine which entities from the four functions have not contributed to an event such as loss of load, SOL/IROL exceedance, or islanding. NERC staff analyzed over 700 reportable events dating back to 2007. Eighty percent of the events used in the analysis could be categorized as a loss of a combination of NERC-defined Elements or Facilities. The second step was to determine which entities identified in step one have never received a PV. This analysis identified 112 GO/GOPs entities covering 412 units, and 38 TO/TOPs. Finally, NERC staff identified the characteristics of entities that have not contributed to an event nor received a violation. The goal of this assessment was to determine whether there was a set of similar entities with consistent configurations or risks to identify a potential class of low-risk entities. These registered entities might be eligible for a reduced set of compliance obligations through a sub-set list of Reliability Standards. GO/GOP: The first step in the analysis was to consider the nature and number of individual generating units. Four hundred and twelve (412) out of 8,525 units were identified that met the event and violation criteria. These units were then analyzed by type to determine their risk to BPS reliability. Following the risk analysis, the number of registered entities that would be affected was considered.10 Of the 412 units, 152 gas turbines (GT) units were the largest group, comprising over 37 percent of potentially lower-risk units.11 These units are owned or operated by 37 entities, nine of which own or operate units other than GTs, leaving 28 entities that solely own or operate GT units. The next largest group was 58 hydro units, 14 percent of the units analyzed, which are owned by six entities. The remaining generating units are divided among several different types of generators including 48 fossil-steam units owned by 21 entities (eight of which own other types of units), and 44 combined cycle units which are owned by 26 entities. Of note, three nuclear units, owned by three entities, and eight diesel units, owned by four entities, met the criteria. The percentages of registered entities that would be affected by a class are as follows:

• GTs – 28 registered entities or 3 percent

• Hydro – 6 registered entities or 0.7 percent

• Fossil-steam – 13 registered entities or 1.4 percent

• Combined cycle – 26 registered entities or 2.8 percent However, other than GT units, no other type of units are operated by entities that contained a significant percentage comprising a single group of units with similar low-risk characteristics. While this analysis did not assess why GT units made up the largest group, some possible hypothesis can made about these types of units and their potential differentiations. First, GTs are predominantly used during peak periods, and have short duration run times. In addition, GTs have low capacity factors, which reduces the potential for this type of unit to be involved in an event. These limited capacity factor entities could be considered a potential opportunity for defining a specific class, which may emerge through the NERC-led review panel process, but there are other characteristics for the GT units that should be considered.12 For example, these units are usually called upon at the most important times during an operating day to meet peak demand or emergency conditions. Thus, they may be critical of the reliable operation of the BPS. Second, GTs can be brought on-line or off-line in as little as ten minutes, so they have the ability to react before an SOL/IROL violation would occur providing potential mitigation options.

10 Currently, there are 922 GOs and 879 GOPs on the NERC Compliance Registry. 11 The units were identified as GTs units per the NERC GADS definition. 12 NERC staff is not recommending that such a class be defined at this time because, as discussed in more detail above, some of these units

may need to be subject to the full set of Reliability Standards to adequately protect reliability.


Background

NERC staff developed a normalized curve of entities that have violations as compared to those that did not. See Figure 4. The normalized curve did not reveal a pattern or break point. In Figure 1, fuel types for GOs were reviewed at the unit level to determine if certain entities were a greater risk for violations than others. The only entities that showed any difference in the probability of violation were owners and operators of Pumped Storage/Hydro units, Combined Cycle, and traditional combustion turbines. Again, many of these types of units are not run for base load, rather, they run during peaking periods and to meet system load ramping requirements. As shown in Figures 2-4, the violation data was also inconclusive in regards to using a MW bright-line to determine a GO/GOP registered entity’s risk. Comparing distributions of all units with their size and violation history (Figure 4), no trend appears in regards to violations and the size of a facility. Of the 314 GO/GOPs that have not contributed to events and have no PVs on record, approximately one-quarter of these functions have units under 100 MW (25.6%). This would seem to indicate that units under 100 MW would qualify as lower risk. However, entities that have violations also have a similar proportion of units are at or under 100 MWs (19.5%). Because the data is inconclusive, the creation of a class based on lower MW levels at this time is not supported. Therefore, NERC staff’s analysis did not identify a group of lower risk GO/GOP entities that would be candidates for a group eligible for a reduced set of compliance obligations through a sub-set list of Reliability Standards. Individual entities may pursue a reduction in compliance obligations through the NERC-led review panel established in Phase I of the RBR effort. TO/TOP: The same criteria (did not contribute to an event and did not have a PV) was used to identify 38 potential TO/TOPs. These entities were examined to identify possible similarities or characteristics. A majority (81.6 percent) of the TO/TOP entities were found to be embedded within a larger TOP. NERC staff considered a lower risk criteria for smaller TOs and TOPs that were performing limited TOP functions for a larger TOP as they were in a geographical area served by the larger TOP. NERC staff believes that this trait alone, however, does not necessarily include all risks associated with the entity, so each entity should be reviewed based on its own facts and circumstances. For example, four of the entities embedded within a larger TOP could have an elevated risk profile based upon the characteristics of the respective entity. This elevated risk profile would exist due to potential impacts on other systems the entities would pose because of their location and multiple interconnection ties between RTOs. The assets under control of the entities were also reviewed, including potential load served and voltages at which the entity is interconnected. Eleven of the entities owned or controlled one or fewer transmission lines (six entities only own substations for generator interconnections). Only ten of the entities reviewed operate or own equipment greater than 200 kV, already limiting some compliance responsibilities such as requirements under FAC-003. Therefore, because of the different characteristics among the identified TO/TOP entities13, no set of criteria emerged to identify a single group or groups of lower risk TOs/TOPs of significant size with common characteristics. Individual entities may be good candidates to pursue a reduction in compliance obligations through the NERC-led review panel established in Phase I of the RBR effort.

13 This group actually comprises two distinct categories of TOs and/or TOPs: entities surrounded by a larger TO/TOP (which tend to own and operate relatively limited transmission facilities and do not perform TOP tasks for the larger TOP), and TO members of ISO/RTOs. This analysis did not attempt to distinguish between these two categories, which can be expected to have different risk profiles.


Background

Observations and Recommendations Observations

1. NERC staff believes that developing pro forma sub-set lists of Reliability Standards for lower risk GOs, GOPs, TOs and TOPs, as was done for UFLS-Only Distribution Providers, and pursuing wholesale Reliability Standard modifications14 are not feasible at this time.

2. NERC staff recommends that use of the Phase I processes and procedures is the most efficient and effective way to enable removal on an individual basis. These small sets of organizations may qualify for reduce compliance obligations, though individual facts and circumstances need to be considered

a. NERC staff’s data analysis identified 28 GO/GOP potential entities.

b. NERC staff identified 38 TO/TOP entities; however, their characteristics vary.

3. Violations are extremely low for the NERC Reliability Standards that were considered in evaluating eligibility as a group of lower risk GO/GOPs and TO/TOPs.

Recommendations

1. Use the NERC-led review panel to address an individual entity’s facts and circumstances to determine potential reduced compliance obligations.

2. Continue to monitor the results of the NERC-led review panel to identify consistent potential groups of entities that qualify for a sub-set of NERC Reliability Standards pursuant to the NERC’s recently enhanced Rules of Procedure supporting risk-based registration.

14 Recent targeted modifications to increase the granularity of standards, by making them more risk-informed, have been successful (e.g., in the GO/TO effort), and similar modifications should, of course, continue to be considered by Standard Drafting Teams, as appropriate.


Risk-Based Registration

Val Agnew, Senior Director, Reliability AssuranceMRC Informational SessionOctober 7, 2015


• Phase I – Rules of Procedure (ROP) changes Remove Purchasing-Selling Entities (PSEs) and Interchange Authorities (IAs) Filed additional information to remove Load Serving Entities (LSEs) Modify criteria for Distribution Providers (DPs) Include NERC-led panel FERC Order March 19, 2015 Response to FERC filed on July 17, 2015

Risk-Based Registration – Phase I


• Phase II – Identify classes Generator Owner (GO), Generator Operator (GOP), and Transmission

Owner (TO), Transmission Operator (TOP) Assessment included industry submittal of potential configurations, though

results did not identify large potential groups NERC then analyzed data to uncover potential groups of candidates

Risk-Based Registration – Phase II


• GO/GOPs and TO/TOPs that were not involved in an event • No violation or possible violation dating back to 2007• Analyze for potential group or groups• Identify potential candidates for review by the NERC-led panel

Phase II – Data Analysis


GO/GOPs

• 412 out of 8,525 generation units Gas Turbine (GT) units and Hydro units - nearly 50%

• 112 out of 922 registered GO/GOPs GT – 3% Hydro - 0.7% Fossil-steam – 1.4% Combined cycle – 2.8%

• No similar characteristics identified MW size as a bright-line was inconclusive Entities’ units may be critical during peak and emergency conditions 28 GT unit GO/GOPs may be candidates for review by the NERC-led panel


TO/TOPs

• 38 out of 497 registered TO/TOPs A majority (81.6%) of TO/TOPs embedded within larger TOP

• Not sole indicator of risk Location Number of interconnection ties

• No similar characteristics identified• 38 TO/TOPs may be candidates for review by the NERC-led panel


Recommendations

• Use the NERC-led review panel Review individual entity’s requests Monitor trends Identify similarly situated entities for potential groups or candidates

• Provide updates to FERC, ERO, and industry with determinations and trends


Agenda Item 3b MRC Informational Session October 7, 2015

Compliance Guidance Policy

Action Information Background A key factor in the success of compliance monitoring and enforcement of mandatory standards rests on a common understanding amongst industry and ERO Enterprise CMEP staff of how compliance can be achieved and demonstrated. For many standards this is straightforward. For others, it remains a concern. Moreover, some standards are written deliberately to allow a variety of approaches to compliance as the nature of the desired end-state does not lend itself to singular or clear cut solutions given the range of system configurations and potential responses to achieving the reliability goal. The NERC Board of Trustees (Board) sought input regarding guidance for implementing NERC Reliability Standards through the April 2015 policy input letter and a discussion led by a panel of NERC and Regional Entity and industry representatives at the May 2015 Members Representatives Committee (MRC) meeting. As a result of these discussions, the Board supported the creation, with the MRC, of a Compliance Guidance Team (Team) to consider alternative approaches to provide compliance guidance and develop a proposal for the purpose, development, use, and maintenance of compliance guidance in the future. Summary At the August MRC meeting, the Team provided an overview of its draft policy paper, which proposed two forms of guidance:

• Application Guidance which would provide examples for implementing a standard.

• CMEP Practice Guides which would provide direction to ERO Enterprise CMEP staff on approaches to carry out compliance and enforcement activities.

The draft policy was posted for industry comment from August 28, 2015, through September 17, 2015, and the Team held a webinar on September 9, 2015. The team met in mid-September to review and consider all comments received during the webinar and through the comment period. The comments received included the following overarching themes for clarification/consideration:

• Application Guidance terminology

• The vetting process

• The meaning of endorsement and deference

• Process steps for Application Guidance

• How the policy relates to other documents or processes

• Transitioning existing documents to Application Guidance

The Team discussed these areas, among the others raised in the comments, and revised the policy paper. Some of the revisions made based on industry comments included:

• Replaced the term Application Guidance with Implementation Guidance

• Clarified vetting

• Added definitions for endorsement and deference

• Included high level process steps for Implementation Guidance

• Clarified that currently developed documents (i.e., standing committee guidelines) would still be developed and could be submitted for endorsement if desired

• Recommendation for the Compliance and Certification Committee and the Standards Committee to jointly review existing documents and submit appropriate documents for endorsement

The revised policy paper will be included in the October 7, 2015, policy input letter for industry comment prior to being presented to the MRC and Board at the November 2015 meetings. At its November meeting, the MRC will be requested to recommend that the Board accept the policy and endorse the recommendations.

Compliance Guidance Policy

Sylvain Clermont, MRC ChairMRC Informational SessionOctober 7, 2015


• May 2015: compliance guidance team (Team) formed Clarify the role, purpose, development, use, and maintenance of

compliance guidance Reduce controversial approaches to provide guidance Provide additional clarity on implementation of standards

• Industry webinar on September 9, 2015• Policy paper posted for comment August 28-September 17,

2015 Team met in September to consider comments received

Status


• Application Guidance Examples for implementing a standard Developed by industry Endorsed for deference by NERC and the Regions (ERO Enterprise)

• CMEP Practice Guides Provides direction to ERO Enterprise CMEP staff on approaches to carry

out compliance and enforcement activities Developed by the ERO May be initiated through policy discussions with industry Posted for transparency

Overview


• Application Guidance terminology• Vetting process• Meaning of endorsement and deference• Process steps for Application Guidance• How the policy relates to other documents or processes• Transitioning existing documents to Application Guidance• Examples of CMEP Practice Guides

Industry Comment Themes


• Replaced the term Application Guidance with Implementation Guidance

• Clarified vetting• Added definitions for endorsement and deference• Included high level process steps for Implementation Guidance• Clarified relationship to other documents and processes Section 11 to be reviewed by the Standing Committee (SC) Does not conflict with the interpretation process Does not supersede the development of other documents (i.e., standing

committee guidelines)

• Recommendation for the CCC and SC to jointly review existing documents and submit appropriate documents for endorsement

Revisions in Response to Comments


• Examples for content: Information in the CMEP manual Paragraph 81 guidance Bulletin on zero-dollar penalties

• Recommendation for new CMEP Practice Guide: Deference

CMEP Practice Guides


One location on NERC website for:• Implementation Guidance• CMEP Practice Guides• Other supporting documents Other documents created during standards development (i.e., RSAWs,

white papers) Other types of guidance (i.e. Events Analysis Lessons Learned) Reports

One-Stop Shop for Guidance


• October 7, 2015: Request input through policy input letter• November 4, 2015: Present to MRC and request that MRC

recommends the Board accept the policy and endorse the recommendations

• November 5, 2015: Request Board acceptance of the policy and endorsement of the recommendations

Next Steps


Agenda Item 3c MRC Informational Webinar October 7, 2015

Clean Power Plan Final Rule: NERC Reliability Assessment Plan (Phase II)

Action Information Background In its Initial Reliability Review and Phase I Special Reliability Assessment, NERC highlighted its objective of publishing assessments on the Clean Power Plan (CPP) as the Environmental Protection Agency (EPA) prepared to issue its final rule. On August 3, 2015, the EPA released a final rule that would reduce carbon CO2 emissions from existing power plants (Clean Air Act Section 111(d)). NERC’s phased approach for evaluating the final rule as well as providing reliability guidance to states was proposed at the August 12, 2015 MRC meeting in Toronto. NERC intends to release a guidance document for states particularly aimed at educating the electric utility agencies, state environmental agencies, and policymakers about reliability considerations and risks that should be considered for Bulk Power System reliability. To help support plan development, NERC and the Planning Committee’s Advisory Group on CPP will author a guidance document that concentrates on system and regional aspects of the expected resource mix changes, the potential acceleration of strained essential reliability services (e.g., voltage support, ramping, frequency response), the implications of a changing dispatch (i.e., increased cycling, energy limitations, maintenance planning), and reliability considerations of further concentration of natural gas generation, variable resources, distributed resources, and demand-side management. Additionally, NERC will revise its initial Phase I analysis and calibrate it with revised assumptions and requirements set forth in the final rule. The Planning Committee’s Advisory Group on CPP will support the technical input on this assessment. In addition, the Regional Entities are expected to support the NERC assessment and use the results to perform reliability analysis that will assess any Region-specific challenges. Several scenarios have already been discussed for analysis, including:

• potential renewable and natural gas generation levels and the varying effects on resource adequacy;

• the effects of potential leakage around new resources that fall under 111(b), and the subsequent effects on compliance with 111(d);

• the effects of potential nuclear retirements on resource adequacy; and

• the effects that trading will potentially have on both retirements and addition of resources.

NERC will continue to conduct its long- and short-term reliability assessments, which will incorporate state, regional, or federal CPP plans as they are integrated into existing planning processes. Key Dates for NERC’s Continuing Reliability Assessments

http://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/Potential_Reliability_Impacts_of_EPA_Proposed_CPP_Final.pdf

http://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/Potential%20Reliability%20Impacts%20of%20EPA%E2%80%99s%20Proposed%20Clean%20Power%20Plan%20-%20Phase%20I.pdf

Two report documents can be expected over the next six months:

• The guidance document for states, which is expected January 2016.

• An updated scenario analysis (Phase II), which is slated for the end of the first quarter in 2016.

Clean Power Plan Final RuleNERC Reliability Assessment Plan

John Moura, Director of Reliability Assessment and System AnalysisMRC Informational SessionOctober 7, 2015


• Formed to advise NERC on assessment scope and goals• Representation All NERC Regions ISO\RTOs and Planning Coordinators IPPs and Renewable Energy Producers Trade Organizations Power Marketers Consultants Canada

• Sub-group formed to author the recommendations document• Work with modelers to develop scenarios and assumptions

Planning Committee Advisory Group


CPP Key Factors and Scenario Parameters

Modeling the Federal Plan

2022 and Interim Periods

2015 LTRA Base Case


Special Reliability Assessment:CPP Phase II

Report Deliverable

Tentatively Scheduled for March

31, 2016

Project Timeline

October 7, 2015

Policy Input Letter

distributed

EPA Special AssessmentCPP Phase II

January 2016

Begin outreach and coordination

engagements with state

agencies and plan developers

Completion of recommendations

and reliability guidance for

states

October through December

Planning Committee Advisory Group on

CPP:1. Primary author of

the guidance report

2. Design scope of the assessment, define scenarios, vet assumptions


Agenda Item 4a MRC Informational Session October 7, 2015

Critical Infrastructure Protection (CIP) Version 5 Implementation

Action Information Update NERC is continuing its efforts to accomplish the goals of the Transition Program and is completing the remaining guidance for outstanding topics on High and Medium impact-related requirements. As described in updates over the course of 2015, the Transition Program is designed to accomplish the following objectives: (1) implementation readiness; (2) clarifying compliance and enforcement expectations; (3) providing industry and Regional Entities a better understanding of the technical and compliance related resources and efforts necessary for an efficient and effective transition; and (4) ensuring consistent and reasonable enforcement of CIP Version 5. The following is an update on the progress that NERC, the Regional Entities and industry have made working together towards a successful implementation. An additional update will be provided to the Board of Trustees’ Compliance Committee (BOTCC) at the November 4, 2015, BOTCC meeting in Atlanta, GA.

• Developed guidance documents focused on reasonable approaches to compliance.

• Completed over 40 topics of guidance, while developing processes to address new opportunities for guidance as they arise.

• Increased outreach and communication with industry to ensure CIP Version 5 implementation readiness.

• Initiate Standards Development Projects to facilitate changes to the CIP standards as needed to address issues raised during the implementation period.

The industry feedback received following the executive-focused meeting to resolve CIP Version 5 issues has been collaboratively addressed, as described in this communication and as reported at the MRC meeting on August 12, 2015. NERC, the Regional Entities and industry have made significant progress to achieve consensus on each of the six strategic topics addressed in the July 1 communication, as highlighted below and noted in Table 1:

• A guidance document was posted on August 19, 2015, to address asset owners affected by Impact Rating 2.6 to clarify compliance dates.

• A guidance document was posted for comment on September 9, 2015, to provide industry greater flexibility when identifying programmable electronic devices.

• Examples supporting effective implementation of network communications infrastructure and serially-connected systems have been shared with industry for public comment on August 19, 2015, and September 9, 2015, respectively.

http://www.nerc.com/pa/CI/tpv5impmntnstdy/CIP%20V5%20Transition%20Update.pdf

http://www.nerc.com/gov/bot/MRC/Agenda%20Highlights%20nad%20Minutes%202013/MRC_August_2015_Agenda_Pkg_Final.pdf

An oversight plan for monitoring compliance to the standards in 2016 is being developed, and NERC staff will provide an update to the BOTCC on November 4. This plan will include a risk-based approach to monitor compliance through the initial period of enforcement, including the identification of compliance monitoring methods and specific areas of risk that will be monitored. As communicated in the release of the 2016 NERC Compliance Monitoring Enforcement Program Implementation Plan, and which may be further refined, monitoring efforts for CIP Version 5 in 2016 will focus, in particular, on activities surrounding identification of High- and Medium-impact Bulk Electric System Cyber Systems. The ERO Enterprise has performed a series of outreach webinars to explain the status and result of NERC’s effort to facilitate the development of effective guidance. Each guidance document is posted for industry comment, the comments are reviewed, addressed and the final draft of the guidance is presented to the Standards Committee for approval. Guidance documents and recorded webinars are available for industry use.

Table 1

Guidance Posting Date Closing Date Webinar

Communication and Networking 19-Aug-15 18-Sep-15 20-Aug-15

IRC 2.3 & 2.6 19-Aug-15 18-Sep-15 20-Aug-15

Generation Interconnection 19-Aug-15 18-Sep-15 20-Aug-15

BCAs/PEDs 9-Sep-15 9-Oct-15 10-Sep-15

External Routable Connectivity 9-Sep-15 9-Oct-15 10-Sep-15

TO Control Centers 23-Sep-15 23-Oct-05 24-Sep-15

http://www.nerc.com/pa/comp/Resources/ResourcesDL/2016%20CMEP%20IP_V_1_09102015_Posted.pdf

http://www.nerc.com/pa/comp/Resources/ResourcesDL/2016%20CMEP%20IP_V_1_09102015_Posted.pdf

http://www.nerc.com/pa/CI/Pages/Transition-Program.aspx

http://www.nerc.com/pa/CI/Pages/Transition-Program.aspx

CIP Version 5 Implementation

Steven Noess, Director of Compliance AssuranceMRC Informational Session October 7, 2015


• Issuance of Remaining Lessons Learned (LL) and FAQs Over 40 LL & FAQs have been posted for industry comment Continued focus on creating consensus via the Section 11 Process

Status of CIP V5 Transition

Guidance Posting Date Closing Date Webinar

Communications and Networking 19-Aug-15 18-Sep-15 20-Aug-15

IRC 2.3 & 2.6 19-Aug-15 18-Sep-15 20-Aug-15

Generation Interconnection 19-Aug-15 18-Sep-15 20-Aug-15

BCAs/PEDs 9-Sep-15 9-Oct-15 10-Sep-15

External Routable Connectivity 9-Sep-15 9-Oct-15 10-Sep-15

TO Control Centers 23-Sep-15 23-Oct-15 24-Sep-15


2016 CMEP Implementation Plan

2016 Areas of FocusCIP-002-5.1 R1, R2 Balancing Authority

Generator OperatorGenerator OwnerReliability CoordinatorTransmission OperatorTransmission Owner

Control CentersBackup Control CentersData CentersSubstationsGeneration Facilities

CIP-005-5 R1, R2 Balancing AuthorityGenerator OperatorGenerator OwnerReliability CoordinatorTransmission OperatorTransmission Owner

Control CentersBackup Control CentersData CentersSubstationsGeneration Facilities

CIP-006-5 R1, R2, R3 Balancing AuthorityReliability CoordinatorTransmission OperatorTransmission Owner

Control CentersBackup Control CentersData CentersSubstations

CIP-007-5 R1, R2, R3, R5 Balancing AuthorityReliability CoordinatorTransmission OperatorTransmission Owner

Control CentersBackup Control CentersData Centers


Agenda Item 4b MRC Informational Session October 7, 2015

Physical Security Reliability Standard Implementation

Action Information Update Reliability Standard CIP-014-2 became enforceable on October 1, 2015. In its effort to support the effective implementation of the standard, NERC and the Regional Entities (ERO Enterprise) are conducting outreach and providing guidance. The ERO Enterprise staff have already begun visiting registered entities through outreach activities to discuss and understand their plans to comply with CIP-014-2. Based on initial observations, from both NERC and Regional Entity staff feedback, industry is making remarkable progress towards effective implementation and compliance of CIP-014-2. Physical security plans reviewed thus far appear to be reasonable and focused on mitigating risk from specific threats to the critical stations or substations, and NERC is encouraged by industry’s initial progress and continued focus on a successful CIP-014-2 implementation. NERC is also implementing the following initiatives:

Industry Awareness Assessment – In Q4 2015, NERC will work to support the Critical Infrastructure Protection Committee’s (CIPC) survey to provide a snapshot of the industry’s approach to implementing the standard. The Physical Security Standard Working Group (PSSWG) of the CIPC developed a survey, intended for voluntary participation by industry, to help gather and share initial information to support successful implementation. Monitor and Assess Implementation – The means and methods the ERO Enterprise will use to monitor compliance to the standards will focus on assessing and supporting effective implementation. An oversight plan for monitoring compliance to the standards in 2016 is being developed, and NERC staff will provide an update to the Board of Trustees’ Compliance Committee (BOTCC) at the November 4, 2015 BOTCC meeting. Focus throughout the rest of 2015 and through the first two quarters of 2016 will be on the efforts surrounding identification of critical stations and substations under CIP-014-2 to confirm that the identifications are appropriate and risk-informed. As part of its compliance assurance activities, in particular, NERC and the Regional Entities will seek understanding of effective application for the following:

• Why certain stations or substations are identified to meet the criteria in Requirement R1;

• Similarly, why certain stations or substations were not identified by Requirement R1;

• What are defining characteristics of stations and substations identified by Requirement R1; and

• How the third party verifying the risk assessment meets the qualifications in Requirement R2 and the means the third party used to ensure effective verification.

Feedback to the Board of Trustees (Board) – NERC management, per the Board’s instruction when adopting the Physical Security Reliability Standard, will monitor and assess implementation of CIP-014-2. Specifically, NERC intends to monitor the general number and characteristics of assets identified as critical and the scope of security plans developed to meet the requirements in CIP-014-2, including the timelines provided for implementation of the various security and resiliency measures included in the plan. Following the effective date of CIP-014-2, NERC will begin providing quarterly reports on these issues to the Board, with particular emphasis during Q4 2015 and Q1 2016 on outcomes of activities related to critical asset identification as described above. Working with system analysis subject matter experts in the ERO Enterprise, NERC’s focus over the next two quarters will include:

• Understanding how entities are engaging in the analysis of determining which facilities are critical and that the analysis is sound;

• Understanding the outcomes of the analysis to support identifying what the common characteristics of critical facilities are, if any; and

• In conjunction with the voluntary survey described above, understanding and validating the scope of facilities identified as critical under CIP-014-2.

Outreach and Communications – NERC will continue providing regular communications and outreach on key information to support industry’s implementation of the standard. NERC and the Regional Entities have conducted webinars to reflect the most recent guidance communication throughout 2015, and it will continue providing updates via webinar during key dates during the implementation period. Going forward, NERC will conduct additional workshops if and as necessary based on feedback from industry and in conjunction with Regional Entity outreach activities. Industry may access NERC and the Regions outreach presentations on CIP-014-2 here.

http://www.nerc.com/pa/CI/Documents/2015_CIP_Curriculum%20%20(as%20of%2020150728)_editedAD.pdf

Physical Security Reliability Standard Implementation

Steven Noess, Director of Compliance AssuranceMRC Informational SessionOctober 7, 2015


• Key enforcement dates: Requirement R1 is enforceable on October 1, 2015 Requirement R2 is enforceable on December 30, 2015 R2.3 through R6 must be completed according to the timelines specified in

the Implementation Plan

• NERC continues to work with industry groups and the Regional Entities to ensure consistent approaches

Increasing Industry’s Understanding


• Q4 2015 – Critical Infrastructure Protection Committee’s CIP-014 implementation survey

• Q1/Q2 2016 – Support understanding of critical asset identification (R1 through R3) via risk-based tools Analysis of processes to identify critical facilities Common characteristics of facilities Number of critical facilities

• Q3/Q4 2016 – Assessing the Effectiveness of Security Plans (R5)• Ongoing informal registered entity site visits

CIP-014 Plan: Next Steps


Agenda Item 4c MRC Informational Session October 7, 2015

NERC Comments on Supply Chain Management

Action Information Background On July 16, 2015, the Federal Energy Regulatory Commission (FERC or Commission) issued a Notice of Proposed Rulemaking (NOPR) proposing to approve revisions to the Critical Infrastructure Protection (CIP) Cybersecurity Reliability Standards.1 The proposed CIP standards were submitted in response to Order No. 791 in which the Commission approved new and modified CIP Reliability Standards, referred to as the CIP version 5 standards, and directed modifications to those standards related to: (1) the “identify, assess, and correct” language; (2) controls for low impact Bulk Electric System (BES) Cyber Systems; (3) protections for transient devices; and (4) protections for non-programmable components of communication networks.2 In the NOPR, the Commission proposes to find that the proposed CIP Reliability Standards are just and reasonable, address the Order No. 791 directives, and improve the base-line cybersecurity posture of applicable entities compared to the current Commission-approved CIP Reliability Standards. The Commission also proposed, among other things, to direct NERC to develop a new or modified Reliability Standard to address security risks from the supply chain for industrial control system hardware and software, and computing and networking services associated with BES operations. NERC Position on Supply Chain As reflected in its NOPR comments submitted on September 21, 2015, NERC is generally supportive of the Commission’s attention to this issue and agrees it is important that electricity subsector participants continue focusing on mitigating security risks associated with the supply chain. NERC recognizes, however, that supply chain management is a complex global issue and there are significant challenges to developing a mandatory Reliability Standard on supply chain management consistent with Section 215 of the Federal Power Act (FPA). NERC therefore requested that if the Commission directs NERC to develop a new or modified Reliability Standard, the Commission provide two years for standard development to allow sufficient time for NERC to in educational and outreach efforts with stakeholders to provide a better understanding of the nature of supply chain risks and the extent to and manner in which a mandatory Reliability Standard can effectively protect against those risks. NERC’s comments highlighted the following challenges for developing a mandatory standard and the types of issues NERC will need to consider:

• Identifying Supply Chain Risks. NERC should better understand global supply chain risks and how to protect against those risks within the limitations of Section 215.

1 Revised Critical Infrastructure Protection Reliability Standards, 152 FERC ¶ 61,054 (2015). 2 Version 5 Critical Infrastructure Protection Reliability Standards, Order No. 791, 78 Fed. Reg. 72,755 (Dec 3, 2013), 145 FERC ¶ 61,160 (2013), order on clarification and reh’g, Order No. 791-A, 146 FERC ¶ 61, 188 (2014).

http://www.nerc.com/FilingsOrders/us/FERCOrdersRules/NOPR%20on%20CIP%20V5%20Directive.pdf

http://www.nerc.com/FilingsOrders/us/NERC%20Filings%20to%20FERC%20DL/CIP%20V5%20Revisions%20NOPR%20Comments.pdf

• Identifying Effective Supply Chain Management Security Controls. NERC will need to analyze the types of procurement practices registered entities can implement that meaningfully reduce supply chain risks without imposing undue burden. NERC should review what entities are currently doing to mitigate supply chain risks, understand how to account for those activities in a mandatory standard, and examine how to leverage existing procurement guidelines (NIST, DOE, and EEI guidelines).

• Negotiating Leverage and Cost Issues. Any supply chain management Reliability Standard must balance the reliability need to implement supply chain management security controls with entities’ business need to obtain products and services at a reasonable cost.

• Differences in Registered Entities. One of the many challenges will be drafting a generally applicable Reliability Standard for registered entities with significant differences in purchasing power, resource needs, and types of equipment.

• Diversity of BES Facilities, Technologies, and Risks. BES system environments, technologies, and risks vary. NERC will need to understand how to draft a generally applicable standard that accounts for different types of products and the various environment in which those products will be integrated or applied so that the required protections are tailored to the relevant cybersecurity programs and policies of the environment into which the product will be integrated or applied.

• Liability for Actions beyond a Registered Entities Control. NERC should understand how to draft a Reliability Standard that creates affirmative obligations to implement supply chain management security controls without holding entities strictly liable for any failure of those controls to eliminate all supply chain threats and vulnerabilities.

• Disincentives to Upgrade BES Systems and Technology. NERC is concerned that a mandatory supply chain management Reliability Standard could, if not reasonably scoped, create a disincentive for entities to upgrade their technology and control systems.

Considering the complexity of these issues, there is a need for significant education and outreach before meaningful standard development can begin. A two-year development will allow NERC the ability to (1) organize technical conferences to educate NERC staff and stakeholders on these issues and obtain stakeholder input on the scope and content of any Reliability Standard; and (2) establish a task force, similar to the Geomagnetic Disturbance Task Force, to provide recommendations on the issues discussed above and the features of any proposed Reliability Standard. NERC comments also highlight that any supply chain management Reliability Standard should build upon existing protections in the CIP Reliability Standards and focus primarily on those procedural controls that registered entities can reasonably implement during the procurement of products and services associated with BES operations to mitigate supply chain risks effectively.

Next Steps

• Comments on the CIP NOPR were due on September 21, 2015.

• FERC to issue a final rule after considering comments, but has no set timeline for doing so.

• In the NOPR, FERC committed to engaging in outreach efforts after receipt and consideration of comments. NERC will work with Commission staff to be included in these outreach efforts.

• If FERC’s final rule includes a directive on supply chain management, NERC will work with stakeholders to develop a standard within the timeframe established in the final rule, if any.

NERC Comments on Supply Chain ManagementShamai Elstein, NERC Senior CounselMRC Informational SessionOctober 7, 2015


• Supportive of the Federal Energy Regulatory Commission’s (FERC or Commission) attention to this issue

• Supply chain management is a complex global issue and there are significant challenges to developing a mandatory Reliability Standard

• Timeframe for Standard Development Requested two years for standard development activities Stressed the need for significant educational and outreach efforts NERC would hold technical conferences and establish a task force to bring

together the necessary subject matter expertise

NERC CIP NOPR Comments


• Issues to Consider During Standard Development Identifying supply chain risks Identifying effective supply chain management security controls Negotiating leverage and cost issues Differences between registered entities Diversity of Bulk Electric System (BES) facilities, technologies, and risks Liability for actions beyond a registered entity’s control Disincentives to upgrade BES systems and technology



• Features of Supply Chain Management Standard Need to build upon existing protections – comments highlighted CIP V5

requirements that help mitigate supply chain risks Need to build upon existing entity practices and leverage existing

guidelines Should focus on procedural controls entities can reasonably implement

during the procurement of products and services associated with BES operations to mitigate supply chain risks effectively

Must be flexible to account for: o The differences in the needs and characteristics of registered entities o The diversity of BES system environments, technologies, and riskso Issues related to the limited applicability of mandatory NERC Reliability

Standards



• FERC committed to engage in outreach efforts after receipt and consideration of comments

• FERC to issue Final Rule after considering comments – no set timeline

• If FERC Final Rule includes supply chain management directive, NERC to work with stakeholder to develop a standard within timeframe established in Final Rule, if any

Next Steps


Agenda Item 4d MRC Informational Session October 7, 2015

Overview of FERC Notice of Proposed Rulemaking on Availability of Certain NERC Databases to FERC (Docket No. RM15-25-000)

Action Information

Background On September 17, 2015, the Federal Energy Regulatory Commission (FERC or Commission) issued a Notice of Proposed Rulemaking proposing to require NERC to make three databases available for review by FERC and its staff (Database NOPR). FERC proposes to revise its regulations to formally require NERC to provide FERC access to view and download data, on a non-public and ongoing basis, to NERC’s Transmission Availability Data System (TADS), which includes data on transmission outages, Generating Availability Data System (GADS), which includes data on generation outages, and protection system misoperations databases. FERC describes its proposal as limited to data on U.S. facilities. Overview of Key Elements of the Database NOPR and Next Steps In issuing the Database NOPR, FERC states that it relies on its authority pursuant to 18 C.F.R. §39.2(d) to seek information necessary to implement section 215 of the Federal Power Act (FPA). The Database NOPR states that FERC believes access to the databases is necessary to carry out its obligations under the FPA, by providing FERC with information necessary for FERC to determine the need for new or modified Reliability Standards and better understand NERC’s reliability and adequacy assessments. FERC recognizes that its proposal may raise concerns regarding confidentiality, and states that it will take appropriate steps under FERC’s governing statutes and regulations in handling confidential information. The Database NOPR clarifies that FERC’s proposal would not require the ERO to collect new information, compile information into any kind of report, or reformulate the raw data. Potential issues under the Database NOPR warrant further consideration, such as:

• The scope of FERC’s proposal; and

• Data vulnerability and confidentiality.

NERC is continuing to evaluate the Database NOPR and plans to submit comments to FERC. NERC will summarize its proposed comments during the November 4, 2015 MRC meeting. Comments on the Database NOPR are due 60 days from publication in the Federal Register.

http://www.nerc.com/FilingsOrders/us/FERCOrdersRules/NOPR_NERCDatabases_09172015_RM15-25.pdf

Overview:Notice of Proposed Rulemaking (Database NOPR) on Availability of Certain NERC Databases to FERC

Candice Castaneda, NERC LegalMRC Informational SessionOctober 7, 2015


• Proposes new 18 C.F.R. §39.11(c): “The Electric Reliability Organization shall make available to the

Commission, on a non-public and ongoing basis, access to the Transmission Availability Data System, Generating Availability Data System, and protection system misoperations databases, or any successor databases thereto.”

• FERC states: Access referenced as “view and download data” and limited to U.S.

facilities. Data to help FERC (i) determine need for new or modified Reliability

Standards, and (ii) understand NERC assessments. Intent to take “appropriate steps” handling confidential information. Would not require NERC to collect new information or

compile/reformulate data.

FERC Proposal


• Potential issues include: Scope Confidentiality

• NERC’s next steps: Present positions to MRC at its November 4, 2015 meeting Submit comments to FERCo Comments due 60 days from Federal Register Publication

FERC Proposal
