By Rich Heidorn Jr.

The Electric Reliability Organization’s proposed $207 million budget appears headed for approval, but NERC’s increased spending to develop its cybersecurity capability is facing some pushback from Canadian utilities.

The Canadian Electricity Association and Ontario’s Independent Electricity System Operator questioned the 13.3% spending increase on the Electricity Information Sharing and Analysis Center (E-ISAC), part of a five-year strategic plan. The E-ISAC will account for about 27% of NERC’s budget next year.

NERC is boosting 2020 assessments by 4.5% overall, but Canada (+7.2% to $0.013/MWh) and Mexico (+6.0% to $0.016/MWh) face bigger increases than the U.S. (+4.3% to $0.016/MWh).

“Canadians have voiced concern regarding the overall value proposition of the E-ISAC, especially given substantial increases in the value of cyber-related services and cybersecurity investments by Canadian government partners,” the CEA said, adding that its member utilities have “limited ability … to flow through NERC costs to ratepayers.”

It said the E-ISAC should take advantage of “capabilities already available from other agencies or partners (such as the Canadian Cyber Centre) to avoid unnecessarily fully building out its own capabilities.”

IESO noted that concern over rising electricity costs has led the Ontario government to promise a 12% rate reduction. “A rise in regulatory fees beyond the rate of inflation forces the IESO to adjust our budget in areas that may negatively affect our ability to execute on our strategic priorities,” it said.

The CEA and IESO were among six entities that filed comments on NERC’s initial budget proposal. (See ERO Budgets up 3.8%; Assessments up 2.9%.) NERC’s second draft budget, released July 15, adds $500,000 for modifications to its Atlanta headquarters to provide more meeting space.

Other Commenters

Other commenters on the initial draft were generally supportive of the expansion of the E-ISAC, although the Bonneville Power Administration called for more “transparency” on its programs and benefits. BPA noted that the E-ISAC and the Cybersecurity Risk Information Sharing Program (CRISP) are more than 30% of the NERC budget, saying it “would like assurance that as resources are transferred from other programs such as event analysis to E-ISAC that those programs will still be viable to the industry.”

The Edison Electric Institute expressed no misgivings over the expansion, saying “the execution of the E-ISAC’s long-term strategic plan for building a world-class ISAC is critical for providing timely sharing of security threat information.”

The ISO/RTO Council (IRC) Standards Review Committee said NERC should “ensure the E-ISAC is able to provide the most relevant and timely actions in response to bulk power system threats and vulnerabilities.”

NERC responded to the comments by detailing the E-ISAC’s programs and touting its access to the intelligence community. It said industry participation with the office has increased, noting 25 Canadian asset owners and operators had established user accounts since late 2018.

Personnel Costs

EEI and the IRC did question NERC’s personnel costs.

The IRC suggested NERC should cut spending in reliability standards and compliance programs to reflect reduced compliance requirements as a result of its Standards Efficiency Review. In May, the Board of Trustees approved the elimination of 84 reliability requirements. (See “Standards Efficiency Review Retirements OK’d,” NERC Standards News Briefs: May 8-9, 2019.)

The council also said that while risk-based monitoring has introduced some efficiencies in the compliance program, “the enforcement program continues to follow a lengthy process.”

“The 2018 average processing age for the entire ERO Enterprise inventory was almost a year, with 37% between one and two years old and 7% over two years old. Developing a quicker path to resolve issues of noncompliance, particularly those that pose minimal risk to the reliability or security of the BPS could affect personnel and future budget dollars,” it said.

EEI sought information on NERC’s salary increases and urged the organization to seek ways to reduce medical expenses, which are budgeted to increase by 13%. NERC said its budget includes a 3% increase over base salaries for “merit adjustments” and “up to 0.5% for equity and market adjustments” that was requested by its board.

The institute said NERC should continue seeking ways to minimize operational costs “and focus resources on activities that are aligned with NERC’s performance objectives and [Reliability Issues Steering Committee] priorities. If new risks are identified, NERC should re-evaluate and prioritize activities, including deferring certain work to efficiently manage resources.”

NERC said its salaries are based on guidelines from the board’s Corporate Governance and Human Resources Committee and market compensation and benefit studies. “NERC is committed to building and maintaining top talent with the required specialized expertise necessary to fulfill the ERO Enterprise’s mission-critical roles,” it said.

The organization said it also benchmarks benefit costs and that increases to its medical insurance plan were “below market for several years.”

“The past two years have shown higher increases due to recent loss experience and fewer medical insurance provider options in the state of Georgia,” it said. “NERC continues to negotiate these premiums and will have final amounts for 2020 at the end of 2019.”

The National Rural Electric Cooperative Association offered brief comments urging the ERO to continue its efficiency efforts, saying it “should be a long-term focus for NERC.”

$500K Increase

NERC presented its revised budget at the board’s Finance and Audit Committee (FAC) conference call Thursday. Interim CFO Andy Sharp said the additional spending, which was revealed in the second draft of the budget, will save money on catering and travel costs.

The additional spending boosts NERC’s 2020 budget to $83.4 million, a 4.5% increase over 2019, compared to 3.8% in the first draft. The office improvements will be funded through reserves, so the NERC assessment will not increase from the original draft.

In addition to the spending on the office, the second draft adds two employees converted from contractors, which it said will result in a slight savings.

The regional entities also presented their 2020 budgets at the meeting, none of which changed materially from the first drafts. All told, NERC and the REs are proposing about $207.3 million in spending in 2020, a 4.1% increase. Total assessments are projected to increase by 2.9%.

Approval Schedule

Written comments on the final budget draft, which are due by July 31, should be sent to Erika Chanzes, manager of business planning and regional relations (erika.chanzes@nerc.net).

The Member Representatives Committee will hold a call to receive input on Aug. 2. The FAC will meet Aug. 14 to recommend approval of final budgets, followed by board approval on Aug. 15 and a FERC filing Aug. 26, with subsequent filings to Canadian authorities.