2012 Annual Report - North American Electric Reliability ... Reports/NERC2012AnnualReportMAR13.pdf2012 Annual Report 7 CIP Version 5 Standards In November, the NERC Board adopted ten

RELIABILITY | ACCOUNTABILITY

2012Annual ReportMarch 2013

2 North American Electric Reliability Corporation

Table of Contents

Letter from the President and Chief Executive Officer .................................................. 3

NERC 2012 Accomplishments ...................................................................................... 4

Southwest Outage ......................................................................................................... 5

Standards Improvements .............................................................................................. 6

CIP Version 5 Standards ........................................................................................ 7

Revised Definition of Bulk Electric System ............................................................ 7

Strategic Improvements to Standards Development ............................................ 8

Reliability Issues Steering Committee ........................................................................... 8

Frequency Response Initiative ...................................................................................... 9

Reliability Assurance Initiative ..................................................................................... 10

Electric Sector Information Sharing and Analysis Center ............................................ 11

Geomagnetic Disturbances ......................................................................................... 12

State of Reliability Report ............................................................................................ 13

Event Analysis Cause Coding ....................................................................................... 14

Situation Awareness for FERC, NERC, and the Regional Entities ................................. 14

Bulk Power System Awareness .................................................................................... 15

Transmission Availability Data System ......................................................................... 16

Canada ........................................................................................................................ 16

Grid Security Conference 2012.................................................................................... 17

Regional Entities .........................................................................................................18

Letter from the Board of Trustees Chair ......................................................................20

2012 Board of Trustees ...............................................................................................21

2012 Annual Report 3

Letter from the President and Chief Executive Officer

As I reflect on 2012, I am excited about the visible progress we see from our risk-based approach to improving and ensuring the reliability of the North American bulk power system. This has been a team effort with the eight Regional Entities; federal, state, and provincial authorities; and stakeholders.

The initial results of the risk-based approach gained awareness and confidence across industry and government. Almost every conversation on bulk power system reliability today is about identifying and prioritizing the most significant risks to reliability and initiating targeted solutions to minimize those risks. The corollary is that we need to continue being more efficient in how we target electric reliability organization and industry resources to address reliability issues.

The engine for success is detailed knowledge of bulk power system risks. Working with the Regions and industry, NERC is beginning to produce analysis from system events, identifying root causes through a systematic assessment using common terminology. The resulting analysis and trends reinforce the importance of system protection, situational awareness and human performance in preventing future outages. Additionally, we always need to remain focused on emerging risks, such as cybersecurity threats to the grid. Toward that end, Version 5 of NERC’s cybersecurity standards was approved by industry ballot and the NERC Board in November. As we move into 2013, we intend to make even more risk analysis information available to industry.

With the support of industry leaders, we were able to initiate changes to reliability standards development in 2012. The NERC Board of Trustees approved a number of recommendations, which are being implemented to improve the timeliness and quality of standards development. The Reliability Issues Steering Committee, an industry advisory group, was formed to advise the Board on the most important priorities to bulk power system reliability. In 2012, many important standards were approved by the Federal Energy Regulatory Commission, including our first performance-based standard on vegetation management and a new definition for bulk electric system.

Working closely with the eight Regions, we also improved our compliance monitoring and enforcement program to ensure the focus is on important reliability risks. The program highlights risk-informed auditing, streamlined record keeping and processing requirements, and incenting positive improvements by industry. In 2012, NERC and FERC partnered on a joint report on the causes of the September 8, 2011 Southwest outage that affected more than three million customers and provided recommendations to address the issues. The substantial work done in the West during 2012 will continue until the causes have been addressed. The 2012 Annual Report highlights these and many other initiatives that have helped improve reliability and accountability. As you review these results, I urge you to join us on the path to bulk power system reliability in 2013.

Gerry W. Cauley, President and CEO


NERC Overview / Accomplishments of the ERO

In its sixth year as the electric reliability organization (ERO), the North American Electric Reliability Corporation (NERC) continued on its path of excellence by evolving and adapting programs and policies to better ensure the reliability of the North American bulk power system.

NERC’s central mission is to ensure grid reliability and foster accountability to its stakeholders. The ERO’s key programs, which impact more than 1,900 bulk power system owners and operators, are based on this framework. Operationally, however, NERC fulfills its mission by emphasizing these essential strategies:

1. Reliability – to address events and identifiable risks, thereby improving the reliability of the bulk power system.

2. Assurance – to provide assurance to the public, industry and government for the reliable performance of the bulk power system.

3. Learning – to promote learning and continuous improvement of operations and adapt based on lessons learned.

4. Risk-based Approach – to focus attention, resources and actions on issues most important to bulk power system reliability.

Throughout the year, the ERO enhanced its ability to analyze and interpret data, which allowed NERC to identify specific risk areas and provide mitigation tools to industry. The collaboration between NERC, the Regions and industry was instrumental to the ERO accomplishing its 2012 goals.


2012 Initiatives

In 2012, the ERO shifted its culture by refocusing efforts on risk control and awareness in order to better identify possible threats to the reliability of the grid. While compliance to NERC’s mandatory standards is important, preventing large outages is paramount to ensuring reliability.

NERC identified high-priority issues that impact reliability and focused ERO efforts on those program areas over the course of the year. Some of the accomplishments are outlined in the following pages.

Southwest Outage

In May, Federal Energy Regulatory Commission (FERC) and NERC staff released a joint report on the September 8, 2011 blackout that left 2.7 million customers in Southern California, Arizona and Baja California without power. Since then, NERC and the Western Electricity Coordinating Council (WECC) began working to address the report findings in a deliberate, methodical way. Additionally, the seven other Regional Entities and both the NERC Operating Committee and the Planning Committee have worked to address the report’s findings and recommendations and have initiated a broad range of reliability actions across the North American grid.

This event was one of the more complex electrical events in North America. It involved multiple entities, each with complicated communication, coordination and institutional relationships with other entities, as well as the performance of hundreds of interconnected electrical components and systems. Major themes of the report include monitoring and situational awareness, communication, coordination and data sharing.

In September, WECC submitted a Response Report, providing updates on its approach for addressing each of the 27 recommendations from the FERC/NERC report, as well as eight broader systemic issues detailed in a July letter from NERC President and Chief Executive Officer Gerry Cauley. Some of these activities have already been completed, while others will take longer to fully develop and implement. The completion timeframe is through 2015.

From the 27 recommendations, WECC has undertaken 52 specific activities – another 77 specific activities currently are underway within eight WECC registered entities. The activities are divided into four categories: Organization, Reliability Coordinator, Operations and Planning, and Compliance. However, all the recommendations identified in the FERC/NERC joint report apply to all entities – not just those in the Western Interconnection.


Some significant achievements in 2012 include:

• Three critical recommendations significant to real-time operations and identification of contingencies that could impact the bulk power system were completed or near completion at the end of 2012:

Transmission operators should ensure procedures and training are in place to notify Reliability Coordinators and neighboring transmission operators and Balancing Authorities promptly after losing Real Time Contingency Analysis capabilities.

All transmission operators should conduct next day studies and share results with neighboring transmission operators and Reliability Coordinators.

Transmission operators and Balancing Authorities should ensure next-day studies are updated to reflect next-day operating conditions external to their systems.

• Data sharing, non-disclosure and data confidentiality agreements are near completion among all WECC registered entities.

• The WECC Board of Directors moved to split WECC into separate entities.

NERC, WECC and the other seven Regional Entities recognize that the activities currently underway provide a unique opportunity to make significant long-term improvements to the reliability of the bulk power system throughout North America. The activities provide a unique opportunity to make significant improvements to the reliability of the bulk power system throughout North America.

Standards Improvements

2012 was an active year in Standards development. Five interpretations and 30 standards were adopted by the NERC Board of Trustees; and three interpretations and ten standards were filed with the FERC (with two interpretations and ten standards approved by FERC by year’s end). Included among the standards adopted by the Board were the Critical Infrastructure Protection Version 5 Standards, an achievement representing NERC and the industry’s dedication to cybersecurity. In addition to these accomplishments, FERC also approved a revised definition of bulk electric system, an approval that broadly impacts the Standards program. In 2013, NERC will continue to develop standards in a more efficient way due to ongoing strategic improvements in its standards development process.


CIP Version 5 Standards

In November, the NERC Board adopted ten standards in CIP V5 (CIP-002-5 through CIP-009-5, CIP-010-1, and CIP-011-1), an associated implementation plan, Violation Risk Factor and Violation Security Level assignments and revised terms for the NERC Glossary. The Project 2008-06 Cyber Security Order 706 standard drafting team was charged with addressing all remaining standards-related issues from FERC Order No. 706. These standards recognize the differing roles of each entity in the operation of the bulk electric system, the criticality and vulnerability of the cyber systems needed to support bulk electric system reliability, and the risks to which they are exposed. Key strategic advancements in CIP V5 include:

• Incorporation of implementation and audit lessons from past versions.

• Flexibility for entities to tailor security in a manner best suited to their own operations. • Transition from the “in or out” classification of critical assets and their associated critical cyber

assets to a “low-medium-high” impact-based categorization.

The CIP V5 standards provide a cybersecurity framework for the categorization and protection of bulk electric system cyber systems to support the reliable operation of the grid. These standards represent a milestone in the industry’s continuing emphasis on the importance of robust, reliability-related cybersecurity and significant progress in mitigating cyber risks to the bulk electric system.

Revised Definition of Bulk Electric System

FERC approved a revised definition of bulk electric system, along with associated revisions to NERC’s Rules of Procedure, in an order issued in December. The Rules of Procedure revisions created an exception process to add elements to or remove elements from the bulk electric system definition, an application form titled “Detailed Information to Support an Exception Request,” and an implementation plan.

The revised definition provides a bright-line definition of the facilities included in the bulk electric system, with detailed inclusions and exclusions based on specific technical criteria that can be consistently and uniformly applied across North America.

A second phase of the bulk electric system definition project was initiated to develop appropriate technical justification to support refinements to the definition that were suggested by stakeholders during Phase I.

NERC Overview and Accomplishments of the ERO

By The Numbers – Industry Participation• 879 participants in the Registered

Ballot Body• 18 Standards industry webinars,

averaging 360 participants• 2 Standards and Compliance

Workshops, averaging 215 participants

• 102 standard drafting team meetings• 188 Industry volunteers on active

standard drafting teams


Strategic Improvements to Standards Development

A number of efforts to modify NERC’s standards development process and ensure a clear focus on the efficient production of technically sound, world-class results-based standards were undertaken and completed in 2012.

Based on recommendations from the Member Representatives Committee’s Standard Process Input Group (SPIG), the Standard Processes Manual was revised to improve the standards development process. The changes improve the standard development process enabling the ERO to develop technically sound standards more efficiently and with better use of industry resources. Further, with the Board’s direction, the Standards Committee developed a strategic plan and enhanced its charter, focusing on increasing its effectiveness and ability to deliver standards.

NERC also made substantial organizational changes to support standards development, including major leadership and staff changes. In August, Mark Lauby, formerly vice president and director of the Reliability Assessment and Performance Analysis department, joined the Standards department as vice president and director.

NERC cemented the implementation and continuation of these important changes with Board approval of the 2013-2015 Reliability Standards Development Plan (RSDP). The plan represents a bold revision of NERC’s approach to managing the standards development workload. It establishes an ambitious goal of transforming the current body of standards to a set of clear and concise results-based standards that ensure reliability, while addressing NERC’s regulatory directives and conducting five-year reviews of standards.

With the Standard Processes Manual changes, the Standards Committee’s enhanced strategic plan and charter, the reorganization of NERC’s Standards department and the goals presented in the development plan, NERC is poised to transform the ERO’s standards into a world-class body of results-based standards.

Reliability Issues Steering Committee

NERC’s Board responded to the SPIG’s recommendation to create a new committee tasked with advising the Board on ERO reliability strategy. The Reliability Issues Steering Committee (RISC), created in August, is made up of industry executives and thought leaders, including representatives from the Operations, Planning, Standards, Critical Infrastructure Protection, and Compliance and Certification Committees. The RISC is a collaborative effort created to assist setting priorities on issues of importance to the grid.

By The Numbers – Directives• 29 directives filed or completed• 63 directives approved by the

Board• 92 directives addressed• 27 percent reduction in total

number of directives• 198 directives remaining


The committee’s first public meeting took place in October, and work began ona strategic framework to prioritize NERC’s work efforts. The committee categorized NERC’s existing and planned reliability activities, and then considered the relative reliability importance of each area. This analysis included defining the problem, reviewing existing controls and their effectiveness, and developing recommendations for filling any identified gaps in current industry strategy for reliability risk management.

The RISC identified the following high-priority focus areas: cyber attack; workforce capability and human error; protection systems; and monitoring and situational awareness. Once finalized, their recommendations will include a review of current efforts, suggestions regarding how NERC should allocate resources to existing and planned reliability activities, and alternatives for achieving measurable reliability improvements.

NERC sponsored a conference in Washington, D.C., where reliability topics were discussed with technical experts. The conference, conducted as a panel discussion, highlighted several existing and emerging reliability risks, and served as both a primer for highly technical topics and an opportunity for informed dialogue. The committee plans to have this conference each fall.

Frequency Response Initiative

NERC launched the Frequency Response Initiative in 2010 to comprehensively address the issues related to frequency response. In addition to coordinating the myriad efforts underway in frequency performance analysis and related standards development, the initiative included in-depth analysis of interconnection-wide frequency response performance to achieve a better understanding of the technical factors influencing frequency behavior across North America.

In 2012, NERC published the Frequency Response Initiative report that presents a comprehensive overview of the work that done to-date by NERC toward gaining understanding of frequency response. The report includes in-depth statistical analysis of frequency response performance trends in the four interconnections, an overview of the current state of frequency responsive resources, an analysis of the frequency response requirements of the four interconnections, and technical recommendations for improving frequency performance across North America.

A key achievement in 2012 was the passage of the BAL-003-1 – Frequency Response and Frequency Bias Setting standard. This standard clarifies frequency response obligations for Balancing Authorities and offers a means for measuring their performance. This was an important chapter in NERC’s research and development activities. The standard is expected to be filed with FERC for approval in the second quarter of 2013.



Reliability Assurance Initiative

NERC’s Board began discussion in August on how to reach a desired end state of compliance for a mature ERO, as well as activities that would support an overall reliability initiative. The Reliability Assurance Initiative was formally introduced at NERC’s November Board meeting with the purpose of identifying and implementing changes to enhance the effectiveness of the ERO’s compliance and enforcement program, and to avoid cascading events and the resulting major loss of load.

Four foundational elements that support the compliance and enforcement initiative were outlined in a white paper, “The Need for Change,” and include:

• Restyling the compliance monitoring approach.• Evaluating compliance data requirements.• Refining compliance and enforcement information flow.• Redesigning the enforcement strategy.

The paper outlines a risk-based approach of the Compliance Monitoring and Enforcement Program (CMEP) that drives a consistent application of compliance monitoring practices based on risk; tools to prioritize and treat violations based on risk; enforcement practices with clear distinctions based on risk to reliability; and a strengthened feedback loop from compliance monitoring and enforcement to the standards development process to incorporate considerations of actual risk into the standards development process.

Initiative achievements in 2012 include:

• Drafted and published three papers to begin discussion with stakeholders: White paper on overall initiative. Change paper on restyling the compliance monitoring approach. Change paper on evaluating compliance data requirements.

• Developed and delivered training to regional compliance auditors on methodology, risk analysis and internal controls.

• Contracted advisory services on regional compliance activities that will drive core activities in 2013.• Participated in outreach activities with the industry and trades to further open initiative dialog.

In the coming year, NERC will publish two final papers focused on refining information flow and on redesigning the enforcement strategy. There also will be continued training, with the support of the Regions on different projects within the initiative including Find, Fix, and Track; execution of a pilot to demonstrate audit methodology changes; and improvement of communication in support of compliance guidance.


Electricity Sector Information Sharing and Analysis Center

The Electricity Sector Information Sharing and Analysis Center (ES-ISAC), which was formed in 1998, gathers information from industry participants about security-related events, disturbances and off-normal occurrences in the industry. ES-ISAC shares that information with industry as a whole and with government partners. In turn, the government provides information regarding risks, threats and warnings to the ES-ISAC, which is responsible for sharing that information with industry.

The ES-ISAC underwent significant transformation in 2012 as it built out its secure portal and added capabilities to aid in information sharing and incident analysis. Specifically, the ES-ISAC secure members’ portal, which became functional in April, has since been populated with reports and other relevant data on a nearly daily basis. There are a total of 398 items that include indicator reports, 10 reports from other organizations and 60 newsfeed items. In addition, the portal receives Indicators of Compromise from the classified United States Computer Emergency Readiness Team (US-CERT) portal and reformats the data for distribution to the bulk power system registered entities. Forty-two percent of all registered entities are represented on the portal, which spans 695 unique user accounts.

NERC’s Board approved a policy statement in February that formalizes the separation of functions between the ES-ISAC and the Compliance Monitoring and Enforcement Program. Because NERC is responsible for both the ES-ISAC and the compliance program, NERC wanted to assure industry of the separation and encourage an even greater flow of information between industry participants and ES-ISAC staff.

Finally, the ES-ISAC improved its analytic capabilities by building out its operations room to include data feeds from multiple sources such as NERC’s situation awareness monitoring tool, and procuring services that deliver cyber awareness and continuous monitoring.



Geomagnetic Disturbances

NERC, as part of the Geomagnetic Disturbance Task Force, released the 2012 Special Reliability Assessment Interim Report: Effects of Geomagnetic Disturbances on the Bulk Power System in February. This report highlights the potential for voltage collapse and the damage or loss of limited number of vulnerable transformers across the bulk power system of North America. The interim report provided industry with a roadmap for action to address geomagnetic disturbances. Based on the report’s findings and recommendations, industry preparations for geomagnetic disturbances should be a part of industry planning efforts, similar to preparations for earthquakes, hurricanes and snowstorms. Specifically, the report identified four recommendations for industry:

• Improve tools for industry planners to develop geomagnetic mitigation strategies. • Improve tools for system operators to manage geomagnetic impacts. • Develop education and information exchanges between researchers and industry.• Review the need for enhanced NERC Reliability Standards.

There are 17 high-level tasks across the planning and operating spectrum of the bulk power system identified as Phase 2 activities. The primary goal is to review and verify, where applicable, the work products of NERC and other industry and scientific organizations in support of the report recommendations; to provide industry subject-matter expertise; to volunteer industry participation as appropriate; and to augment and update the interim report.

Achievements in 2012 include:

• Development of operating procedure templates for transmission and generation operators that reflect best practices and consensus among technical experts.

• Improved ground conductivity models that represent the geological regions of North America and a draft application guide for geomagnetic induced current (GIC) modeling.

• A transformer modeling and testing project was initiated to validate models used to assess the effects of GIC on transformers.

The Phase 2 action plan began in June after receiving approval from the Planning Committee and endorsement from the Operating Committee, and was officially kicked off via a public webinar in July. The task force's quarterly webinars and in-person meetings contributed to a strong collaborative climate between industry, researchers, and policymakers to continue development of an effective risk control strategy for geomagnetic disturbances.


State of Reliability Report

The first State of Reliability report, released in May, assessed grid reliability based on performance trends identified through data and analysis of system disturbance events. The report represents NERC’s integrated view of ongoing bulk power system reliability performance trends. The report assessed 18 reliability performance metrics that measure whether an adequate level of reliability exists in North America. The report also includes an analysis from the frequency response initiative, the 2011 demand response availability assessment, event analysis trends, and post-seasonal assessments.

Key findings of the report include:

• Reliability of the bulk power system remains adequate with little change in trends between 2008 and 2011.

• Frequency response is stable with no deterioration. • Protection system misoperations are a significant reliability issue. • Equipment failure warrants further analysis. • Resource mix changes necessitate new metrics. • More data and research is needed.


Key Reports

Long-Term Reliability Assessment – NovemberNERC’s annual ten-year reliability outlook provides an independent view of the reliability of the bulk power system and identifies trends, emerging issues and potential concerns. NERC’s 2012 LTRA found that over the next ten years, the electricity industry faces a number of emerging reliability issues driven by transformational changes in the industry. The changes include a resource mix with more reliance on natural gas-fired generation, a reduction in coal-fired capacity, lower than targeted planning reserve margins in the Electric Reliability Council of Texas assessment area, and significantly larger amounts of variable generation – mostly wind and solar – and demand-side management.

Seasonal Assessments – Summer (May) and Winter (November)The 2012 Summer Assessment found North America had sufficient resources available to meet summer peak demands. However, planning reserve margins in the ERCOT assessment area were projected to be below the NERC Reference Margin Level, the threshold by which resource adequacy is measured. In California, reserves were projected to be tight, but manageable, through the summer months.

The 2012 Winter Assessment identified three key findings that highlight either a common theme across North America or a region-specific challenge – planning reserve margins are sufficient to accommodate normal winter weather; extreme winter weather in the Northeast could lead to increased gas-fired generator outages; and improved winterization in the Southwest responding to the February 2011 cold weather event.


Event Analysis Cause Coding

The event analysis process began as a voluntary reporting mechanism aimed at providing valuable information for the ERO and industry to address threats to reliability of the bulk power system. The current version of the event analysis process document was approved by the Board and went into effect in February. Since its initial implementation in 2010, the process has yielded more than 255 qualified events reported to the ERO, more than 60 lessons learned and two published industry alerts. Over the past two years, improvements have been made to how NERC defines, catalogs and trends the causes of events. The NERC cause code assignment process allows for greater historical trending and predictive analysis.

NERC assesses every event to identify and share with industry the possible threats to reliability. In Spring 2011, an increase in events was identified in the Texas Reliability Entity assessment area, which was driven largely by the drought in that area. Several lessons learned were published and used during the 2012 summer season, as several areas throughout the Midwest and Pacific Northwest experienced similar conditions.

NERC continues to conduct cause analysis training with staff from the Regions and registered entities. As of December 2012, personnel from all eight Regions and 405 persons from 115 different registered entities have received cause analysis training, more than 3,200 hours of training. Of that total, 432 continuing education hours were awarded to 54 NERC-Certified System Operators. Additionally, NERC is adding a training and education component to the event analysis process to increase the relevance and impact of lessons learned for the Regions, industry and other stakeholders. Efforts are underway to develop continuing education credits based on lessons learned that will make training more valuable to industry.

The event analysis process continues to establish the appropriate balance of data reporting for analysis and use by the industry. NERC is creating incentives to sustain positive efforts and to improve the process.

Situation Awareness for FERC, NERC, and the Regional Entities

NERC successfully updated its situational awareness tool in November. The updated software allows industry to monitor and identify in advance conditions that could impact the reliability of the North American bulk power system. Situation Awareness for FERC, NERC and Regional Entities, Version 2 (SAFNR v2) provides real-time, integrated visibility of generation facilities 500 MW and above, and transmission facilities 200 kV and above for Reliability Coordinators and NERC and FERC situation awareness staff. All 11 U.S. Regional Coordinators are streaming live, operational data on the system.

Culminating more than two years of development, SAFNR v2 replaced a tool suite implemented in 2009 that displayed limited data and used individual display formats rather than an integrated view. Additional features expected to be implemented in 2013 include load forecasts and links to more detailed information on current system conditions.


Bulk Power System Awareness

NERC’s Bulk Power System Awareness group and the eight Regional Entities monitor bulk power system conditions, significant events and emerging threats for the 15 Reliability Coordinator regions in North America to maintain an understanding of conditions and situations that could impact the bulk power system’s reliable operation. The group also supports the development and publication of alerts and awareness products, and facilitates information sharing among industry, Regions and the government during crisis situations and major system disturbances.

The first step in NERC’s event analysis process is to monitor and be aware of bulk power system events above a certain threshold of impact or risk. The group partners with Regional Entity staffs to monitor conditions on the bulk power system and allow the ERO to conduct aggressive, critical self-analysis of these events to identify trends and provide experience-based insight to prevent repeat occurrences.

Highlights in 2012:

• In conjunction with Regional Entities’ staffs, the group facilitated information sharing during the June 29 “Derecho” storm, Hurricane Isaac in August and September, and Hurricane Sandy in October and November.

• Situation Awareness for FERC, NERC and the Regional Entities, Version 2 (SAFNR v2) moved into production on November 28, following more than two years of development. SAFNR v2 enables users to monitor real-time performance of the grid across the United States in an integrated way.


By The Numbers – Bulk Power System Awareness• 545 new event analysis database entries initiated • 250 daily reports published• 23 special reports published during major system disturbances• 15 government agency update conference calls

hosted during major system disturbances• Received and processed:

456 OE-417 reports 38 EOP-004 system disturbance reports More than 2,900 intelligent alarms notifications More than 1,400 FNet notifications More than 1,900 Reliability Coordinator

Information System messages• 2 alerts issued• 6 alerts published, assisting ES-ISAC


Transmission Availability Data System Enhancements

The Reliability Assessment and Performance Analysis department worked with industry to enhance data collection for the Transmission Availability Data System (TADS). In December, NERC’s Planning Committee endorsed the changes, and the Board approved them. The enhancements deal with inventory collection, quarterly reporting and increased inclusion of voltage classes. The enhancements include:

• Key Inventory Collection. Key inventory information provides the necessary data to ensure that NERC offers high-value information for risk analysis. This enhanced TADS dataset, along with integrated event analysis information and risk analysis results, supports the RISC as it evaluates reliability issues and risks identified by stakeholders. This data also will be used to develop recommendations for reliability performance results required for a standard or other actions.

• Quarterly Reporting. Collecting TADS data each quarter, rather than annually, allows for consistent reporting and timely metric trending display across all NERC data, such as Generating Availability Data System (GADS) information and protection system misoperations information, which both are provided on a quarterly basis.

• Bulk Electric System Element Outages Operated at TADS 100-199 kV or below. The elements operated between 100 and 199 kV make up approximately 47 percent of total bulk electric system circuit miles. Studies indicate that 66 percent of protection system misoperations occurred on 100-199 kV bulk electric system circuits. This additional collection will make the TADS outage data consistent with misoperations and disturbance event reporting, and provide visibility of the performance of all elements within the revised bulk electric system definition.

The new enhancements will advance NERC’s reliability toolset and make integration of current stand-alone databases possible.

Canada

The National Energy Board of Canada issued a General Order for Electricity Reliability Standards in December, meaning all nine Canadian jurisdictions responsible for a part of the interconnected bulk power system have exercised their authority to make reliability standards mandatory and enforceable. This completed a process that began in 2002, with Ontario becoming the first jurisdiction to adopt NERC standards as mandatory. While the provincial structures vary considerably, the significant objective of having a framework of common, mandatory reliability standards between the United States and Canada was achieved.

Also significant was a meeting hosted by the Ontario Independent System Operator in October. The meeting was the first of Canadian jurisdictional authorities exercising compliance and enforcement duties. Established as a subgroup of the Federal/Provincial/Territorial Electricity Working Group, its inaugural session included training provided by NERC on the conduct of investigations.


Other 2012 accomplishments include:

• Agreement with the Canadian Association of Members of Public Utility Tribunals (CAMPUT) for its chair to be the Canadian regulators’ non-voting representative on the Member Representatives Committee.

• Continued participation in Regulators Trilateral meetings with presentations and updated on NERC activities and coordination opportunities.

• Increased visits by NERC staff with Canadian officials and industry, including meetings with the Deputy Minister for Public Safety Canada and the Canadian Electricity Association; and attendance at the World Energy Forum in Quebec City.

• Continued outreach with each province to improve cross-border communications related to reliability of the bulk power system.

Grid Security Conference

NERC hosted more than 280 participants at GridSecCon, its grid security conference, in October in San Diego. For the second year, GridSecCon brought together industry and government security professionals to educate and share best practices. Opening keynotes were delivered by Gerry Cauley from NERC; and Thad Allen, retired U.S. Coast Guard commandant and senior vice president at Booz Allen Hamilton.

More than 20 speakers discussed topics ranging from strategic policy to tactical measures and best practices to reduce risk and better protect critical infrastructure.

Prior to the conference, more than 90 participants received training in workshops from Lofty Perch, the SANS Institute and Idaho National Laboratory. Some of the goals of the conference were to:

• Build on NERC’s mission to ensure the reliability of the North American bulk power system through education and training.

• Discuss and provide solutions to emerging industrial control system security issues.• Deliver expert analysis on social engineering and phishing attacks.• Focus strategically upon public and private partnerships.• Provide more communication with the ES-ISAC.



NERC Regional Entities

FRCCFlorida Reliability Coordinating Council operates in peninsular Florida east of the Apalachicola River within the Eastern Interconnection.Stacy Dochoda, president and chief executive officer

MROMidwest Reliability Organization covers roughly one million square miles spanning the Canadian provinces of Saskatchewan and Manitoba, the states of North Dakota, Minnesota and Nebraska, the majority of the states of Iowa, South Dakota and Wisconsin and portions of Michigan and Montana. This cross-border region includes a diverse set of organizations that are involved in the production and delivery of power to more than 20 million people.Daniel Skaar, president and chief executive officer

NPCCNortheast Power Coordinating Council, Inc. includes New York and the six New England states, as well as the Canadian provinces of Ontario, Québec and the Maritime provinces of New Brunswick and Nova Scotia. Overall, NPCC covers an area of nearly 1.2 million square miles, populated by more than 55 million people.Edward Schwerdt, president and chief executive officer

RFCReliabilityFirst Corporation operates across 13 states and the District of Columbia. The 13 states are New Jersey, Delaware, Pennsylvania, Maryland, West Virginia, Ohio, Indiana, lower Michigan and portions of upper Michigan, Wisconsin, Illinois, Kentucky, Tennessee and Virginia.Timothy Gallagher, president and chief executive officer

SERCThe SERC Reliability Corporation is a nonprofit corporation responsible for promoting and improving the reliability, adequacy and critical infrastructure of the bulk power supply systems in all or portions of 16 Central and Southeastern states. Owners, operators and users in these states cover an area of approximately 560,000 square miles.Scott Henry, president and chief executive officer

SPPThe Southwest Power Pool Regional Entity is an independent and functionally separate division of SPP, Inc. SPP RE promotes and improves bulk power system reliability within an eight-state area that includes all or parts of Arkansas, Kansas, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, and Texas. Ron Ciesiel, general manager


TRETexas Reliability Entity, Inc. operates within the geographic boundaries of the Electric Reliability Council of Texas (ERCOT) region. The ERCOT region is located exclusively within Texas and represents 85 percent of the state’s electric load and 75 percent of the Texas land area.W. Lane Lanford, president and chief executive officer

WECCWestern Electricity Coordinating Council’s territory extends from Canada to Mexico. It includes the provinces of Alberta and British Columbia, the northern portion of Baja California, Mexico, and all or portions of the 14 Western states between, which totals approximately 1.8 million square miles.Mark Maher, chief executive officer


Letter from the Board of Trustees Chair

As I step down after 14 years on the Board, the last four as chair, I believe the Board continues to oversee NERC’s strategy and direction with a sharp focus on ensuring the reliability of the bulk power system in North America. This has always been the first principle we followed and we constantly measure our actions and results against this mission.

Looking back, I see a five-step journey: 1) early steps toward a fully independent Board in the late 1990s; 2) a period of rebalancing roles between stakeholders, NERC management and the Board in the early 2000s; 3) a momentous accomplishment of moving to mandatory standards through legislation in the United States and negotiated agreements with regulatory authorities in Canada; 4) a period of learning, frustration, redefinition of roles and rapid growth as the ERO is constituted and the Regions are brought into a new relationship with NERC; and 5) the current step of increasing effectiveness, growing sophistication in our understanding of reliability, steadying the balance between industry, regulators, and the ERO, and a greater awareness of limits and tradeoffs that are appropriate.

The most important accomplishment during this journey was the conceptualization, birth and maturing of the ERO concept. This hybrid concept of “self-regulation,” industry-government partnership, balanced-stakeholder power, and delegated international authority by sovereign entities has never been tried on this scale. The boldness and vision required to put this concept into action was a marvelous display of common purpose and public spiritedness by all players in pursuit of a fundamental underpinning of modern society – an almost inconceivable level of reliability for our international bulk electric system.

Getting to this point has not been a flawless or smooth path. As would be expected with such a venture, there have been major toes stepped on including those of regulators, stakeholders, Regional Entities, staff, and even trustees. But overall as a Board we did it openly, with respect for all viewpoints, with eagerness for learning, and most importantly in a spirit focused on the mission of achieving a more reliable bulk power system.

Now I believe we are on an excellent trajectory with an exemplary CEO and staff, a new Board chair with excellent leadership experience and skills for the coming steps in our evolution, and the same deep commitment from stakeholders and regulators that got us this far. The big tasks facing NERC and its constituents will revolve around risk-based balancing of standards and compliance, and a renewed focus on managing costs to ratepayers. I have great confidence that the ERO will successfully carry out these tasks because the foundation we’ve laid for the almost unequalled cooperation among stakeholders, regulators, staff and trustees will continue and flourish in the NERC of the future.

Thank you to the thousands of individuals I’ve been able to work with through the past 14 years. I have literally and figuratively laughed, cried, cussed, celebrated, planned, postured and soared with you. I will deeply miss my time with NERC, but you all will go on to greater success and accomplishments as you continue to build on the foundation we laid together.

John Q. AndersonNERC Board of Trustees, Chair


Janice B. Case

Jan Schori

David Goulding

Roy Thilly

2012 Board of Trustees

John Q. Anderson,Chair

Frederick W. Gorbet, Vice-Chair and Chair-Elect

Gerry W. Cauley,President and CEO

Vicky Bailey

Kenneth G. Peterson

Thomas W. Berry

Bruce A. Scherr

Paul F. Barber

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Atlanta, GA 30326404-446-2560 | www.nerc.com

Documents

2012 Annual Report - North American Electric Reliability ... Reports/NERC2012AnnualReportMAR13.pdf2012 Annual Report 7 CIP Version 5 Standards In November, the NERC Board adopted ten