Cajun Christmas Surprise: Louisiana Electric Cooperative Successfully Defends NERC Deregistration
Yesterday the Federal Energy Regulatory Commission ("FERC")
reaffirmed its July order (discussed here
) ordering the North American Electric Reliability Corporation ("NERC")
to remove Southeast Louisiana Electric Cooperative Association ("SLECA")
from its registry of entities subject to electric reliability regulation. Barring appeal by FERC, SLECA is the first small utility company to successfully deregister and thereby to remove itself from often onerous reliability compliance burdens.
In 2008, SLECA voluntarily registered with NERC as a "Distribution Provider" and a "Load-Serving Entity," thereby becoming obligated to comply with a significant number of NERC Reliability Standards. Later, SLECA realized it had registered in error and sought to remove itself from the NERC registry. NERC refused to deregister SLECA. SLECA appealed NERC's decision to FERC, and FERC in July rejected NERC's position and concluded that SLECA should not be registered, primarily because it is not "directly connected to" the Bulk Electric System, as required by the NERC Statement of Compliance Registry Criteria ("SCRC").
NERC filed a petition for rehearing of the FERC's July order, followed by a series of dueling technical pleadings from NERC and SLECA. Yesterday's order rejects the NERC petition and reaffirms the July order. In addition to reaffirming that a load-serving utility must be "directly connected to the BES" to be registered, yesterday's order contained several additional noteworthy items:
(1) FERC rejects the notion that all "users" of the Bulk Electric System ("BES") must be registered. Rather, "users" of the BES are merely "candidates for registration" under the SCRC. If the "user" does not meet the SCRC's requirements for registration, it need not be registered, irrespective of its status as a "user."
(2) Confirming findings in the extensive BES rulemaking process recently undertaken by NERC and FERC
, FERC concludes that the presence of a normally-open switch between two radial distribution lines does not change the nature of the radial facilities. Because the normally-open switch does not allow for looped flows between the radials, there is "no 'loop' at the point where SLECA is connected, and only one radial feed to SLECA's facilities." SLECA is therefore exempt from registration because its facilities are purely radial, as has long been the rule.
(3) Confirming another important finding from the BES rulemaking process, FERC rejects NERC's arguments that registration of facilities is required if they operate at voltages above 100 kV. FERC's reaffirms the broad industry understanding arising from the BES rulemaking process, which is that the 100 kV threshold is just a starting point, and that radials, local networks, and other types of local distribution facilities are excluded from the BES even if they operate above 100 kV.
(4) FERC makes clear that, while its decision rests on the current (old) definition of BES, it would reach the same conclusion under the new definition, which will come into effect on July 1, 2014.
(5) Finally, FERC makes clear that it continues to view BES, rather than "Bulk Power System," as the operative term for reliability purposes. FERC will conform to this view until such time as regulatory action is undertaken to define "Bulk Power System." No such action has been undertaken. Nor is it on the horizon.
Congratulations to SLECA! Many smaller entities here in the Pacific Northwest are drinking a holiday toast to your success.