Ben Christensen Duane Cooke Rachael Ferrin Elizabeth Brereton

1. Ben ChristensenDuane CookeRachael Ferrin Elizabeth Brereton Compliance 101 January 2013

2. Lifecycle of a Violation Every violation goes through the same process

3. Agenda • What is a violation? • How does WECC know about a violation? • What is the submittal and review process for possible violations? • What is the submittal and review process for Mitigation Plans?

4. The Team • Ben Christensen – CIP Enforcement Analyst • Tyson Jarrett – CIP Enforcement Analyst • Jennifer Vallace – Associate CIP Enforcement Analyst • Tim Reynolds – Compliance Engineer – Enforcement • Brent Read - Compliance Engineer – Enforcement • Duane Cooke – Compliance Process Analyst • Rachael Ferrin – Associate Enforcement Process Analyst

5. What is a violation? A violation is a failure to demonstrate compliance pursuant to applicable NERC Reliability Standard Requirement • Possible Violation • The identification by the Compliance Enforcement Authority of a possible failure by a registered Entity to comply with a Reliability Standard that is applicable to the Registered Entity. NERC Rules of Procedure, Appendix 2 (January 31, 2012).

6. How does the Entity discover a violation?

7. How does WECC know about a violation? Compliance Monitoring • Self-Reports • Self-Certifications New possible violation Change in scope • Compliance Audits • Spot Checks • Compliance Investigations • Periodic Data Submittals • Exception Reporting • Complaints

8. Possible Violation SME Review Process

9. Possible Violation Submittal • Submit Self-Reports and Self-Certifications via webCDMS • Self Report/Self Certification Content Checklist

10. Self-Report/Self-Certification Content Checklist

11. Possible Violation Review • WECC Subject Matter Experts (SME) reviews the possible violation • Analyze facts and circumstances • Data Requests/conference call if necessary • Technical assessment • Facts and Timelines • Risk Assessment • Recommendation of Dismissal or Acceptance to Case Managers

12. What is the Entity’s next step after reporting a possible violation? • Submit Mitigation Plan • Notice of Alleged Violation triggers Mitigation Plan due date • Timely Mitigation is encouraged • Not admission of violation Every violation goes through the same process

13. Mitigation Plan Review Process

14. Mitigation Plan Submittal • Submit via webCDMS • One violation per plan • Eight Steps to Prevention and Mitigation • Mitigation Plan Content Checklist

15. Mitigation and Prevention Checklist • Symptom • Root Cause • Corrective Actions • Preventive Actions • Detective Actions • Assign tasks • Timeline and milestones • Interim Risk

16. Mitigation Plan Content Checklist

17. Mitigation Plan Review • WECC Subject Matter Experts (SME) conduct reviews • Review the mitigation plan • Actions (Corrective, Detective and Preventive) • Duration • Data Requests/conference call if necessary • Notice of Acceptance or Rejection via EFT server

18. Mitigation Plan Extensions • Extension Requests • Accepted Mitigation Plan completion date = date Completion Certification and evidence submitted to WECC • Five business days prior to completion date • Submit via webCDMS • Include reasons for request • Don’t forget milestones! • Usual WECC review process

19. Completed MP Review Process

20. CMP Submittal • Submit Completion Certification and evidence via webCDMS • CMP Content Checklist

21. CMP Content Checklist

22. Mitigation Plan Completion Review • WECC Subject Matter Experts (SME) conduct reviews • Analyze Evidence • Were all actions outlined in the plan completed? • Data Requests/conference call if necessary • Notice of Acceptance or Rejection via EFT Server

23. Summary • Violation life cycle – the early days • Submitting violations and mitigation plans • WECC’s review of violations and mitigation plans • Resources

24. Questions?

25. The Hand-off

26. WECC Enforcement Case Managers Primary Role: Determining Violation Disposition (disposition analysis) • Case analysis • Policy analysis • Assess penalties • Conduct Settlements • Build Relationships

27. Enforcement Processes

28. Disposition Analysis • Dismissal • Find, Fix and Track (“FFT”) • Notice of Alleged Violation (“NOAV”) • Expedited Settlement Agreement (“ESA”)

29. Dismissal • Disposition method used when the Case Manager determines the possible violation is not enforceable For Example… • Standard Requirement does not apply to Entity • Facts and circumstances warrant a violation of a different Standard Requirement • Entity produced additional evidence demonstrating compliance

30. What does a dismissal look like? • Case Manager will issue a “Notice of Dismissal and Completion of Enforcement Action” • WECC: • Withdraws the Possible Violation from Entity’s compliance record • Any data retention directives relating to the possible violation are released • Entity: • Does not need to respond to notice • Questions/concerns contact Case Manager

31. Not a Dismissal, Now what? • Dismissal • Find, Fix and Track (“FFT”) • Notice of Alleged Violation (“NOAV”) • Expedited Settlement Agreement (“ESA”)

32. “Strong” FFT Candidate • The PV poses a minimal risk • The PV is not ongoing • The PV is not a repeat • The PV does not reveal programmatic or systematic shortcomings

33. What does a FFT look like? • WECC Enforcement will issue a “Notice of Find, Fix and Track” • PV becomes a “remediated issue” • Violation must be mitigated (affidavit required) • No Penalty or sanction • FFT is filed with FERC but does not become a “confirmed violation” • FFT will become part of an Entity’s compliance history

34. What to do with a FFT? • Within five (5) days of receiving a FFT Notice an Entity • Must submit to WECC an affidavit, signed by an officer with knowledge of remediation, OR • Must submit to WECC written notification opting out of the FFT processing • If an Entity opts out of the FFT disposition, then WECCs policy is to issue the violation through the traditional NOAV process.

35. 4 Disposition Methods • Dismissal • Find, Fix and Track (“FFT”) • Notice of Alleged Violation (“NOAV”) • Expedited Settlement Agreement (“ESA”)

36. A Word on Penalties • Attached to violations disposed of using the NOAV or ESA processes • Based on • NERC Sanction Guidelines (January 31, 2012) • Penalty Range • Penalty range depends upon Violation Severity Level (“VSL”) and Violation Risk Factor (“VRF”)

37. Calculation of Penalties • NERC Sanction Guidelines, Appendix A

38. Determination of Penalties • Base Penalty • Within the Penalty Range • VSL, VRF • Considers BES Risk • Mitigating Factors • Self Report • Internal Compliance Program Assessment (“ICPA”) • Voluntary Corrective Action • Mitigation Plan submission • Aggravating Factors • Repeat Violation • Negative Compliance history • Uncooperative • Intentional BASE PENALTY – Mitigating Factors +Aggravating Factors $$ Penalty Amount

39. 4 Disposition Methods • Dismissal • Find, Fix and Track (“FFT”) • Notice of Alleged Violation (“NOAV”) • Expedited Settlement Agreement (“ESA”)

40. What does a NOAV Look like?CMEP Section 5.3 • NERC Rules of Procedure, Appendix 4C §5.3 (“CMEP”) • Alleged Violation Facts • Mitigation Plan Summary (if applicable) • Enforcement Violation Determinations • BES Impact Statement • Minimal • Moderate • Severe • Violation Severity Level (“VSL”) • Violation Risk Factor (“VRF”) • Penalty

41. What to do with a NOAV? • Submit a NOAV Response within 30 days. • The NOAV Response must conform to one of three options. • Failure to submit a NOAV Response within 30 days will automatically result in confirmed violations with penalties.

42. NOAV Response: “Option 1” Does not contest • Does not contest violation facts as alleged in the NOAV • May identify errors that should be corrected in the “Notice of Confirmed Violation” (“NOCV”) • Submit a Mitigation Plan Enforcement will issue a Notice of Confirmed Violation within ten (10) days of receiving a NOAV Response that “agrees with or does not contest an alleged violation.”

43. NOAV Response: “Option 2” Contests Penalty • NOAV Response will be submitted to Enforcementusing the EFT Server within thirty (30) calendar days of receiving the NOAV. • Submit a Mitigation Plan. • NOAV Response must explicitly contest penalty and request settlement. • NOAV Response must articulate basis for each penalty • NOAV Response should include a proposed penalty the entity believes to be reasonable including the basis for proposed penalty

44. NOAV Response: Option 3Contests Alleged Violation & Penalties • NOAV Response must be submitted to Enforcementusing the EFT Server within thirty (30) calendar days of receiving the NOAV. • NOAV Response must explicitly contest each alleged violation and proposed penalty and request settlement. • Each Contention must be supported by: • An explanation of the Entity’s position • Basis for Contention • Additional Information or evidence • Request for specific Enforcement Action

45. Reaching Settlement

46. 4 Disposition Methods • Dismissal • Find, Fix and Track (“FFT”) • Notice of Alleged Violation (“NOAV”) • Expedited Settlement Agreement (“ESA”)

47. ESA: Expedited Settlement Process

48. What does an ESA look like? • Expedites Formal Settlement Negotiations • The ESA will contain • Facts and circumstances of the violation • Risk Assessment Summary • Mitigation Plan Summary • VSL and VRF determinations • Penalty determination

49. What to do with an ESA? 1. Entity will have 15 days to review the ESA… • The Entity will contact Case Manager with questions or concerns. 2. If the Entity accepts the terms of the ESA… • The Entity must submit a signed copy of the ESA to WECC within 15 days of receipt of the ESA issuance. 3. If the Entity rejects the ESA or does not respond within 15 days… • WECC will issue a Notice of Alleged Violation and Proposed Penalty and Sanction.

50. Settlement Agreements & Expedited Settlement Agreements