By Rich Heidorn Jr
PJM Insider

The Federal Energy Regulatory Commission gave final approval Thursday to NERC’s revised definition of the “Bulk Electric System“ (BES), the category of transmission facilities covered by NERC reliability rules (Docket #s RM12-6, RM12-7).

The new definition eliminates regional discretion and establishes a “bright-line” threshold including most facilities operating at or above 100 kV. Excluded from the definition are certain radial facilities.

The order includes a case-by-case exemption process for entities seeking to remove from BES status facilities that they believe should be characterized as local.

Thursday’s order reaffirmed FERC’s Dec. 20 ruling in the docket and rejected rehearing requests from several parties who said the commission’s explanation of the case-by-case exemption process was unclear. The  order did little to address the commenters’ concerns, however, containing several apparent contradictions (see below).

Reason for Change:

FERC directed NERC to develop the new BES definition in Order 743 (Nov. 18, 2010), saying the current process lacked sufficient oversight and led to inconsistencies between regions.

All reliability regions except the Northeast Power Coordinating Council, Inc. (NPCC) already use the 100 kV threshold. The commission said NPCC’s classifications of 100 kV facilities as local distribution were “subjective” and inconsistent and excluded “facilities that clearly are needed for reliable operation.”

The commission said the new threshold was appropriate because most 100 kV and above facilities operate in parallel with higher voltage facilities and experience similar loading. As a result, 100 kV facilities are relied upon during contingency scenarios and failures of such lines have caused cascading outages, the commission said.

The Commission also asserted that it can designate sub-100 kV facilities as part of the BES if they are necessary for the reliability of the transmission network, noting that such facilities were a significant factor in the Arizona-Southern California outages on Sept. 8, 2011.

Impact:

NERC had previously used 100 kV as a guideline for distinguishing between transmission and local distribution systems. The new order eliminates the phrase “generally operated at voltages of 100 kV or higher” in the current definition.

In its place is a new “core definition” covering all transmission elements and real power and reactive power resources connected at 100 kV or higher. The rule also lists five facilities configurations that are typically included in the BES and four that are excluded.

Newly-included elements have 24 months from the July 1, 2013 effective date to comply with reliability standards.

The commission required two changes to the NERC proposal, saying the exclusions for radial systems should not cover generator tie lines but should cover looped configurations connected below 100 kV.

The commission said most local distribution facilities will be automatically excluded by the 100 kV threshold and the local network exclusion (see exclusion 3). For those that aren’t, the new rules allow facility owners to appeal to NERC or FERC for a case-by-case review.

The “starting point” for FERC’s review will be the seven-factor test it set out in Order 888 (April 24, 1996). The seven “indicators” of local distribution include physical characteristics (local distribution facilities are normally in close proximity to retail customers, primarily radial and lower voltage) and functional characteristics (power flowing into local distribution systems is consumed in a restricted geographical area; it rarely, if ever, flows out to be transported to another market).

Confusion over Appeal Process

How NERC’s process will interact with FERC’s was the subject of much confusion after the Dec. 20 order.

In Order 743, the commission said that determining the line between transmission and local distribution should be part of NERC’s case-by-case exception process and directed NERC to develop rules for doing so.

In the Dec. 20 order, however, FERC announced that “while NERC’s case-by-case exceptions process is appropriate to determine the technical issue of whether facilities are part of the bulk electric system, the jurisdictional question of whether facilities are used in local distribution should be decided by the Commission.” (Emphasis added.)

Several parties filed responses saying that the Dec. 20 order created a confusing and potentially duplicative process.

“Will the processes run concurrently? If not, which process (NERC’s “technical” consideration or FERC’s “jurisdictional” consideration) is conducted first?” the National Rural Electric Cooperative Association asked in a Jan. 22 request for clarification or rehearing.

The Transmission Access Policy Study Group (“TAPS”) and Electricity Consumers Resource Council (“ELCON”) called FERC’s solution confusing and unwieldy. “Would NERC be bound by prior FERC determinations? Would FERC reopen NERC determinations? Are there issues that NERC would not be permitted or required to consider, or that entities would not be permitted to raise, in the exception process? Would one process be delayed pending completion of the other process?” the organizations asked in their petition.

FERC Response

In Thursday’s order, FERC denied the rehearing requests and attempted — without much success — to address the confusion.

FERC said that entities whose facilities are not excluded by NERC under the core definition and exclusions “may appeal a final NERC exceptions process decision to the Commission.” (Paragraph 91)

But it also said entities can petition FERC directly without filing first with NERC and that FERC’s “inquiry is a distinct process not made in connection with review of NERC exception process decisions.”(P 90)

The two processes, FERC said, “are separate, not concurrent and will be used for different determinations.” (P 89)

What the commission appears to be saying in paragraph 90 is that it will independently determine questions of whether a facility is used in local distribution or is part of the Bulk Electric System.

A separate question concerns whether a facility that is not used in local distribution should nonetheless be excluded from NERC’s reliability standards because it is not necessary for the grid’s reliability. In paragraph 91, the commission appears to say that this determination is initially NERC’s call, but can later be appealed to FERC.

A NERC spokeswoman told PJM Insider yesterday that it was still reviewing the order and had no immediate comment. A FERC spokesman said he was unable to elaborate on the order.

The bottom line: Unless the commission provides further clarification,  it may fall to the appellate courts to sort out this tangle.