United States: FERC Proposes To Approve NERC's New Definition Of The "Bulk Electric System"

On June 22, 2012, the Federal Energy Regulatory Commission (Commission) issued a Notice of Proposed Rulemaking (NOPR) in which it proposes to approve revised rules of the North American Electric Reliability Corporation (NERC), including a revised definition of the "bulk electric system."  The revised definition would eliminate regional discretion over whether to treat facilities as part of the "bulk electric system" and instead would establish a bright-line threshold that includes all facilities operated at or above 100 kV.  The revised rules also would provide further clarity by identifying specific categories of facilities that will be treated as included in, and others that will be treated as excluded from, the redefined bulk electric system.

On the other hand, the revised rules would create an exception procedure to add or subtract facilities from the redefined bulk electric system on a case-by-case basis.  Requests for an exception can be made by Regional Entities, planning authorities, reliability coordinators, transmission operators, transmission planners, balancing authorities, or owners of transmission elements.  Anyone requesting an exception would need to complete the same proposed form, which would help to ensure NERC uses a consistent baseline in making exception decisions.

Comments on the NOPR are due by September 4, 2012.

Included Facilities

The NOPR clarifies that the following facilities will be among those treated as part of the bulk electric system:

• I1 – Transformers with the primary terminal and at least one secondary terminal operated at 100 kV or higher, unless excluded under Exclusion E1 or E3 below.  The Commission notes, however, that it may be necessary to include some transformers operated below 100 kV on all their secondary windings.  The Commission noted how the loss of two such transformers impacted system reliability in the recent Arizona-Southern California blackout.
  
  
• I2 – A generating resource with a gross individual nameplate rating greater than 20 MVA or gross plant/facility aggregate nameplate rating greater than 75 MVA, including the generator terminals through the high-side of the step-up transformer(s) connected at a voltage of 100 kV or above.  This inclusion is intended to mirror the text of the NERC Registry Criteria for generating units.
  
  
• I3 – Blackstart Resources identified in the Transmission Operator's restoration plan.  These resources are included facilities regardless of their size (MVA) or the voltage at which they are connected.
  
  
• I4 – Dispersed power producing resources with aggregate capacity greater than 75 MVA (gross aggregate nameplate rating) utilizing a system designed primarily for aggregating capacity, connected at a common point at a voltage of 100 kV or above.  This inclusion reflects the effect of dispersed variable generation on the system.
  
  
• I5 – Static or dynamic devices (excluding generators) dedicated to supplying or absorbing Reactive Power that are connected at 100 kV or higher, or through a dedicated transformer with a high-side voltage of 100 kV or higher, or through a transformer that is designated in Inclusion I1.  This inclusion is intended to mirror I2 above, only for reactive power devices.

Excluded Facilities

The NOPR further clarifies that the following facilities will not be considered part of the bulk electric system:

• E1 – Radial systems: A group of contiguous transmission Elements that emanates from a single point of connection of 100 kV or higher and also meets one of the following criteria: (a) only serves load; (b) only includes generation resources, not identified in Inclusion I3, with an aggregate capacity less than or equal to 75 MVA (gross nameplate rating); or (c) serves load and includes generation resources, not identified in Inclusion I3, with an aggregate capacity of non-retail generation less than or equal to 75 MVA (gross nameplate rating).  This exclusion is intended to address small utilities, including municipal utilities and cooperatives.  The 75 MVA threshold is consistent with the threshold presently provided in NERC's Registry Criteria for registration as a generation owner or operator.  The proposed rule notes that a "normally open" switching device between radial systems does not affect this exclusion.
  
  
• E2 – A generating unit or multiple generating units on the customer's side of the retail meter that serve all or part of the retail load with electric energy if:  (i) the net capacity provided to the Bulk Electric System does not exceed 75 MVA, and (ii) the generating unit(s) are fully backed up by other resources.  These facilities are deemed unnecessary for operation of the bulk electric system because they serve a single load, provide a limited amount of capacity to the bulk electric system, and are fully backed up by other resources.
  
  
• E3 – Local networks (LN):  A group of contiguous transmission Elements operated at or above 100 kV but less than 300 kV that distribute power to load rather than transfer bulk-power across the interconnected system.  The purpose of facilities covered by this exclusion is to provide local distribution service.  Local networks are not planned, designed or operated to benefit or support the balance of the interconnected transmission network.
  
  
• E4 – Reactive Power devices owned and operated by the retail customer solely for its own use.

Request for Comments

Regarding the proposed inclusions, the Commission seeks comment on, among other things, whether the revised definition adequately eliminates subjectivity and regional variation and whether NERC's proposal adequately distinguishes between local distribution and transmission facilities in an objective, consistent, and transparent manner.

On the proposed exclusions, the Commission seeks comment on, among other things, whether Exclusion E1 would work to remove from the bulk electric system certain generation resources that should be included in the definition, whether the phrase "normally open" in Exclusion E1 would be subject to differing interpretations and difficult to oversee, and whether the 300 kV ceiling in Exclusion E3 is appropriate and how it would apply.

Finally, the Commission requests comments on a variety of other matters, including:  how the relevant entities will seek inclusion of sub-100 kV elements to ensure that all facilities necessary for operation of the bulk power system are included; the role NERC should have in initiating the designation of sub-100 kV facilities, or any other facilities, necessary for inclusion, or in directing others to initiate such designation; instances in which the Commission itself should designate (or direct others to designate) facilities for inclusion; and whether Regional Entities should be required to submit all proposed determinations on exception requests to a technical review panel regardless of the recommendation.

In short, the Commission is seeking to provide as much certainty as possible regarding the applicability of NERC's Reliability Standards to specific facilities, while at the same time attempting to ensure that any gaps in needed coverage are filled.

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