While the Federal Energy Regulatory Commission at its December meeting put Bonneville Power Administration on the "naughty" list, it awarded the North American Electric Reliability Corporation's ("NERC") industry-led "Bulk Electric System" Standards Drafting Team a place on the "nice" list. On December 20, FERC issued Order No. 773, which adopts a new definition of "Bulk Electric System." The new definition is fundamental to FERC's electric reliability enforcement regime because FERC's mandatory enforcement authority is limited by statute to elements of the "Bulk Electric System." In addition, Order No. 773 adds a couple of stocking-stuffers for the industry in the form of new procedures for regulated entities seeking to reduce their compliance burdens by excluding systems or elements from the Bulk Electric System.
As we have previously explained in greater detail, for several years after Congress adopted a mandatory electric reliability requirement in 2005, FERC relied on the pre-existing definition of "Bulk Electric System," despite its ambiguity. In March, 2010, however, FERC reversed course, proposing a new definition of "Bulk Electric System" that would classify all elements rated at 100 kV or above as "Bulk Electric System" with very limited exceptions. FERC's unexpected move provoked a fierce backlash from all sectors of the industry. In response, FERC again changed course, this time ordering NERC to develop a new Bulk Electric System definition using the NERC standards development process.
In response, NERC formed the BES Standards Development Team which conducted a standards development process over the course of 2011. Utilities from across the country, including a large coalition of public power entities from the West, devoted a great deal of time and talent to developing a workable "Bulk Electric System" definition. These efforts culminated in a revised "Bulk Electric System" submitted by the Standards Drafting Team for approval by FERC in January of this year. The new definition starts with a 100-kV threshold, but adds several specific inclusions and exclusions. For example, exclusions for "Local Networks" and radial systems will cover most local distribution systems, allowing them to escape the considerably more burdensome reliability requirements that would apply if they are classified as part of the Bulk Electric System. The NERC proposal also includes an "Exceptions" process that allows case-by-case variations from the Bulk Electric System definition based upon system-specific technical information.