116-390 Village Blvd. Princeton, NJ 08540 609.452.8060 ... actions dl/finalfiled...Jay Lehr*...

116-390 Village Blvd. Princeton, NJ 08540 609.452.8060 | www.nerc.com

February 23, 2011 Ms. Kimberly Bose Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, DC 20426 Re: NERC Abbreviated Notice of Penalty regarding Covanta, Fairfax, Inc.,

FERC Docket No. NP11-__-000 Dear Ms. Bose: The North American Electric Reliability Corporation (NERC) hereby provides this Abbreviated Notice of Penalty (NOP) regarding Covanta, Fairfax, Inc. (Covanta), with information and details regarding the nature and resolution of the violations1 discussed in detail in the Settlement Agreement (Attachment a) and the Disposition Document (attached thereto), in accordance with the Federal Energy Regulatory Commission’s (Commission or FERC) rules, regulations and orders, as well as NERC Rules of Procedure including Appendix 4C (NERC Compliance Monitoring and Enforcement Program (CMEP)).2

This NOP is being filed with the Commission because SERC Reliability Corporation (SERC) and Covanta have entered into a Settlement Agreement to resolve all outstanding issues arising from SERC’s determination and findings of the enforceable violations of PRC-005-1 Requirement (R) 1 and PRC-005-1 R2/2.1. According to the Settlement Agreement, Covanta admits the violations, and has agreed to the assessed penalty of three thousand dollars ($3,000), in addition to other remedies and actions to mitigate the instant violations and facilitate future compliance under the terms and conditions of the Settlement Agreement. Accordingly, the violations identified as NERC Violation Tracking Identification Numbers SERC200900307 and

1 For purposes of this document, each violation at issue is described as a “violation,” regardless of its procedural posture and whether it was a possible, alleged or confirmed violation. 2 Rules Concerning Certification of the Electric Reliability Organization; and Procedures for the Establishment, Approval, and Enforcement of Electric Reliability Standards (Order No. 672), III FERC Stats. & Regs. ¶ 31,204 (2006); Notice of New Docket Prefix “NP” for Notices of Penalty Filed by the North American Electric Reliability Corporation, Docket No. RM05-30-000 (February 7, 2008). See also 18 C.F.R. Part 39 (2010). Mandatory Reliability Standards for the Bulk-Power System, FERC Stats. & Regs. ¶ 31,242 (2007) (Order No. 693), reh’g denied, 120 FERC ¶ 61,053 (2007) (Order No. 693-A). See 18 C.F.R § 39.7(c)(2).

NERC Notice of Penalty Covanta, Fairfax, Inc. February 23, 2011 Page 2

SERC200900308 are being filed in accordance with the NERC Rules of Procedure and the CMEP. Statement of Findings Underlying the Violations This NOP incorporates the findings and justifications set forth in the Settlement Agreement executed on February 22, 2011, by and between SERC and Covanta. The details of the findings and the basis for the penalty are set forth in the Disposition Document. This NOP filing contains the basis for approval of the Settlement Agreement by the NERC Board of Trustees Compliance Committee (NERC BOTCC). In accordance with Section 39.7 of the Commission’s regulations, 18 C.F.R. § 39.7, NERC provides the following summary table identifying each violation of a Reliability Standard resolved by the Settlement Agreement, as discussed in greater detail below.

NOC ID NERC

Violation ID

Reliability Std.

Req. (R) VRF Duration

Total Penalty

($)

NOC-708 SERC200900307 PRC-005-1 1 High3 6/18/07 -

8/28/09 3,000

SERC200900308 PRC-005-1 2/2.1 High4 9/30/08 – 11/24/09

The text of the Reliability Standards at issue and further information on the subject violations are set forth in the Disposition Document. PRC-005-1 R1 - OVERVIEW During an on-site compliance audit of Covanta that concluded on August 28, 2009 (Audit), SERC determined that Covanta, as a Generation Owner, did not have documentation of Protection System5

maintenance and testing intervals to be performed for DC control circuits, associated communication systems, or voltage and current sensing devices, as required by PRC-005-1 R1.1; and a summary of maintenance and testing procedures, as required by PRC-005-1 R1.2, because the evidence reviewed was undated.

PRC-005-1 R2/2.1 - OVERVIEW During the Audit, SERC determined that Covanta, as a Generation Owner, did not have evidence that its station battery bank was maintained in the third quarter of 2008 or the first quarter of 2009 within the intervals defined in Covanta’s Protection System maintenance and testing program, as required by PRC-005-1 R2.1.

3 When NERC filed Violation Risk Factors (VRFs) for PRC-005-1, NERC originally assigned a “Medium” VRF to PRC-005-1 R1. In the Commission’s May 18, 2007 Order on Violation Risk Factors, the Commission approved the VRF as filed but directed modifications. On June 1, 2007, NERC filed a modified “High” VRF for PRC-005 R1 for approval. On August 9, 2007, the Commission issued an Order approving the modified VRF. Therefore, the “Medium” VRF was in effect from June 18, 2007 until August 9, 2007 and the “High” VRF has been in effect since August 9, 2007. 4 PRC-005-1 R2 has a “Lower” VRF; R2.1 and R2.2 each have a “High” VRF. In the context of this case, SERC has determined that the violation is related to R2.1 and therefore a “High” VRF is appropriate. 5 The NERC Glossary of Terms Used in Reliability Standards defines Protection System as “Protective relays, associated communication systems, voltage and current sensing devices, station batteries and DC control circuitry.”


Statement Describing the Assessed Penalty, Sanction or Enforcement Action Imposed6

Basis for Determination Taking into consideration the Commission’s direction in Order No. 693, the NERC Sanction Guidelines, the Commission’s July 3, 2008, October 26, 2009 and August 27, 2010 Guidance Orders,7

the NERC BOTCC reviewed the Settlement Agreement and supporting documentation on January 10, 2011. The NERC BOTCC approved the Settlement Agreement, including SERC’s assessment of a three thousand dollar ($3,000) financial penalty against Covanta and other actions to facilitate future compliance required under the terms and conditions of the Settlement Agreement. In approving the Settlement Agreement, the NERC BOTCC reviewed the applicable requirements of the Commission-approved Reliability Standards and the underlying facts and circumstances of the violations at issue.

In reaching this determination, the NERC BOTCC considered the following factors:8

1. the violations constituted Covanta’s first occurrence of violation of the subject NERC Reliability Standards;

2. SERC reported that Covanta was cooperative throughout the compliance enforcement process;

3. there was no evidence of any attempt to conceal a violation nor evidence of intent to do so;

4. SERC determined that the violations posed a minimal risk and did not pose a serious or substantial risk to the reliability of the bulk power system (BPS), as discussed in the Disposition Document; and

5. SERC reported that there were no other mitigating or aggravating factors or extenuating circumstances that would affect the assessed penalty.

For the foregoing reasons, the NERC BOTCC approves the Settlement Agreement and believes that the assessed penalty of three-thousand dollars ($3,000) is appropriate for the violations and circumstances at issue, and is consistent with NERC’s goal to promote and ensure reliability of the BPS. Pursuant to 18 C.F.R. § 39.7(e), the penalty will be effective upon expiration of the 30 day period following the filing of this NOP with FERC, or, if FERC decides to review the penalty, upon final determination by FERC. 6 See 18 C.F.R. § 39.7(d)(4). 7 North American Electric Reliability Corporation, “Guidance Order on Reliability Notices of Penalty,” 124 FERC ¶ 61,015 (2008); North American Electric Reliability Corporation, “Further Guidance Order on Reliability Notices of Penalty,” 129 FERC ¶ 61,069 (2009); North American Electric Reliability Corporation, “Notice of No Further Review and Guidance Order,” 132 FERC ¶ 61,182 (2010). 8 SERC considered Covanta’s compliance program as neutral factor in determining the penalty, as discussed in the Disposition Document.


Attachments to be included as Part of this Notice of Penalty The attachments to be included as part of this NOP are the following documents:

a) Settlement Agreement by and between SERC and Covanta executed February 22, 2011, included as Attachment a;

i. Disposition Document, included as an Attachment to the Settlement Agreement;

b) Covanta’s Response dated December 21, 2010, included as Attachment b;

c) SERC’s Compliance Audit Screening Worksheet for PRC-005-1 R1 and R2/2.1 dated August 28, 2009, included as Attachment c;

d) Covanta’s Mitigation Plan MIT-07-2160 for PRC-005-1 R1 and R2/2.1 submitted November 30, 2009, included as Attachment d;

e) Covanta’s Certification of Mitigation Plan Completion for PRC-005-1 R1 and R2/2.1 dated November 30, 2009, included as Attachment e; and

f) SERC’s Verification of Mitigation Plan Completion for PRC-005 R1 and R2/2.1 dated January 7, 2010, included as Attachment f.

A Form of Notice Suitable for Publication9

A copy of a notice suitable for publication is included in Attachment g.

9 See 18 C.F.R. § 39.7(d)(6).


Notices and Communications Notices and communications with respect to this filing may be addressed to the following:

Gerald W. Cauley President and Chief Executive Officer David N. Cook* Sr. Vice President and General Counsel North American Electric Reliability Corporation 116-390 Village Boulevard Princeton, NJ 08540-5721 (609) 452-8060 (609) 452-9550 – facsimile [email protected] Samuel Cabassa* Manager, NERC Compliance Covanta Energy Corporation 2209 South 58th Street Philadelphia, PA 19143 (215) 921-7504 (215) 729-1379 – facsimile [email protected] Scott Drew* Facility Manager Covanta Fairfax, Inc. 9898 Furnace Road Lorton, VA 22079 (703)-690-6860 x609 (703)-690-4223– facsimile [email protected] Jay Lehr* Director Operations Americas 445 South Street Morristown, NJ 07960 (862)-345-5276 [email protected] *Persons to be included on the Commission’s service list are indicated with an asterisk. NERC requests waiver of the Commission’s rules and regulations to permit the inclusion of more than two people on the service list.

Rebecca J. Michael* Assistant General Counsel North American Electric Reliability Corporation 1120 G Street, N.W. Suite 990 Washington, DC 20005-3801 (202) 393-3998 (202) 393-3955 – facsimile [email protected] R. Scott Henry* President and Chief Executive Officer SERC Reliability Corporation 2815 Coliseum Centre Drive Charlotte, NC 28217 (704) 940-8202 (704) 357-7914 – facsimile [email protected] Marisa A. Sifontes* General Counsel SERC Reliability Corporation 2815 Coliseum Centre Drive, Suite 500 Charlotte, NC 28217 (704) 494-7775 (704) 357-7914 – facsimile [email protected] Kenneth B. Keels, Jr.* Director of Compliance Andrea Koch* Manager, Compliance Enforcement and Mitigation SERC Reliability Corporation 2815 Coliseum Centre Drive, Suite 500 Charlotte, NC 28217 (704) 940-8214 (704) 357-7914 – facsimile [email protected] [email protected]


Conclusion Accordingly, NERC respectfully requests that the Commission accept this Abbreviated NOP as compliant with its rules, regulations and orders.

Respectfully submitted, /s/ Rebecca J. Michael Gerald W. Cauley President and Chief Executive Officer David N. Cook Sr. Vice President and General Counsel North American Electric Reliability Corporation 116-390 Village Boulevard Princeton, NJ 08540-5721 (609) 452-8060 (609) 452-9550 – facsimile [email protected]

Rebecca J. Michael Assistant General Counsel North American Electric Reliability

Corporation 1120 G Street, N.W. Suite 990 Washington, DC 20005-3801 (202) 393-3998 (202) 393-3955 – facsimile [email protected]

cc: Covanta Fairfax, Inc. SERC Reliability Corporation Attachments

Attachment a

Settlement Agreement by and between SERC and Covanta executed February 22, 2011

Settlement Agreement of Covanta Fairfax, Inc. and SERC Reliability Corporation

Page 1 of 16

SETTLEMENT AGREEMENT

OF

SERC RELIABILITY CORPORATION

AND

COVANTA FAIRFAX, INC.

I. INTRODUCTION

1. SERC Reliability Corporation (“SERC”) and Covanta Fairfax, Inc. (“Covanta”) enter

into this Settlement Agreement (“Settlement Agreement”) to resolve all outstanding issues arising from a preliminary and non-public assessment resulting in SERC’s determination and findings, pursuant to the North American Electric Reliability Corporation (“NERC”) Rules of Procedure, of two violations by Covanta of NERC Reliability Standard PRC-005-1 (Transmission and Generation Protection System Maintenance and Testing) Requirements R1 (R1.1, R1.2) and R2 (R2.1), (SERC Issue Tracking Nos. 09-066 and 09-067; NERC Violation ID Nos. SERC200900307 and SERC200900308).

2. Covanta admits the violations of NERC Reliability Standard PRC-005-1, R1 and R2 and has agreed to the proposed penalty of three thousand dollars ($3,000) to be assessed to Covanta in addition to other remedies and mitigation actions to mitigate the violations and ensure future compliance under the terms and conditions of the Settlement Agreement.

II. STIPULATION

3. The facts stipulated herein are stipulated solely for the purpose of resolving, between Covanta and SERC, the matters discussed herein and do not constitute stipulations or admissions for any other purpose. The attached Disposition document is incorporated herein in its entirety. Covanta and SERC hereby stipulate and agree to the following:

Background

4. See Section I of the Disposition document for a description of Covanta.

Violations of NERC Reliability Standard PRC-005-1 Requirements 1 and 2.

5. See Section II of the Disposition document for the description of the violations.


Page 2 of 16

III. PARTIES’ SEPARATE REPRESENTATIONS

Statement of SERC and Summary of Findings

6. SERC staff finds that beginning on June 18, 2007 and continuing until August 28, 2009, Covanta, as a Generator Owner, did not have documentation of maintenance and testing intervals to be performed for DC control circuits, associated communication systems, or voltage and current sensing devices, as described in the Disposition document, and as required by PRC-005-1, R1.

7. SERC staff finds that beginning on September 30, 2008 and continuing until completion of Covanta’s mitigation plan on November 24, 2009, Covanta, as a Generator Owner, did not have evidence that its station battery bank was maintained in the third quarter of 2008 or the first quarter of 2009 within the intervals defined in Covanta’s Protection System maintenance and testing program, as described in the Disposition document, and as required by PRC-005-1, R2 (R2.1).

8. SERC staff concluded that the violations posed a minimal risk and did not pose a serious or substantial risk to the Bulk-Power System, as discussed in the Disposition document.

9. SERC agrees that this Settlement Agreement is in the best interest of the parties and in the best interest of Bulk-Power System reliability.

Statement of Covanta

10. Covanta admits that the facts set forth and agreed to by the parties for purposes of this Agreement constitute violations of NERC Reliability Standard PRC-005-1, Requirements 1 (R1.1 and R1.2) and 2 (R2.1).

11. Covanta has agreed to enter into this Settlement Agreement with SERC to avoid extended litigation with respect to the matters described or referred to herein, to avoid uncertainty, and to effectuate a complete and final resolution of the issues set forth herein. Covanta agrees that this Settlement Agreement is in the best interest of the parties and in the best interest of Bulk-Power System reliability.

IV. MITIGATING ACTIONS, REMEDIES AND SANCTIONS

12. SERC and Covanta agree that Covanta has completed and SERC has verified completion of the mitigating actions set forth in Section IV of the Disposition document. The Mitigating Actions, Remedies and Sanctions are discussed in detail in the Disposition document.

13. SERC staff also considered the specific facts and circumstances of the violations and Covanta’s actions in response to the violations in determining a proposed penalty that meets the requirement in Section 215 of the Federal Power Act that “[a]ny penalty imposed under this section shall bear a reasonable relation to the seriousness of the


Page 3 of 16

violation and shall take into consideration the efforts of [Covanta] to remedy the violation in a timely manner.”1

14. Based on the above factors, as well as the mitigation actions and preventative measures taken, Covanta shall pay three thousand dollars ($3,000) to SERC as set forth in this Settlement Agreement. Covanta shall remit the payment to SERC via check, or by wire transfer to an account to be identified by SERC, within thirty days after SERC provides Covanta with a notice of penalty payment due and invoice, to be issued by SERC after this Settlement Agreement is either approved by the Federal Energy Regulatory Commission (“Commission”) or by operation of law. SERC shall notify NERC, and NERC shall notify the Commission, if the payment is not timely received. If Covanta does not remit the payment by the required date, interest payable to SERC will begin to accrue pursuant to the Commission’s regulations at 18 C.F.R. §35.19a(a)(2)(iii) from the date that payment is due, and shall be payable in addition to the payment.

The factors considered by SERC staff in the determination of the appropriate penalty are set forth in Section V of the Disposition document.

15. Failure to make a timely penalty payment or to comply with any of the terms and conditions agreed to herein, or any other conditions of this Settlement Agreement shall be deemed to be either the same alleged violation that initiated this Settlement Agreement and/or additional violation(s) and may subject Covanta to new or additional enforcement, penalty or sanction actions in accordance with the NERC Rules of Procedure. Covanta shall retain all rights to defend against such additional enforcement actions in accordance with NERC Rules of Procedure.

V. ADDITIONAL TERMS

16. The signatories to the Settlement Agreement agree that they enter into the Settlement Agreement voluntarily and that, other than the recitations set forth herein, no tender, offer or promise of any kind by any member, employee, officer, director, agent or representative of SERC or Covanta has been made to induce the signatories or any other party to enter into the Settlement Agreement. The signatories agree that the terms and conditions of this Settlement Agreement are consistent with the Commission’s regulations and orders, and NERC’s Rules of Procedure.

17. SERC shall report the terms of all settlements of compliance matters to NERC. NERC will review the settlement for the purpose of evaluating its consistency with other settlements entered into for similar violations or under other, similar circumstances. Based on this review, NERC will either approve the settlement or reject the settlement and notify SERC and Covanta of changes to the settlement that would result in approval. If NERC rejects the settlement, NERC will provide specific written reasons for such rejection and SERC will attempt to negotiate a revised

1 16 U.S.C. § 824o(e)(6).


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settlement agreement with Covanta including any changes to the settlement specified by NERC. If a settlement cannot be reached, the enforcement process shall continue to conclusion. If NERC approves the settlement, NERC will (i) report the approved settlement to the Commission for the Commission’s review and approval by order or operation of law and (ii) publicly post this Settlement Agreement.

18. This Settlement Agreement shall become effective upon the Commission’s approval of the Settlement Agreement by order or operation of law as submitted to it or as modified in a manner acceptable to the parties.

19. Covanta agrees that this Settlement Agreement, when approved by NERC and the Commission, shall represent a final settlement of all matters set forth herein and Covanta waives its right to further hearings and appeal, unless and only to the extent that Covanta contends that any NERC or Commission action on the Settlement Agreement contains one or more material modifications to the Settlement Agreement. SERC reserves all rights to initiate enforcement, penalty or sanction actions against Covanta in accordance with the NERC Rules of Procedure in the event that Covanta fails to comply with the mitigation plan and compliance program agreed to in this Settlement Agreement. In the event Covanta fails to comply with any of the stipulations, remedies, sanctions or additional terms, as set forth in this Settlement Agreement, SERC will initiate enforcement, penalty, or sanction actions against Covanta to the maximum extent allowed by the NERC Rules of Procedure, up to the maximum statutorily allowed penalty. Except as otherwise specified in this Settlement Agreement, Covanta shall retain all rights to defend against such enforcement actions, also according to the NERC Rules of Procedure.

20. Covanta consents to the use of SERC’s determinations, findings, and conclusions set forth in this Agreement for the purpose of assessing the factors, including the factor of determining the company’s history of violations, in accordance with the NERC Sanction Guidelines and applicable Commission orders and policy statements. Such use may be in any enforcement action or compliance proceeding undertaken by NERC and/or any Regional Entity; provided, however, that Covanta does not consent to the use of the specific acts set forth in this Agreement as the sole basis for any other action or proceeding brought by NERC and/or SERC, nor does Covanta consent to the use of this Agreement by any other party in any other action or proceeding.

21. Each of the undersigned warrants that he or she is an authorized representative of the entity designated, is authorized to bind such entity and accepts the Settlement Agreement on the entity’s behalf.

22. The undersigned representative of each party affirms that he or she has read the Settlement Agreement, that all of the matters set forth in the Settlement Agreement are true and correct to the best of his or her knowledge, information and belief, and that he or she understands that the Settlement Agreement is entered into by such party in express reliance on those representations, provided, however, that such affirmation


Page 5 of 16

by each party’s representative shall not apply to the other party’s statements of position set forth in Section III of this Settlement Agreement.

23. The Settlement Agreement may be signed in counterparts.

24. This Settlement Agreement is executed in duplicate, each of which so executed shall be deemed to be an original.

Remainder of page intentionally blank.

Signatures to be affixed to the following page.

Disposition Document


Page 7 of 16

DISPOSITION OF VIOLATION2

Dated February 22, 2011

NERC TRACKING NO.

REGIONAL ENTITY TRACKING NO.

NOC#

SERC200900307 and SERC200900308

09-066 and 09-067

NOC-708

REGISTERED ENTITY

NERC REGISTRY ID.

Covanta Fairfax, Inc. (Covanta) NCR01211 REGIONAL ENTITY (IES)

SERC Reliability Corporation (SERC)

I. REGISTRATION INFORMATION

ENTITY IS REGISTERED FOR THE FOLLOWING FUNCTIONS IN THE SERC REGION:

BA DP GO GOP IA LSE PA PSE RC RP RSG TO TOP TP TSP X X

5/31

/07

5/31

/07

* VIOLATION(S) APPLIES TO SHADED FUNCTIONS DESCRIPTION OF THE REGISTERED ENTITY Covanta Energy, LP, the parent company of Covanta owns and/or operates 54 power generation facilities within the United States, which utilize a variety of fuels and have an aggregate generating capacity of approximately 1,230 MW (gross) in operation, including the facility located in Fairfax County, Virginia. Covanta Energy, LP’s international segment owns and/or operates power production facilities in Asia, South America, and Europe.

2 For purposes of this document and attachments hereto, each violation at issue is described as a “violation,” regardless of its procedural posture and whether it was a possible, alleged or confirmed violation.


Page 8 of 16

Covanta works in conjunction with Fairfax County, Virginia to accept household and commercial non-hazardous waste and combusts the waste in boilers to produce steam which drives turbines that produce clean and renewable power. The Fairfax facility began commercial operation in June 1990. It is Covanta Energy's largest facility, processing 3,000 tons per day of municipal solid waste for a population of more than 900,000 in the Washington, D.C. suburbs of Fairfax County and producing 79 MW of power.

II. VIOLATION INFORMATION RELIABILITY STANDARD

REQUIREMENT(S) SUB-REQUIREMENT(S)

VRF(S) VSL(S)

PRC-005-1 1 1.1, 1.2 High3 High PRC-005-1 2 2.1 High4 Lower PURPOSE OF THE RELIABILITY STANDARD(S) AND TEXT OF RELIABILITY STANDARD(S) AND REQUIREMENT(S)/SUB-REQUIREMENT(S) The purpose statement of PRC-005-1 provides: “To ensure that all transmission and generation Protection Systems[5

] affecting the reliability of the Bulk Electric System (BES) are maintained and tested.”

PRC-005-1 provides:

R1. Each Transmission Owner and any Distribution Provider that owns a transmission Protection System and each Generator Owner that owns a generation Protection System shall have a Protection System maintenance and testing program for Protection Systems that affect the reliability of the BES. The program shall include:

R1.1. Maintenance and testing intervals and their basis.

3 When NERC filed VRFs for PRC-005-1, NERC originally assigned a “Medium” VRF to PRC-005-1 R1. In the Commission’s May 18, 2007 Order on Violation Risk Factors, the Commission approved the VRF as filed but directed modifications. On June 1, 2007, NERC filed a modified “High” VRF for PRC-005 R1 for approval. On August 9, 2007, the Commission issued an Order approving the modified VRF. Therefore, the “Medium” VRF was in effect from June 18, 2007 until August 9, 2007 and the “High” VRF has been in effect since August 9, 2007. 4 PRC-005-1 R2 has a “Lower” VRF; R2.1 and R2.2 each have a “High” VRF. In the context of this case, SERC has determined that the violation is related to R2.1, and therefore a “High” VRF is appropriate. 5 The NERC Glossary of Terms Used in Reliability Standards, updated April 20, 2010, defines Protection System as “Protective relays, associated communication systems, voltage and current sending devices, station batteries and DC control circuitry.”


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R1.2. Summary of maintenance and testing procedures.

R2. Each Transmission Owner and any Distribution Provider that owns a transmission Protection System and each Generator Owner that owns a generation Protection System shall provide documentation of its Protection System maintenance and testing program and the implementation of that program to its Regional Reliability Organization[6

] on request (within 30calendar days). The documentation of the program implementation shall include:

R2.1. Evidence Protection System devices were maintained and tested within the defined intervals.

R2.2. Date each Protection System device was last tested/maintained.

VIOLATION DESCRIPTION PRC-005-1 R1 On February 27, 2009, SERC notified Covanta of an on-site SERC compliance audit of Covanta scheduled for August 26, 2009 through August 28, 2009. During the audit, the SERC audit team reviewed Covanta’s Protection System maintenance and testing procedure and identified a violation because Covanta was not able to provide sufficient documentation of its Protection System maintenance and testing intervals for its associated communications systems, DC control circuitry, and voltage and current sensing devices. Upon receipt of the audit findings, SERC Compliance Enforcement staff reviewed Covanta’s Protection System maintenance and testing procedures and supporting documentation. From its review, SERC Compliance Enforcement staff found that the Protection System maintenance and testing procedure Covanta provided for protective relays was satisfactory to meet the requirements of the standard. A separate document addressing the balance of the components was not dated. Because that procedure was undated, SERC Compliance Enforcement staff could not verify that Covanta had been in compliance throughout the monitored period except with respect to its protective relays. Therefore, SERC Compliance Enforcement staff found Covanta had violated PRC-005-1 R1.1 and R1.2 because Covanta did not have proof of compliance for 103 out of 159 Protection System components (65%).

6 Consistent with applicable FERC precedent, the term ‘Regional Reliability Organization’ in this context refers to SERC.


Page 10 of 16

PRC-005-1 R2 During the compliance audit, the SERC audit team requested a representative sample of maintenance records to determine whether Covanta had maintained and tested its Protection System equipment within the defined intervals in its Protection System maintenance and testing program. In its review, the SERC audit team found that while Covanta’s Protection System maintenance and testing program required maintenance and testing of batteries on a quarterly basis, Covanta was unable to produce evidence that its station battery bank had been maintained in the third quarter of 2008. Covanta was able to provide documentation to show that its other components were maintained and tested in accordance with its program. Upon receipt of the audit findings, SERC Compliance Enforcement staff requested additional maintenance and testing records for Covanta’s Protection System components. After a review of the materials, SERC Compliance Enforcement staff confirmed that Covanta had a violation of PRC-005-1 R2.1 because although, according to Covanta, testing and maintenance had been performed, it could not provide evidence that its battery bank was maintained in the third quarter of 2008 or the first quarter of 2009 within the intervals defined in Covanta's Protection System maintenance and testing program. Covanta did provide records of testing and maintenance of the batteries for the quarters preceding the third quarter of 2008 and following the first quarter of 2009. As a result of its assessment, SERC Compliance Enforcement staff determined that documentation was not available to confirm that Covanta had performed the quarterly maintenance and testing activity for its battery bank within the defined intervals for the third quarter of 2008 and the first quarter of 2009. As a result, SERC Compliance Enforcement staff found Covanta had a violation of PRC-005-1 R2.1 because Covanta did not have records for 1 battery bank out of 159 Protection System components (0.6%). RELIABILITY IMPACT STATEMENT- POTENTIAL AND ACTUAL SERC finds that the violations posed a minimal risk and did not pose a serious or substantial risk to the reliability of the bulk power system (BPS), because:

1. for the violation of PRC-005-1 R1.1 and 1.2: a. Covanta had a Protection System maintenance and testing procedure

which it attested that it had used since June 18, 2007, but that procedure was not dated; the audit team was able to confirm that the Protection System equipment, except for the batteries as described below, had been maintained in accordance with the undated maintenance and testing program.


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2. for the violation of PRC-005-1 R2.1: a. Covanta was only missing evidence of battery maintenance and testing

for two quarters. During that time, however, Covanta was performing monthly battery maintenance and was able to produce records of the maintenance that would have provided indication of the battery condition.

IS THERE A SETTLEMENT AGREEMENT YES NO WITH RESPECT TO THE VIOLATION(S), REGISTERED ENTITY

ADMITS TO IT YES NEITHER ADMITS NOR DENIES IT YES

DOES NOT CONTEST IT (INCLUDING WITHIN 30 DAYS)YES WITH RESPECT TO THE ASSESSED PENALTY OR SANCTION, REGISTERED ENTITY ACCEPTS IT/DOES NOT CONTEST IT YES

III. DISCOVERY INFORMATION

METHOD OF DISCOVERY: SELF-REPORT

SELF-CERTIFICATION COMPLIANCE AUDIT COMPLIANCE VIOLATION INVESTIGATION

SPOT CHECK COMPLAINT PERIODIC DATA SUBMITTAL EXCEPTION REPORTING

DURATION DATE(S): PRC-005-1 R1 – 6/18/07 (when the Standard became mandatory and enforceable) through 08/28/09 (the date of the Audit when Covanta produced the necessary documentation). PRC-005-1 R2.1– 9/30/08 (last day of testing interval) through 11/24/09 (Mitigation Plan completion). DATE DISCOVERED BY OR REPORTED TO REGIONAL ENTITY 8/28/09


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IS THE VIOLATION STILL OCCURRING YES NO

IF YES, EXPLAIN

REMEDIAL ACTION DIRECTIVE ISSUED YES NO

PRE TO POST JUNE 18, 2007 VIOLATION YES NO

IV. MITIGATION INFORMATION FOR FINAL ACCEPTED MITIGATION PLAN:

MITIGATION PLAN NO. MIT-07-2160 DATE SUBMITTED TO REGIONAL ENTITY 11/30/09

DATE ACCEPTED BY REGIONAL ENTITY 12/3/09 DATE APPROVED BY NERC 12/4/09

DATE PROVIDED TO FERC 12/4/09 IDENTIFY AND EXPLAIN ALL PRIOR VERSIONS THAT WERE ACCEPTED OR REJECTED, IF APPLICABLE None MITIGATION PLAN COMPLETED YES NO

EXPECTED COMPLETION DATE Submitted as complete EXTENSIONS GRANTED No

ACTUAL COMPLETION DATE 11/24/09 DATE OF CERTIFICATION LETTER 11/30/09

CERTIFIED COMPLETE BY REGISTERED ENTITY AS OF 11/24/09 DATE OF VERIFICATION LETTER 1/7/10

VERIFIED COMPLETE BY REGIONAL ENTITY AS OF 11/24/09

ACTIONS TAKEN TO MITIGATE THE ISSUE AND PREVENT RECURRENCE To correct the violation of PRC-005-1 R1.1 and R1.2, Covanta was required to and has completed the following actions detailed in its Mitigation Plan:

1. Covanta updated its Protection System Maintenance and Testing Tracking matrix to include revision numbers and dates. In addition, the matrix now references Work Orders and governing Preventative Maintenance references for all battery related maintenance.


Page 13 of 16

To prevent recurrence of a violation of PRC-005-1 R2, Covanta was required to and has completed the following action detailed in its Mitigation Plan:

1. Covanta has installed and implemented an asset management system (Maximo) allowing the facility to schedule all maintenance activities while enabling independent compliance monitoring of each applicable frequency.

LIST OF EVIDENCE REVIEWED BY REGIONAL ENTITY TO EVALUATE COMPLETION OF MITIGATION PLAN OR MILESTONES (FOR CASES IN WHICH MITIGATION IS NOT YET COMPLETED)

Covanta submitted the following as evidence of completion of its Mitigation Plan: 1. Fairfax PRC-005 Summary Matrix Template Rev 1 11242009 SC.xls - The revised spreadsheet that includes all of the information required for compliance with R1.1 and R1.2. The revised spreadsheet includes a revision history with Rev. 1 dated November 24, 2009; 2. Covanta Fairfax Maximo Work Order Screen Shots – This document demonstrates the levels of information present in the Maximo system for scheduling monthly, quarterly, and annual activities for station batteries; and 3. Fairfax Battery Station Inspection Report – A word document that provides evidence that Covanta performed its monthly battery inspection that was scheduled and completed according to the schedule in Maximo.

V. PENALTY INFORMATION

TOTAL ASSESSED PENALTY OR SANCTION OF $3,000 FOR TWO VIOLATIONS OF RELIABILITY STANDARDS.

(1) REGISTERED ENTITY’S COMPLIANCE HISTORY

PREVIOUSLY FILED VIOLATIONS OF ANY OF THE INSTANT RELIABILITY STANDARD(S) OR REQUIREMENT(S) THEREUNDER YES NO

LIST VIOLATIONS AND STATUS ADDITIONAL COMMENTS


Page 14 of 16

PREVIOUSLY FILED VIOLATIONS OF OTHER RELIABILITY STANDARD(S) OR REQUIREMENTS THEREUNDER YES NO

LIST VIOLATIONS AND STATUS ADDITIONAL COMMENTS

(2) THE DEGREE AND QUALITY OF COOPERATION BY THE REGISTERED ENTITY (IF THE RESPONSE TO FULL COOPERATION IS “NO,” THE ABBREVIATED NOP FORM MAY NOT BE USED.)

FULL COOPERATION YES NO EXPLAIN

Covanta cooperated in a timely and satisfactory manner with SERC Compliance Enforcement staff during the investigation. Covanta provided prompt responses to all of SERC staff’s data requests and cooperated with SERC Compliance Enforcement staff during meetings between the parties to discuss these issues. Further, Covanta’s Senior Management was actively involved in addressing and resolving these issues.

(3) THE PRESENCE AND QUALITY OF THE REGISTERED ENTITY’S COMPLIANCE PROGRAM

IS THERE A DOCUMENTED COMPLIANCE PROGRAM

YES NO UNDETERMINED EXPLAIN

According to Covanta, Covanta Energy, LP has a corporate-wide compliance program in which Covanta participates and many of the action items are executed at the local level. The program includes adoption and implementation of NERC Standard Implementing Procedures and NERC Implementing Procedures training. A Culture of Compliance Policy is currently under development. Covanta also performs Internal Self-Assessments including onsite evaluations and mock audits. The compliance program with respect to the NERC Reliability Standards was put into place on June 16, 2007 but SERC considered this program as a neutral factor in determining the penalty because the compliance program was not as robust as other similarly situated entities’ programs observed by SERC.


Page 15 of 16

EXPLAIN SENIOR MANAGEMENT’S ROLE AND INVOLVEMENT WITH RESPECT TO THE REGISTERED ENTITY’S COMPLIANCE PROGRAM, INCLUDING WHETHER SENIOR MANAGEMENT TAKES ACTIONS THAT SUPPORT THE COMPLIANCE PROGRAM, SUCH AS TRAINING, COMPLIANCE AS A FACTOR IN EMPLOYEE EVALUATIONS, OR OTHERWISE. According to Covanta, Covanta Energy, LP has assigned NERC compliance efforts to its Vice President, Maintenance/Asset Reliability, an officer of the organization, who has delegated responsibilities to its NERC/Asset Compliance Specialist and actionable responsibilities are assigned to individual site Facility Managers.

(4) ANY ATTEMPT BY THE REGISTERED ENTITY TO CONCEAL THE VIOLATION(S) OR INFORMATION NEEDED TO REVIEW, EVALUATE OR INVESTIGATE THE VIOLATION(S)

YES NO IF YES, EXPLAIN

(5) ANY EVIDENCE THE VIOLATION(S) WEREINTENTIONAL (IF THE RESPONSE IS “YES,” THE ABBREVIATED NOP FORM MAY NOT BE USED.)

YES NO IF YES, EXPLAIN

(6) ANY OTHER MITIGATING FACTORS FOR CONSIDERATION YES NO

IF YES, EXPLAIN

(7) ANY OTHER AGGRAVATING FACTORS FOR CONSIDERATION YES NO

IF YES, EXPLAIN

(8) ANY OTHER EXTENUATING CIRCUMSTANCES YES NO

IF YES, EXPLAIN


Page 16 of 16

OTHER RELEVANT INFORMATION: NOTICE OF ALLEGED VIOLATION AND PROPOSED PENALTY OR SANCTION ISSUED DATE: OR N/A SETTLEMENT DISCUSSIONS COMMENCED DATE: 4/22/10 OR N/A NOTICE OF CONFIRMED VIOLATION ISSUED DATE: OR N/A SUPPLEMENTAL RECORD INFORMATION DATES(S): OR N/A REGISTERED ENTITY RESPONSE CONTESTED FINDINGS PENALTY BOTH N/A HEARING REQUESTED YES NO DATE OUTCOME APPEAL REQUESTED EXHIBITS: SOURCE DOCUMENT SERC’s Compliance Audit Screening Worksheet dated August 28, 2009 MITIGATION PLAN Covanta’s Mitigation Plan MIT-07-2160 submitted November 30, 2009 CERTIFICATION BY REGISTERED ENTITY Covanta’s Certification of Mitigation Plan Completion dated November 30, 2009 VERIFICATION BY REGIONAL ENTITY SERC’s Verification of Mitigation Plan Completion dated January 7, 2010

Attachment b

Covanta’s Response dated December 21, 2010

December 21 , 2010

Ken Keels Director of Compliance SERC Reliability Corporation 2815 Coliseum Centre Drive, Suite 500 Charlotte, NC 28217

2209 South 58th Street, Philadelphia, PA 19143

RE: Statement Regarding SERC Issue Tracking Nos. 09-066 and 09-067; NERC Violation ID Nos. SERC200900307 and SERC200900308

Concerning Covanta Fairfax's confirmed violation ofNERC reliability standard PRC-005-1 Requirements Rl and R2, Covanta wishes to acknowledge and not contest auditors' fmdings as documented in Covanta Fairfax, Inc. Final Audit Report. Nonetheless, it is our request that our position on both protective system devices and the evidence presented be documented for the record.

Current Sensing, Voltage Sensing devices, and DC Control circuitry directly related to BES reliability requirements are not specifically referenced in Covanta's Technical Standard TS-301 (latest revision 12/5/2005; originating in 1997), because Covanta's Technical Standards only defme the minimum operating, maintenance, and administrative requirements for Waste-To-Energy facilities. Absences of this specific equipment are therefore encompassed under a condition-based maintenance approach as per original manufacturer's testing recommendations. Such recommendations delineate initial installation testing with no specific maintenance and testing intervals. This approach has proven to be reliable and effective with no known failures occurring since the facility's inception in 1990. As such, Covanta's condition based maintenance (CBM) program (non-invasive maintenance) basis is a sound and acceptable method as established in NERC Technical Reference document Section 6. It states, "Non-invasive Maintenance is where 'the system is kept in its normal operating state, without human intervention for checking. This reduces risk of damage, or risk of leaving the system in an inoperable state after a manual test. Experience has shown that keeping human hands away from equipment known to be working correctly enhances reliability.

Furthermore, Covanta's maintenance and testing summary matrix, as it exists today, is the result of an evolution of documents beginning with Technical Standards implemented in November 1997. As documentation requirements for NERC Reliability Standard PRC-005-1 varied throughout individual Regional Entity footprints, the decision was made to enhance Covanta' s existing Maintenance and Testing supporting documents. Covanta's Maintenance and Testing Elaboration statement was developed in November of2008, in efforts to clarify our position on Protective System Maintenance and Testing. Its ' content is based on Technical Standard TS-301 and has evolved into an Excel spreadsheet (starting in August 2008) which incorporated all of PRC-005 requirements into one single

document. It is important to understand that the content and origination of maintenance and testing foundation have remained the same. It has been through Covanta's commitment to Continuous Improvement and Internal Compliance programs that these changes have occurred. The company prides itself in team and benchmarking concepts. As such, it has incorporated format and verbiage changes upon peer reviews and shared best practices.

SERC auditors both acknowledged that the current format meets the intent and requirements ofPRC-005-1 reliability standard. The content and source of our basis has not changed since 12/5/2005 when a revision to the Covanta Technical Standard TS-301 took place.

Sincerely,

Samuel Cabassa Manager, NERC Compliance Covanta Energl Corporation 2209 South 58 Street Philadelphia, P A 19143 Tel 215-921-7504 scabassa(a),covantaenergy.com

Attachment c

SERC’s Compliance Audit Screening Worksheet for PRC-005-1 R1 and R2/2.1 dated August 28,

2009

Screening Worksheet

Tracking Number No number

assigned

Entity Name Is Entity Registered? Covanta Fairfax Inc. Yes Unregistered Entity

Entity Contact Entity Telephone Number Scott Drew 703-690-6860

Enter Unlisted Contact Name Here Enter Unlisted Contact E-Mail and/or Telephone Here

Standard Requirement Is Issue Still Occurring? Remedial Action Directive?

PRC-005-1 R1, R1.1, R2, R2.1 Yes No

Date Issue Occurred Date Issue/Event Reported Method of Discovery

6/18/07 8/28/09 On site audit

NERC 48-Hour Reportable? Threat to BES? No No

Alleged Violation Applies to:

BA DP GO GOP LSE PA PSE RC RP RSG TO TOP TP TSP X

Brief Description

During review of the Covanta Fairfax Maintenance and Testing program, Covanta Fairfax could not provide evidence to support compliance with some of the components of R1, R1.1 and R2, R2.1.

Detailed Description

R1, R1.1 Covanta Fairfax had a documentation only gap between June 2007 and the current documents and could not provide M&T intervals for communications systems, DC control circuitry, and voltage and current sensing devices. R2, R2.1: Covanta Fairfax could not provide quarterly battery testing records for fall 2008.

Prepared By Date

Mike Bartlett 8/28/09

Attachment d

Covanta’s Mitigation Plan MIT-07-2160 for PRC-005-1 R1 and R2/2.1 submitted November 30,

2009

aeRC SERC Rlill.blllt", CorporatioFl

Mitigation Plan Submittal Form

Please refer to SERe Guidelines for Mitigation Plan Submission. pdf available at

http://www.serc1.org/Application/ContentPageView.aspx?Contentld=22

Date this Mitigation Plan is being submitted: 1113012009

If this Mitigation Plan has already been completed: • Check this box IZI and • Provide the Date of Completion of the Mitigation Plan: 1112412009

Section i~: Compliance Notices

• Section 6.2 of the CMEp1 sets forth the information that must be included in a Mitigatic1n Plan. The Mitigation Plan must include:

(1) The Registered Entity's point of contact for the Mitigation Plan, who shall be a person (i) responsible for filing the Mitigation Plan, (ii) technically knowledgeable regarding the Mitigation Plan, and (iii) authorized and competent to respond to questions regarding the status of the Mitigation Plan. This person may be the Registered Entity's point of contact described in Section 2.0.

(2) The Alleged or Confirmed Violation(s) of Reliability Standard(s) the Mitigation Plan will correct.

(3) The cause of the Alleged or Confirmed Violation(s).

(4) The Registered Entity's action plan to correct the Alleged or Confirmed Violation(s).

(5) The Registered Entity's action plan to prevent recurrence of the Alleged or Confirmed violation(s).

(6) The anticipated impact of the Mitigation Plan on the bulk power system reliability and an action plan to mitigate any increased risk to the reliability of the bulk power-system while the Mitigation Plan is being implemented.

(7) A timetable for completion of the Mitigation Plan including the completion date by which the Mitigation Plan will be fully implemented and the Alleged or Confirmed Violation(s) corrected.

(8) Implementation milestones no more than three (3) months apart for Mitigation Plans with expected completion dates more than three (3) months from the date

1 "Uniform Compliance Monitoring and Enforcement Program of the North American Electric Reliability Corporation;" a copy of the current version approved by the Federal Energy Regulatory Commission is posted on NERC's website.

Derived from NERC Form Version 1.7Page 1 of 11 Form Rev. Date - 2/23/09

CONFIDENTIAL INFORMATION

For Public Release - February 23, 2011

tAeRC SERe Rf:llability Corporation

of submission. Additional violations could be determined for not completing work associated with accepted milestones.

(9) Any other information deemed necessary or appropriate.

(10) The Mitigation Plan shall be signed by an officer, employee, attorney or other authorized representative of the Registered Entity, which if applicable, shall be the person that Signed the Self-Certification or Self Reporting submittals.

• This submittal form shall be used to provide a required Mitigation Plan for review and approva' by SERC and NERC.

• The Mitigation Plan shall be submitted to SERC and NERC as confidential information in accordance with Section 1500 of the NERC Rules of Procedure.

• This Mitigation Plan form may be used to address one or more related violations of one Reliability Standard. A separate mitigation plan is required to address violations with respect to each additional Reliability Standard, as applicable.

• If the Mitigation Plan is approved by SERC and NERC, a copy of this Mitigation Plan will be provided to the Federal Energy Regulatory Commission in accordance with applicable Commission rules, regulations and orders.

• SERC or NERC may reject Mitigation Plans that they determine to be incomplete or inadequate.

• Remedi'31 action directives also may be issued as necessary to ensure reliability of the bulk power system.

Section B: Registered Entity Information

B.1 IdHntify your organization:

Company Name: Covanta Fairfax, Inc. Company Address: 9898 Furnace Road, Lorton V A , 22079 NERC Compliance Registry 10 [if known]: 01211

B.2 Id'3ntify the individual in your organization who will serve as the Contact

to SERC regarding this Mitigation Plan. This person shall be technically knowledgeable regarding this Mitigation Plan and authorized to respond to SERC regarding this Mitigation Plan.

Name: Ti":le: Email: Phone:

Samuel Cabassa NERCI Asset Compliance Specialist [email protected] 862-485-8535

Derived fro" NERC Form Version 1.7Page 2 of 11 Form Rev. Date - 2/23/09



b~RC SERC Rlillabllltli Corporation

Section G: Identity of Reliability Standard Violations Associated with this Mitigation Plan

This Mitiga·:ion Plan is associated with the following violation(s) of the reliability standard listed below:

C.1 Standard: PRC-005-l f/dnntify by Standard Acronym (e.g. FAC-001-1)]

C.2 Requirement(s) violated and violation dates: fEr-ter information in the following Tab/e]

NERC Vic,lation ID # SERC Requirement [if krown] Violation I D Violated

# (e.g. R3.2) [if known]

R1 R2

Violation Daten

8/28/2009 8/28/3009

(*) Note: The Violation Date shall be: (i) the date that the violation occurred; (ii) the date that the violation was self-reported; or (iii) the date that the violation has been deemed to have occurred on by SERC. Questions regarding the date to use should be directed to SERC.

C.3 IdBntify the cause of the violation(s) identified above:

PRC-005-l Rl

Covanta Fairfax, Inc. submitted its PRC-005 Maintenance and Testing Matrix as evidence establishing compliance with this requirement. The Maintenance an:! Testing Matrix clearly provides a comprehensive list of all of its Protective System Components along with summary of testing procedures, basis, dates both past and future. The evidence provided failed to show dates and revisions in which this document was created, as such SERe auditors could not establish compliance from mandatory compliance date of June 18,2007.




'q~ERC SERC REliability Corporation

PRC-005-1 R2

Th~ audit team determined there was a possible violation of this requirement when Covanta Fairfax, Inc was unable to produce a randomly selected Quarterly tes': (Q4 2008).

[Pmvide your response here; additional detailed information may be provided as an attachment as necessary]

C.4 [Optional] Provide any relevant additional information regarding the violations associated with this Mitigation Plan:

PRC-005-1 R1

Covanta maintenance and testing summary matrix, as it exists today, is the result of an evolution of documents beginning with Technical Standards implemented in November 1997. As documentation requirements for NERC Reliability Standard PRC-005-1 varied throughout individual Regional Entity footprints, the decision was made to enhance Covanta's existing Maintenance and Testing supporting documents. Covanta's Maintenancl~ and Testing Elaboration statement was deVeloped in November of 2008, in efforts to clarify our position on Protective System Maintenance and Testing. Its' content is based on Technical Standard TS-301 and has evolved into an Excel spreadsheet (starting in August 2008) which incorporated all ofPRC-005 requirements into one single document. It is important to understand that the content and origination of maintenance and testing foundation have remained the same. It has been through Covanta's commitment to Continuous Improvement and Internal Compliance programs that these changes have occurred. The company prides itself in team and benchmarking concepts. As such, it has incorporated format and verbiage changes upon peer reviews and shared best practices. SERC auditors both acknowledged that the current format meets the intent and requirements ofPRC-005-1 reliability standard. The content and source of our basis has not changed since 12/5/2005 when a revision to the Covanta Technical Standard TS-301 took place.

PRC-005-1 R2

Covanta acknowledges that randomly selected date was not available for auditor's review. However, a'J other randomly selected test dates (Monthly and Annual) were made available wJhout delay. It should be noted that Covanta Fairfax has a rigorous protective




aERC SERe Rtnabllltw Corporation

system maintenance and testing program which has been validated by the facility's twenty years of safe and reliable operation.

[Provide your response here; additional detailed information may be provided as an attachment as necessary]




,!jeRe SERC R.llablllt\l Corporation

Section U: Details of Proposed Mitigation Plan

Mitigation Plan Contents

D.1 Idemtify and describe the action plan, including specific tasks and actions that your organization is proposing to undertake, or which it undertook if this Mitigation Plan has been completed, to correct the violations identified above in Part C.2 of this form:

PHC-005-1 R1

All NERC related documentation is now accompanied by creation dates along with revision numbers. These steps will ensure that any document pmsented as evidence will, without question, represent a true implementation date. A revision history and tracking sheet will also be added to all Excel tracking sheets, similar to compliance procedures.

PHC-005 R2

Covanta Fairfax, Inc. is now tracking all of its Preventive Maintenance and Testing through Covanta's Enterprise Asset Management (EAM) System - Maximo. This tool allows each facility to schedule all Preventive Maintenance activities while enabling independent compliance monitoring of each applicable frequency. In addition, Covanta has revised its current Maintenance and Testing Matrix to include references to MAXIMO work orders and governing PM Job Plans for each applicable testing frequency. [Provide your response here; additional detailed information may be provided as an att.3chment as necessary]

Check thi.s box ~ and proceed to Section E of this form if this Mitigation Plan, as set forth in Part D.1, has already been completed; otherwise respond to Part D.2, D.3 and, optionally, Part D.4, below.

Mitigation Plan Timeline and Milestones

0.2 Provide the timetable for completion of the Mitigation Plan, including the completion date by which the Mitigation Plan will be fully implemented and the violations associated with this Mitigation Plan are corrected: Proposed chages have already been implemented at Covanta Fairfax as wf311 as all other NERC registrered Covanta sites on 11/24/2009.




,!ieRc SERC Rlill.bllltl/ Corporation

D.3 Enter Milestone Activities, with completion dates, that your organization is proposing for this Mitigation Plan:

lVIilestone Activity Proposed Completion Date* {shall not be more than 3 months apart)

(*) Note: Implementation milestones no more than three (3) months apart for Mitigation Plans with expected cOMpletion dates more than three (3) months from the date of submission. Additional violations could be determined for not completing work associated with accepted milestones.

[Note: Provide your response here; additional detailed information may be provided as an attachment as necessary]

Derived fro" NERC Form Version 1.7Page 7 of 11


Form Rev. Date - 2/23/09


~eRC SERC Rlillablllty Corporation

Additional Relevant Information (Optional)

0.4 If you have any relevant additional information that you wish to include regarding the mitigation plan, milestones, milestones dates and completion date proposed above you may include it here:

[Prt)vide your response here; additional detailed information may be provided as an attachment as necessary]

Section E: Interim and Future Reliability Risk

Check this box [8J and proceed and respond to Part E.2 and E.3, below, if this Mitigation Plan, as set forth in Part D.1, has already been completed.

Abatement of Interim BPS Reliability Risk

E.1 While your organization is implementing the Mitigation Plan proposed in Part 0 of this form, the reliability of the Bulk Power System may remain at higher risk or be otherwise negatively impacted until the plan is successfully completed. To the extent they are, or may be, known or anticipated: (i) identify any such risks or impacts; and (ii) discuss any actions that your organization is planning to take or is proposing as part of the Mitigation Plan to mitigate any increased risk to the reliability of thH bulk power system while the Mitigation Plan is being implemented:

[Provide your response here; additional detailed information may be provided as an attachment as necessary]

Prevention of Future BPS Reliability Risk

E.2 OE~scribe how successful completion of the Mitigation Plan as laid out in Part 0 of this form will prevent or minimize the probability that your or!~anization incurs further violations of the same or similar reliability standards requirements in the future:

A~, part of our continous improvement and self-assessment initiatives, all actionable items described in this document have been implemented throughout all of Covanta's NERC registered facilities. This will prevent repeat occurrences in all applicable Regional Entity footprints. This will eliminate and further


CONFIDENTIAL INFORMATION For Public Release - February 23, 2011

enhance our commitment to maintaining the reliability of the Bulk Electric System. [Provide your response here; additional detailed information may be provided as an attachment as necessary]

E.3 Your organization may be taking or planning other action, beyond that listed in the Mitigation Plan, as proposed in Part D.1, to prevent or minimize the probability of incurring further violations of the same or similar standards requirements listed in Part C.2, or of other reliability standards. If so, identify and describe any such action, including miestones and completion dates:

Covanta is committed to maintaining a rigorous NERC compliance program. As such, it will take this experience and further expand it into other applicable areas where opportunities to improve exist. Continued strengthening of Covanta's internal compliance program and learning through benchmarking with our peers will help minimize the potential for similar events from occurring in the future. [Provide your response here; additional detailed information may be provided as an attachment as necessary]

Continued on Next Page




~eRC SERe Rtillablllt~ Corporation

Section F:: Authorization

An authorized individual must sign and date this Mitigation Plan Submittal Form. By doing so, this individual, on behalf of your organization:

a) Submits the Mitigation Plan, as laid out in Section D of this form, to SERC for acceptance by SERC and approval by NERC, and

b) If applicable, certifies that the Mitigation Plan, as laid out in Section D of this form, was completed (i) as laid out in Section D of this form and (ii) on or before the date provided as the 'Date of Completion of the Mitigation Plan' on this form, and

c) Acknowledges:

1. I am Facility Manager of Covanta Fairfax, Inc ..

2. I am qualified to sign this Mitigation Plan on behalf of Covanta Fairfax, Inc ..

3. I have read and understand Covanta Fairfax, Inc. obligations to comply with Mitigation Plan requirements and ERO remedial action directives as well as ERO documents, including, but not limited to, the NERC Rules of Procedure, including Appendix 4(C) (Compliance Monitoring and Enforcement Program of the North American Electric Reliability Corporation" (NERC CMEP)).

4. I have read and am familiar with the contents of the foregoing Mitigation Plan.

5. [Covanta Fairfax, Inc.] agrees to be bound by, and comply with, the Mitigation Plan, including the timetable completion date, as approved by SERC and approved by NERC.

Authorized Individual Signature bli...~ (Electronic signatures are acceptable; see CMEP)

Name (Print):Scott Drew Title< Facility Manager Dab~: 11130/2009




,~eRC SERC RliUabllltli Corporation

Section C;: Comments and Additional Information

You may UBe this area to provide comments or any additional relevant information not previously addressed in this form.

[Provid 3 your response here; additional detailed information may be provided as an attachment as necessary]

Submittal Instructions:

Please convert the completed and signed document to a text-searchable Adobe .pdf document using the following naming convention:

[(MP Entity Name (STD-XXX) MM .. :DD-YV.pdf)]

Email the pdf file to [email protected].

Please dirE!ct any questions regarding completion of this form to:

Ken Keels Marager, Compliance Enforcement SEFtC Reliability Corporation 704··357-7372 [email protected]

Derived from NERC Form Version 1.7Page 11 of 11


Form Rev. Date - 2/23/09


Attachment e

Covanta’s Certification of Mitigation Plan Completion for PRC-005-1 R1 and R2/2.1 dated

November 30, 2009

f!"IIIIlIT8 .11u;LII •• .... !::iiIf iii •• 11 • __

ENE R G Y for a cleaner world

Certification of a Completed Mitigation Plan

SERC Reliability Corporation Violation Mitigation Plan Closure Form

Name of RegiBtered Entity submitting certification: Covanta Fairfax, Inc.

Date of Certification: 11/30/2009

Name of Standard and the Requirement(s) of mitigated violation(s): PRC-005 R 1 and R2

SERC Tracking Number (contact SERC if not known):

NERC Violation 10 Number (if assigned):

Date of completion of the Mitigation Plan: 11/24/2009

Summary of a I actions described in Part 0 of the relevant mitigation plan:

Covanta has r'3vised all of its documentation to include revision numbers and dates. In addition all battery PMs are currently tracked and managed using Maximo Enterprise Asset Management software.

Description of the information provided to SERC for their evaluation:

Regarding PRC-005 R1 violation, SERC personnel should evaluate our newly revised Protective System Maintenance and Testing Tracking matrix, which has been updated to include revision numbers and dates. In addition, the matrix now references Work Orders and governing PM references for all battery related maintenance. All Protective system components as defined by NERC Glossary of Terms are included in this matrix and will be used by all Covanta NERC registered facilities.

For PRC-005-1 R2, Covanta Fairfax has included screenshots and documentation of current battery PM maintenance. SERC personnel will notice accompanying work orders for applicable PM frequencies.

I certify that the mitigation plan for the above-named violation has been completed on the date show1 above. In doing so, I certify that all required mitigation plan actions described in Part D of the relevant mitigation plan have been completed, compliance has been restored, the above-named entity is currently compliant with all of the requirements of the referenced standard, and that all information submitted information is complete ard correct to the best of my knowledge.

Name: Scott Drew Title: Facilitiy Manager Entity: Covant3 Fairfax, Inc. Email: [email protected] Phone: 703-6HO-6860 x609;

Designated Si!~nature Jt/::::;;r;-rL/-----· Date 11/30/2009

[NOTE - Closum Form should be signed by same individual that signed Mitigation Plan]

./7 ..

{t>1)IL-~--""'" . ScottPDrew Facility Manager Covanta Fairfax, Inc.

(Form Revised August 13, 2008)

A Covanta Energy Company 9898 Furnace Road Lorton, Virginia 22079 Telephone #: 703-690-6860 Facsimile #: 703-690-4223

Attachment f

SERC’s Verification of Mitigation Plan Completion for PRC-005 R1 and R2/2.1 dated

January 7, 2010

1

Statement of SERC Reliability Corporation Compliance Staff Regarding Completion of Mitigation Plan

Registered Entity: Covanta, Fairfax SERC Tracking ID: 09-066 and 09-067 NERC Violation No: SERC200900307 and SERC200900308 NERC Mitigation Plan ID: MIT-07-2160 Standard: PRC-005-1 Requirement(s): R1(1.1 and 1.2) and R2 (2.1) Violation Summary: During an audit conducted by SERC ending on August 28, 2009, when asked for evidence of compliance with PRC-005-1 R1, Entity provided a spreadsheet to the auditors that was purported to be an attachment to Entity's PRC-005 R1 Protection System maintenance and testing program document and which contained the necessary information (interval and basis, and description of maintenance and testing) for all required elements of the Protection System. Entity also provided to the auditors an attestation that the DC control systems, and voltage and current sensing devices were maintained on a “condition-based program." Entity's Protection System program document and the spreadsheet attachment met the requirements for compliance with PRC- 005 R1, however, because the spreadsheet and attestation presented to the audit team were not dated, the evidence was not sufficient to demonstrate compliance throughout the enforceable period. During that same audit ending August 28, 2008, when asked for evidence to demonstrate compliance with PRC-005-1 R2, Entity was unable to produce records of quarterly battery maintenance and testing as described in its maintenance and testing program for the Fall quarter of 2008. Mitigation Plan Summary: Covanta, Fairfax ’s Mitigation Plan to address the referenced violation was submitted on November 30, 2009 and was accepted by SERC on Decemeber 3. 2009 and approved by NERC on December 4, 2009. The Mitigation Plan is identified as MIT-07-2160 and was submitted as non-public information to FERC on December 4, 2009 in accordance with FERC orders. The mitigation plan was submitted as completed and was not revised, nor was an extension requested. PRC-005-1 R1 All NERC related documentation is now accompanied by creation dates along with revision numbers. These steps will ensure that any document presented as evidence will, without question, represent a true implementation date. A revision history and tracking sheet will also be added to all Excel tracking sheets, similar to compliance procedures.

2

PRC-005 R2 Covanta Fairfax, Inc. is now tracking all of its Preventive Maintenance and Testing through Covanta's Enterprise Asset Management (EAM) System - Maximo. This tool allows each facility to schedule all Preventive Maintenance activities while enabling independent compliance monitoring of each applicable frequency. In addition, Covanta has revised its current Maintenance and Testing Matrix to include references to MAXIMO work orders and governing PM Job Plans for each applicable testing frequency. SERC’s Monitoring of Registered Entity’s Mitigation Plan Progress: SERC Reliability Corporation Compliance Staff (“SERC Staff”) monitors the Registered Entity’s progress towards completion of its Mitigation Plans in accordance with Section 6.0 of the uniform Compliance Monitoring and Enforcement Program, (“CMEP”). Pursuant to the CMEP, Registered Entities are required to establish implementation milestones no more than three (3) months apart. SERC Staff solicits quarterly reports from all Registered Entities with open mitigation plans to monitor the progress on completion of milestones. SERC Staff also produces and reviews daily Mitigation Plan status reports highlighting Mitigation Plans that are nearing the scheduled completion date. If the Registered Entity fails to complete its Mitigation Plan according to schedule, appropriate additional enforcement action is initiated to assure compliance is attained. In this case, Covanta, Fairfax submitted the Mitigation Plan as complete and no additional monitoring of progress was necessary. Mitigation Plan Completion Review Process: Covanta, Fairfax certified on November 30, 2009 that the subject Mitigation Plan was completed on November 24, 2009. A SERC compliance staff member reviewed the evidence submitted in a manner similar to a compliance audit. That action was followed by another compliance staff member’s peer review of the initial conclusion. Evidence Reviewed: Covanta, Fairfax submitted and SERC Staff reviewed the following evidence in support of its certification that its Mitigation Plan was completed in accordance with its terms: Fairfax PRC-005 Summary Matrix Template Rev 1 11242009 SC.xls is the revised spreadsheet that includes all of the information required for compliance with R1. The revised spreadsheet includes a revision history with Rev. 1 dated 11/24/09. Covanta Fairfax Maximo Work Order Screen Shots.doc demonstrates three levels of information present in the Maximo system for scheduling monthly, quarterly, and annual activities for station batteries. Fairfax BatteryStation Inspection Report 11202009.xls is evidence that the monthly battery inspection was scheduled and completed according to the schedule in Maximo.

3

Conclusion: On January 7, 2010 SERC Reliability Corporation Compliance Staff (“SERC Staff”) completed its review of the evidence submitted by Covanta, Fairfax in support of its Certification of Completion of the subject Mitigation Plan. Based on its review of the evidence submitted, SERC Staff verifies that, in its professional judgment, all required actions in the Mitigation Plan have been completed and Covanta, Fairfax is in compliance with the subject Reliability Standard Requirements as of the certified date of completion of the Mitigation Plan, November 24, 2009. This Statement, along with the subject Mitigation Plan, may become part of a public record upon final disposition of the possible violation. Respectfully Submitted, John Wolfmeyer Kevin Berent

Attachment g

Notice of Filing

UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION

Covanta, Fairfax, Inc. Docket No. NP11-___-000

NOTICE OF FILING February 23, 2011

Take notice that on February 23, 2011, the North American Electric Reliability

Corporation (NERC) filed a Notice of Penalty regarding Covanta, Fairfax, Inc. in the SERC Reliability Corporation region.

Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission’s Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant.

The Commission encourages electronic submission of protests and interventions

in lieu of paper using the “eFiling” link at http://www.ferc.gov. Persons unable to file electronically should submit an original and 14 copies of the protest or intervention to the Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426.

This filing is accessible on-line at http://www.ferc.gov, using the “eLibrary” link and is available for review in the Commission’s Public Reference Room in Washington, D.C. There is an “eSubscription” link on the web site that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email [email protected], or call (866) 208-3676 (toll free). For TTY, call (202) 502-8659. Comment Date: [BLANK]

Kimberly D. Bose, Secretary

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