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As the August 2003 blackout illustrated, even the slightest hiccup in the process of providing a reliable power supply can spell trouble for both the United States and Canada. A reliable supply of electricity is an essential priority for electric utilities in North America. Our industry harbors no illusions. Reliability is the fundamental benchmark used to assess our performance and ultimately we’re judged on how well we can meet the round-the-clock needs of our customers.
Those looking for evidence of the industry’s commitment to delivering on this priority need look no further than the North American Electric Reliability Corporation (NERC). Since 2006, NERC has been certified by U.S. and Canadian governments to serve as the forum in which industry experts from across the continent can coordinate in the development of common standards to guide the operation of the North American electric system. At industry’s own behest, these standards are made mandatory and enforceable, to help ensure the strongest possible degree of reliability for the grid.
By and large, this collaborative model has been quite successful. Since NERC’s inception, stakeholders in Canada and the U.S. have developed over 100 rigorous reliability standards. In turn, industry has greatly improved its ability to prevent cascading outages and elevate its level of service for customers.
This is why the recent notice of the planned dismantling of the cornerstone of NERC’s framework came as a very unpleasant surprise. On March 18, the Federal Energy Regulatory Commission (FERC) – the agency tasked with overseeing NERC’s activities in the U.S. – released a series of decisions which fundamentally challenge NERC’s mandate. Of these, the most problematic is the order for NERC to modify the processes it employs to develop reliability standards for application across North America.
In a nutshell, FERC is looking for a guarantee that NERC can fulfill instructions from FERC to address a reliability issue. This, in itself, presents no concern and is consistent with the law outlining FERC’s authority over NERC. However, what risks turning the whole NERC framework on its head is FERC’s prescription for how NERC is supposed to address such issues.
This may seem like a trivial detail. But, this seemingly minor distinction may have some profound implications for the reliability of the electricity system in North America.
For starters, the decision is inconsistent with the original vision of an international process for developing reliability standards. When Congress passed Section 215 of the Federal Power Act in 2005, NERC procedures were designed to accommodate the participation of stakeholders in Canada and the U.S. This international model ensured that standards would be acceptable to governments on either side of the border. FERC’s order essentially downgrades the jurisdiction of Canadian authorities to a lower tier. This, in turn, boosts the prospects of weakened international coordination on reliability and a patchwork of standards emerging as a result.
Furthermore, the decision conflicts with the goal of leveraging the electricity industry’s know-how in developing standards. The law specifically tells FERC to give “due weight” to the technical expertise of the industry, which understands the complexities of the grid – and ways to strengthen it – better than anyone else. It’s disappointing, then, that FERC’s order overlooks this and aims to remove from the driver’s seat those who are most capable of operating the vehicle. Taken together with the international roadblocks FERC is erecting, this is bound to make for some risky conditions on our electric superhighways.
FERC’s announcement has sparked strong pushback from the electricity industry on the broader reliability file. Along with trade associations in the U.S., the Canadian Electricity Association (CEA) filed a response with FERC in mid-April in which we vigorously defended the NERC framework and requested FERC to reconsider its decision. Earlier this week, FERC signaled that it needed more time to review these appeals.
As we await FERC’s reply, we’re afforded some time to take stock of the improvements in electric reliability achieved during NERC’s short history. To be sure, the NERC framework stands to benefit from further strengthening. However, NERC and the stakeholders from all over North America who have invested significant time and resources in its activities have much to show for their efforts. NERC has performed admirably in following through on the first principles for reliability – leveraging technical expertise, carrying out a collaborative process inclusive of all international stakeholders and developing standards for uniform implementation.
As such, the interests of Canada and the U.S. seem best served by permitting NERC to continue fulfilling its mandate to help keep the lights on for all of us. It is time FERC got back into the box Congress intended.
President and CEO
Canadian Electricity Association
