NERC Registration Issues

1. NERC Registration Issues Andrew Gallo, Assistant General Counsel, Litigation and Business Operations ERCOT Legal Dept. TAC Meeting

2. Background • FERC’s Order 672 directs that owners, operators and users of the bulk power system be registered with the NERC and appropriate RE • Organizations in the compliance registry are subject to NERC’s and the RE’ compliance and enforcement programs • Reliability Standards (effective 6/18/07) are no longer voluntary and organizations that do not fully comply with them face penalties/ sanctions determined and levied by NERC or the REs (up to $1M/day) • A person may recommend to the NERC in writing, with supporting reasons, that an organization be added to or removed from the compliance registry (NERC ROP 501.1.3.5.) TAC Meeting

3. Background (Cont’d) • NERC intends to include in the registry all entities that can materially impact the reliability of the bulk power system • An entity not initially placed in the registry but identified subsequently as having a material reliability impact will be added to the registry • But not subject to a sanction or penalty for actions or inactions prior to going onto registry • may be required to comply with a remedial action directive or mitigation plan to become compliant with applicable standards TAC Meeting

4. Background (Cont’d) • FERC Order on MISO application to uplift penalties (5/31/07): • In Order No. 693, FERC addressed concerns about the manner in which users, owners, and operators would be responsible for compliance with the Reliability Standards in the context of ISOs…where decision-making and implementation are performed by separate entities • FERC’s intent was to allow the appropriate user, owner, or operator of the bulk power system to be identified for each Reliability Standard • More specifically to identify the actual user, owner or operator that would be responsible for complying with the Reliability Standards so there would be neither gaps nor redundancy in responsibility for compliance with the Reliability Standard TAC Meeting

5. Background (Cont’d) • In Feb. 2007, NERC published its Statement of Compliance Registry Version 3 • “Any entity reasonably deemed material to the reliability of the bulk power system will be registered, irrespective of other considerations” • Contains multiple models for registration • With regard to TO/TOP, NERC provides the following guidance for companies to register: • An entity that owns/operates an integrated transmission element associated with the bulk power system 100 kV and above (or lower voltage as defined by the RE as necessary to provide for the reliable operation of the grid); or • An entity that owns/operates a transmission element below 100 kV associated with a facility included on a critical facilities list defined by the RE TAC Meeting

6. Background (Cont’d) • For some registration categories, ERCOT-ISO does not perform all of the functions • Easiest example: Transmission Operator (Definition: “The entity responsible for the reliability of its local transmission system and operates or directs the operations of the transmission facilities”) • RS TOP-002-2 • Each…Transmission Operator shall ensure its operating personnel participate in the system planning and design study processes, so that these studies contain the operating personnel perspective and system operating personnel are aware of the planning purpose (ERCOT-ISO) • RS TOP-004-1 • Transmission Operators, individually and jointly with other Transmission Operators, shall develop, maintain, and implement formal policies and procedures … [which] shall address the execution and coordination of activities that impact inter- and intra-Regional reliability, including: - Switching transmission elements (TSP) TAC Meeting

7. Issue • How do ERCOT-ISO Market Participants ensure that all Reliability Standards are met? • Other ISOs are wrestling with same issue • According to NERC… • Joint registration may be used by entities which agree upon a clear division of compliance responsibility for Reliability Standards by written agreement • The issue of joint or individual registration involves making a factual determination • “who” does “what” with regard to each requirement and • a determination of who is “responsible” TAC Meeting

8. Joint Registration Organization (JRO) • From NERC Compliance Registry Criteria (Ver. 3) and NERC ROP 501 1.2.7: A Joint Registration Organization (JRO): …may be registered, in lieu of each of the JRO’s members or related entities being registering individually, by the JRO accepting the reliability functions identified in Section 1.1 above, or (b) a JRO and its members or related entities may enter into a written agreement as to which of them will be responsible for one or more reliability standards applicable to a particular function and/or for one or more requirements within particular reliability standards, in either case in accordance with the provisions specified in Section 507 (each of (a) and (b), a “joint registration”). For purposes of this [Section], a “related entity” is an entity whose operations in relation to the operation of the JRO make it feasible for the JRO to accept responsibility for reliability functions for which the related entity would otherwise be responsible. A non-exclusive list if examples of JROs and related entities includes (i) a balancing authority or a transmission provider as the JRO, and (ii) a load-serving entity or a distribution provider within the balancing authority’s control area or receiving transmission services from the transmission provider, as the related entity. TAC Meeting

9. Joint Registration Organization (Cont’d) Three “Joint Registration Organization” (JRO) models: • JRO Registration • JRO registers on behalf of other entities for one or more functions as to which the others would otherwise be required to register • JRO accepts all compliance responsibility, including reporting requirements for all Standards applicable to the function(s) for which the JRO has registered on behalf of others • JRO must provide the RE with an annual list identifying: • the others for which it acts and • the functions for which the JRO has registered and for which the JRO assumes full compliance responsibility • JRO must identify its primary compliance contact • Responsible for providing all info and data and submitting reports as needed by the RE for performing assessment of compliance TAC Meeting

10. Joint Registration Organization (Cont’d) 2. Individual Member Registration • A member of a JRO (i.e. one of the entities for which a JRO is acting) may register itself and undertake full compliance responsibility, including reporting requirements, for the Reliability Standards applicable to the function for which the entity registers • JRO member that registers as a Registered Entity for any function under this section must inform the JRO and applicable RE of its registration TAC Meeting

11. Joint Registration Organization (Cont’d) 3.Joint Registration • JRO and any of its members divide compliance responsibility between them for one or more Reliability Standard(s) applicable to a particular function or for one or more requirements w/n a Reliability Standard • In such case, the JRO and the other entity must have a written agreement that clearly specifies their respective responsibilities: • Develop a matrix of Reliability Standards the ISO or TSP will be responsible for; or • Develop a matrix of tasks the ISO performs vs. tasks the TSPs perform with regard to each requirement under each Reliability Standard TAC Meeting

12. Now What? TAC Meeting