Self-Reporting Process: Submitting a Good Self-Report

1. Self-Reporting Process:Submitting a Good Self-Report Steve Goodwill Associate General Counsel

2. Summary • Why Care? • What is a Self-Report? • When to Self-Report? • Contents of a Self-Report • Examples: the good and the not-so-good • What Happens Next? • Key Points

3. Why Care? • FERC Policy Statement on Enforcement, Oct 05 • P.25: “prompt and full self-reporting of violations, coupled with steps to correct the adverse impact…may result in a significant reduction in the amount of civil penalty” • How did the entity uncover the misconduct? • Did the entity notify the Commission promptly? • Did the entity take immediate steps to stop the misconduct? Did it implement or create an adequate response to the misconduct? • Did the entity provide all relevant evidence? • FERC ERO Certification Order, Jul 06 • P.457: “In appropriate circumstances, self-reporting should serve as a mitigating factor, although we believe that the ERO and Regional Entities must have the discretion to determine the extent to which a penalty should be reduced in a specific case based on its specific facts.”

4. Why Care? • FERC Policy Statement on Compliance, Oct 08 • P.19: “A company will receive credit for prompt reporting if it reports a violation…shortly after discovery…based on the circumstances of each case, a company can demonstrate the extent to which it was diligent in discovering misconduct, correcting the problem, and reporting the offense promptly.” • P.20: “companies that fail to report violations discovered as a result of improved compliance monitoring can expect to be penalized far more severely than if they self-report such violations.” • NERC Sanction Guidelines • Sections 4.3c and 4.3.3: mandates “[s]elf-disclosure and voluntary corrective action” as adjustment factors in penalty calculation

5. What is a Self-Report? • CMEP, Section 1.1.21 A report by a Registered Entity of a violation of a Reliability Standard, based on its own assessment in order to provide prompt reports of any Reliability Standard violation and the actions that were taken or will be taken to resolve the violation.

6. When to Self-Report? • CMEP, Section 3.5 Self-Reporting is encouraged at the time a Registered Entity becomes aware (i) of a violation of a Reliability Standard or (ii) a change in the violation severity level of a previously reported violation. Self-Reporting of a violation of a Reliability Standard is encouraged regardless of whether the Reliability Standard requires reporting on a pre-defined schedule in the Compliance Program and the violation is determined outside the pre-defined reporting schedule.

7. Contents of the Report Not too many problems here.

8. Contents of the Report Here is where we need to do a better job.

9. Contents of the Report—ExamplesHow was the noncompliance found? • Not-so-good: “Annual internal review” • Good:

10. Contents of the Report—ExamplesDescribe the cause of non-compliance? • Not-so-good: “Violated R3.1” • Good:

11. Contents of the Report—ExamplesDescribe the cause of non-compliance?

12. Contents of the Report—ExamplesDescribe the reliability impact of this non-compliance? • Not-so-good: “None” or “No impact on the BES.” • Good:

13. Contents of the Report—ExamplesBut wait… Is three months too long?

14. What Happens Next? • CMEP, Section 3.5.1 • WECC reviews the self-reported information; may request clarification or additional data/information • WECC completes its assessment of the self-report, and any mitigation plan; notifies the Registered Entity • If WECC Enforcement determines a reasonable basis exists for believing a violation of a Reliability Standard has occurred, WECC will send a Notice of Alleged Violation and Proposed Penalty and Sanction to the Registered Entity • Here is where the self-report adjustment factor is considered

15. Key Points • Self-reports matter • WECC, NERC and FERC consider the source of the violation in determining appropriate penalty • More information is better than less • If you don’t provide sufficient detail, we’ll be asking for more • If you still don’t provide sufficient detail, WECC may initiate a spot check or other process • Sooner is better than later • If non-compliance is related to an event (e.g. an outage), report immediately • You can always follow an initial report with a revised report providing additional detail

16. Questions? Comments? ? Steve Goodwill, WECC Associate General Counsel sgoodwill@wecc.biz 801-883-6857