The Midwest Reliability Organization (MRO) covered a number of timely issues at its quarterly Board of Directors meeting, held via conference call on Thursday because of the COVID-19 pandemic.

Protests, Racial Tensions Acknowledged

MRO CEO Sara Patrick wasted no time addressing the protests in the Minneapolis and St. Paul, Minn., areas that were set in motion by the killing of George Floyd while in Minneapolis police custody on May 25. MRO is headquartered in St. Paul.

“It isn’t easy to talk about racism. … I should be uncomfortable. I will never know what it is to be black,” Patrick said. She announced that MRO is forming a diversity and inclusion committee and holding all-staff trainings on implicit bias.

MRO Board Chair Tom Kent reminded attendees of Iowa teacher Jane Elliott’s famous eye-color classroom exercise.

“I was a participant in this exercise in my school as a sixth-grader in rural Nebraska,” Kent said, remembering how quickly the class “bought in” to the idea of special treatment based on eye color. He acknowledged that as a middle-aged white man from Nebraska, he’s lived much of his life “not really appreciating the impact of discrimination and prejudice,” but he can no longer ignore it.

NERC Trustee Jan Schori said staff reached out to make sure MRO employees and facilities were safe during the unrest.

Post-pandemic ‘Novel Normal’ Predicted

MRO is also betting the protest-and-pandemic combo will be an inflection point in the energy industry, and the board invited Caitlin Durkovich, of advisory firm Toffler Associates, to speak on societal changes affecting the energy industry.

“When you think about the Great Depression and World War II, you understand the frugality brought on by those events. To this day, my father-in-law cuts away the mold from an onion [rather than throwing it away],” she said.

Durkovich also recalled the 1982 Tylenol poisonings in Chicago that spurred tamper-proof packaging and the banking changes implemented after the 2008 subprime mortgage crisis and ensuing Great Recession. As with these previous crises, Durkovich predicted that following the pandemic, the world will transition to a “novel normal.”

“COVID-19 is a catalyst for new behaviors,” she said. “My concern is the perception that we’re going to return to normal. … I think increasingly with each passing day that society is being stretched to its limits and the chances that it resumes its normal shape is slim.”

Durkovich said Black Lives Matter protests have also generated distrust in large institutions. Coupled with the recent emphasis on hygiene and supply chain reinforcements, she predicted that many households would move toward renewable resources and battery storage in a bid for independence.

Social distancing is accelerating “the dislocation of activities from locations,” Durkovich said, allowing companies to increasingly consider a virtual talent pool for new employees. More remote operations also mean more security issues, she warned.

MRO must battle with market uncertainty and an economic recovery dependent on when “the great wait” will let up, Durkovich added.

“This great wait will last until we have a vaccine or a better understanding of antibodies,” she predicted. MRO will need to be able to adjust its market strategy quickly on advice, Durkovich recommended. She also said decarbonization and electrification will likely continue unabated.

“I don’t think we’re going to take our foot off the pedal,” she said.

2021 Budget Approved; Assessment Flat from 2020

Also in the meeting, Patrick announced an $18.4 million budget for 2021, a 5% increase from 2020’s $17.5 million budget. She said MRO’s assessment costs in 2021 would remain flat from 2020 at nearly $17 million.

In keeping assessments flat, MRO is following the lead of NERC, which in its 2021 business plan and budget resolved to maintain its own assessment at the 2020 level of $72 million. (See NERC Aims for Cost Control in 2021 Budget.) The total ERO Enterprise budget for the year is projected to be $211.4 million, up 2.4% from the year before, while overall assessments are expected to grow by 0.8% to $189.2 million.

MRO Vice President Lam Chung said 2021 budget planning balanced financial pressures brought on by the pandemic and operational needs. Impacts from COVID-19 included delays to the regional entity’s office expansion plan, though the outbreak has also provided a limited amount of budget relief in the form of reduced meeting and travel expenses, as Chung and other RE representatives reported in a webinar earlier this month. (See Pandemic Provides Travel Savings for NERC, REs.)

Board members voted to approve the proposed budget, including funding for the MRO post-retirement medical plan and a targeted operating reserve of 30 days’ cash, and to submit it for approval by NERC and regulatory agencies.

NERC Delivers Update on Align, SEL Training

Stan Hoptroff, NERC’s vice president of business technology, provided an update on the development of the organization’s Align software project, an effort to standardize compliance monitoring and reporting processes across the ERO Enterprise.

The project’s flagship product, the Align tool for managing Compliance Monitoring and Enforcement Program-related work papers, is currently set for release in the first quarter of 2021. (See Align Tool Set for 2021 Rollout.) A separate product, the ERO Secure Evidence Locker — which will provide secure storage for potentially sensitive information — is planned for release in the fourth quarter of 2020, though the organization recently acknowledged that a delay to the following quarter is likely because of the pandemic. (See related story, FERC Approves NERC’s Align Spending Request.)

In addition to detailing the expected benefits of the new software for REs — such as a standardized interface for reporting compliance issues, real-time access to information and secure management of data — Hoptroff also provided a look at the roles that REs and registered entities are expected to play in its future development. Testing by select registered entities is planned to begin by next month, with regional adoption workshops for ERO Enterprise staff scheduled for August and September. Regional training is planned for October through December, with a “Go/No-Go Process” scheduled for December and January.

“We’ve got a checklist of items that we will systematically step through to make sure all systems are go, and if they are, then we’ll publish the release schedule,” Hoptroff said. “But if there’s work to be done, then obviously we’ll put our time and attention into buttoning up whatever items … may need more work.”

RDA Acknowledges Independence Commitment

The MRO board also unanimously approved the new Regional Delegation Agreement (RDA) between itself and NERC that NERC’s board adopted at its May meeting, along with agreements with the other REs. (See “Other Approvals,” NERC Board of Trustees/MRC Briefs: May 14, 2020.) The agreement was set to expire Dec. 31 without a renewal.

Revisions in the new RDAs were relatively light but include:

• eliminating maps of RE boundaries in favor of textual descriptions;
• clarifying that delegation agreements may be terminated earlier than the end of the five-year term as long as written notice is provided of at least one year;
• allowing REs greater flexibility regarding the use of funds collected through penalties; and
• clarifying requirements regarding the nomination of independent board members.

The last topic was of special importance to MRO’s board, as the new agreement includes a provision “noting that MRO commits to maintaining independent members to perform oversight obligations” such as monitoring the compensation of CEO and board members, as well as maintaining conflict-of-interest and recusal policies for board members and staff. Future renewals of the RDA will require reviews to ensure MRO has continued to fulfill the independence principles.

“We’ve had a number of discussions over the course of the past couple of years with the board, and one of the outcomes of RDA negotiations was a confirmation … that MRO has satisfied independence principles. That was nice to hear,” Patrick said.