Eric Christensen Publishes "A Guide To The Byzantine" in November Northwest Public Power Association Bulletin

December 12, 2012

Eric Christensen published an article concerning the new "Bulk Electric System" definition and how it is likely to aid Northwest utilities in complying with the FERC/NERC electric reliability regime in the November 2102 issue of the Northwest Public Power Bulletin. We've reprinted the text (without footnotes) here:


Eric Christensen, Partner
Gordon Thomas Honeywell

The ancient Byzantine Empire was famous for "bureaucratic overelaboration bordering on lunacy." In modern times, "Byzantine" has come to describe a system with "so many labyrinthine internal interconnections" that it is impossible to simplify or clarify. For power managers struggling to cope with the mind-numbing complexities of mandatory electric reliability standards, "Byzantine" seems a useful description.

For example, although many reliability standards have been mandatory since 2007, basic terms such as "Bulk Electric System" ("BES") and "Local Distribution" have yet to be defined. These terms are critical in determining a utility's compliance obligations because, if a utility owns or operates BES facilities, it will be obligated to comply with a much larger set of standards than otherwise.

Fortunately, interpretative assistance is at last on the way, in the form of the "Bulk Electric System" definition currently under consideration by the Federal Energy Regulatory Commission ("FERC"). NWPPA played a major role in developing the definition, helping leverage the expertise of its members by coordinating public power participation in the development of the BES definition from its inception. Public power's persistence helped produce a definition that will promote reliable operation of the backbone high-voltage transmission system while avoiding unnecessary and expensive regulation of local distribution systems.

After Congress launched the mandatory reliability regime in 2005, regulators muddled along for several years, using an old and ambiguous BES definition from the era of non-mandatory reliability standards. This changed suddenly in March 2010, when FERC proposed its own BES definition, which would have declared any facility rated above 100 kV to be BES, with exceptions granted only by petition to FERC.

If adopted, FERC's proposal would have resulted in systematic over-regulation, especially in the West. Western utilities frequently operate 115-kV distribution facilities, and, under FERC's 100-kV test, these facilities would have been classified as BES. If this occurred, compliance costs for the distribution-only systems often operated by public power would skyrocket, but with no improvement in reliability. To give one example, classifying 115-kV distribution systems as BES transmission would have required public owners of these systems to spend tens or even hundreds of thousands of dollars to obtain training for system operators from the North American Electric Reliability Corporation ("NERC"). But these distribution system operators generally have no access to the bulk system controls NERC would train them to operate. Money spent on training would, therefore, simply be wasted.

Fortunately, after strong industry reaction to the March 2010 proposal, FERC modified its approach. Rather than simply imposing a 100-kV test, FERC directed NERC to develop a new definition, challenging NERC to find an approach that would more effectively meet FERC's objectives. Public power representatives, including many from the West, devoted countless hours to the Standards Development Process that followed. The resulting proposal is vastly superior to FERC's original hard-line proposal and, if adopted, should improve bulk system reliability while avoiding the needless expense and overregulation that would have resulted from FERC's initial approach.

For example, the new definition makes clear that radial systems and local networks are not BES, even if operated above 100-kV. Both configurations are commonly employed by Western public power agencies to provide local distribution service. These exceptions should therefore allow most public power agencies operating local distribution to avoid inappropriate categorization as BES operators. Even if this does not occur, the new proposal includes an "Exceptions Process," whereby public power systems inappropriately classified under the definition as BES may be reclassified based upon technical analysis demonstrating that a system has no meaningful impact on the reliability of the backbone transmission system.

In June, FERC proposed adopting the NERC-developed definition but expressed a number of concerns, suggesting it may require additional changes to the NERC proposal. In order to reassure FERC, and thereby promote FERC adoption of the NERC proposal without modifications, NWPPA helped coordinate extensive comments from public power experts across the West addressing FERC's concerns and demonstrating that the proposed definition satisfies them.

In the next few months, FERC is expected to issue a final order concerning the BES definition. Public power's concerted efforts to develop a reasonable definition, and to support that definition at FERC, substantially increase the likelihood FERC will issue a favorable decision. The NWPPA's efforts should serve as a model for future public power involvement in developing reliability standards and in improving the operation of the reliability system.