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Agenda Member Representatives Committee August 10, 2016 | 1:00 5:00 p.m. Atlantic Halifax Marriott Harbourfront Hotel 1919 Upper Water Street Halifax, NS B3J 3J5, Canada Introduction and Chairs Remarks NERC Antitrust Compliance Guidelines and Public Announcement* Consent Agenda

1. Minutes* - (Approve) a. May 4, 2016 Meeting

b. July 13, 2016 Conference Call

2. Future Meetings* 3. Schedule for MRC Officer and Sector Elections*

Regular Agenda

4. Update from Board of Trustees Nominating Committee* 5. Responses to the Board of Trustees Request for Policy Input*

a. Reliability Assessments Planning and Review Process*

b. Scope and Plans for Distributed Energy Resources Task Force*

c. ERO Enterprise Strategic Planning and Metrics*

6. Additional Policy Discussion from Board Committee Meetings* a. Standards Oversight and Technology Committee (August 4, 2016)

i. NERC and ERO Enterprise IT Projects Update

ii. Reliability Standards Quarterly Status Report

b. Corporate Governance and Human Resources Committee

i. 2016 ERO Enterprise and Corporate Performance Metrics

ii. Annual Board Effectiveness Assessments

iii. ERO Enterprise Effectiveness Survey Results and Action Plans

Agenda Member Representatives Committee August 10, 2016 2

c. Compliance Committee

i. Consolidated Hearing Process

ii. Update on Handling Critical Infrastructure Protection Compliance Evidence

iii. Compliance Monitoring and Enforcement Program Quarterly Report

d. Finance and Audit Committee

i. Second Quarter Unaudited Statement of Activities for NERC and the Regional Entities

ii. NERC and Regional Entity Proposed 2017 Business Plans and Budgets and Associated Assessments

iii. Extension of capital financing program

iv. Audio visual project implementation

7. Reliability Assessments a. Aliso Canyon Facility Status and Continuing ERO Assessments*

b. Short-Term Special Assessment: Single Points of Disruption on Natural Gas Infrastructure*

8. Update on FERC Reliability Matters* 9. Accountability Matrix* 10. Regulatory Update*

*Background materials included.

Antitrust Compliance Guidelines I. General It is NERCs policy and practice to obey the antitrust laws and to avoid all conduct that unreasonably restrains competition. This policy requires the avoidance of any conduct that violates, or that might appear to violate, the antitrust laws. Among other things, the antitrust laws forbid any agreement between or among competitors regarding prices, availability of service, product design, terms of sale, division of markets, allocation of customers or any other activity that unreasonably restrains competition. It is the responsibility of every NERC participant and employee who may in any way affect NERCs compliance with the antitrust laws to carry out this commitment. Antitrust laws are complex and subject to court interpretation that can vary over time and from one court to another. The purpose of these guidelines is to alert NERC participants and employees to potential antitrust problems and to set forth policies to be followed with respect to activities that may involve antitrust considerations. In some instances, the NERC policy contained in these guidelines is stricter than the applicable antitrust laws. Any NERC participant or employee who is uncertain about the legal ramifications of a particular course of conduct or who has doubts or concerns about whether NERCs antitrust compliance policy is implicated in any situation should consult NERCs General Counsel immediately. II. Prohibited Activities Participants in NERC activities (including those of its committees and subgroups) should refrain from the following when acting in their capacity as participants in NERC activities (e.g., at NERC meetings, conference calls and in informal discussions):

Discussions involving pricing information, especially margin (profit) and internal cost information and participants expectations as to their future prices or internal costs.

Discussions of a participants marketing strategies.

Discussions regarding how customers and geographical areas are to be divided among competitors.

Discussions concerning the exclusion of competitors from markets.

Discussions concerning boycotting or group refusals to deal with competitors, vendors or suppliers.

NERC Antitrust Compliance Guidelines 2

Any other matters that do not clearly fall within these guidelines should be reviewed with NERCs General Counsel before being discussed.

III. Activities That Are Permitted From time to time decisions or actions of NERC (including those of its committees and subgroups) may have a negative impact on particular entities and thus in that sense adversely impact competition. Decisions and actions by NERC (including its committees and subgroups) should only be undertaken for the purpose of promoting and maintaining the reliability and adequacy of the bulk power system. If you do not have a legitimate purpose consistent with this objective for discussing a matter, please refrain from discussing the matter during NERC meetings and in other NERC-related communications. You should also ensure that NERC procedures, including those set forth in NERCs Certificate of Incorporation, Bylaws, and Rules of Procedure are followed in conducting NERC business. In addition, all discussions in NERC meetings and other NERC-related communications should be within the scope of the mandate for or assignment to the particular NERC committee or subgroup, as well as within the scope of the published agenda for the meeting. No decisions should be made nor any actions taken in NERC activities for the purpose of giving an industry participant or group of participants a competitive advantage over other participants. In particular, decisions with respect to setting, revising, or assessing compliance with NERC reliability standards should not be influenced by anti-competitive motivations. Subject to the foregoing restrictions, participants in NERC activities may discuss:

Reliability matters relating to the bulk power system, including operation and planning matters such as establishing or revising reliability standards, special operating procedures, operating transfer capabilities, and plans for new facilities.

Matters relating to the impact of reliability standards for the bulk power system on electricity markets, and the impact of electricity market operations on the reliability of the bulk power system.

Proposed filings or other communications with state or federal regulatory authorities or other governmental entities.

Matters relating to the internal governance, management and operation of NERC, such as nominations for vacant committee positions, budgeting and assessments, and employment matters; and procedural matters such as planning and scheduling meetings.

Draft Minutes Member Representatives Committee May 4, 2016 | 1:005:00 p.m. Central The Westin Chicago River North 320 North Dearborn Street Chicago, IL 60654 Chair Nabil Hitti, with Vice Chair John Twitty present, called to order the North American Electric Reliability Corporation (NERC) Member Representatives Committee (MRC) meeting on May 4, 2016, at 1:02 p.m., Central. The meeting announcement, agenda, and list of MRC members in attendance are attached as Exhibits A, B and C, respectively. Introduction and Chairs Remarks Mr. Hitti welcomed new MRC members and attendees, and acknowledged the attendance of the Board, Commissioner Cheryl LaFleur from the Federal Energy Regulatory Commission (FERC), Michael Bardee and others from FERC, Liz Barton from the Department of Energy (DOE), and State Commissioner David Clark, and Tab Gangopadhyay from the National Energy Board. Mr. Hitti recognized the MRC responses to the April 6, 2016 policy input request from Fred Gorbet, chairman of the Board. He reminded attendees that full presentations were conducted at the committee meetings and will not be repeated during the MRC meeting. NERC Antitrust Compliance Guidelines and Public Announcement Kristin Iwanechko, committee secretary, called attention to the NERC antitrust compliance guidelines and the public meeting notice. Any questions should be addressed to NERCs general counsel, Charles Berardesco. Ms. Iwanechko declared a quorum present with the following recognized proxies:

Anthony Montoya for Sylvain Clermont Federal/Provincial

Fred Plett for Jacqueline Roberts Small End-Use Electricity Customer

Peter Brandien for Gordon van Welie ISO/RTO

David Clark for Asim Haque State Government

Minutes The MRC approved, on a motion by Jason Marshall and seconded by Bill Gallagher, the draft minutes of its February 10, 2016 meeting in Sarasota and its April 6, 2016 conference call.

Minutes Member Representatives Committee May 4, 2016 2

Board of Trustees Nominating Committee Update Ken Peterson, chair of the Board of Trustees Nominating Committee (BOTNC), provided an update on the BOTNC. He noted that three Trustees are up for re-election and one Trustee is term limited, creating a vacancy. The BOTNC unanimously chose a search firm to assist with filling the vacancy and is on track to review nominees in August and interview candidates in November. The BOTNC includes five MRC members:

Nabil Hitti MRC Chair

John Twitty MRC Vice Chair

Michelle DAntuono Large End-Use Electricity Customer

Tony Montoya Federal/Provincial Utility

Nelson Peeler Investor-Owned Utility Responses to the Boards Request for Policy Input Mr. Hitti acknowledged the MRCs responses to Fred Gorbets April 6, 2016, letter requesting policy input on assessing reliability for an evolving bulk power system and the ERO Enterprise strategic planning framework. The following comments on the policy input topics are not all inclusive, but provide the general tenor and scope of the discussion: Assessing Reliability for an Evolving Bulk Power System Thomas Coleman, director of Reliability Assessments at NERC, highlighted the areas identified for focus in the 2016-2018 ERO Enterprise Strategic Plan (NERCs capability, robust and independent reliability assessments focused on the changing resource mix and the Clean Power Plan, and the integration of new technologies and resources). Mr. Coleman provided an overview of the analysis and assessments that NERC, working with the Regional Entities and the technical stakeholder committees, intends to begin addressing the changing resource mix. Mr. Coleman provided a summary of the policy input received, noting that a number of comments focused on avoiding duplication of work and leveraging regional assessments, the need for interconnection-wide analysis, and the amount of time being provided to review the reports. Mr. Coleman noted that NERC is focused on avoiding duplication of work and plans to do an interconnection-wide analysis. He also stated that NERC is very cognizant of the desire for more time to review the assessments and is working to improve that. Mr. Coleman also highlighted the short-term deliverables for this year, which include the 2016 Long-term Reliability Assessment (December 2016), 2016 Summer Reliability Assessment condensed report (May 2016), 2016/17 Winter Reliability Assessment condensed report (November 2016), 2016 Probabilistic Reliability Assessment (Q1 2017), Clean Power Plan phase II assessment (May 2016), 2016 Short-term Reliability Assessment on gas-electric interdependency (May 2016), 2016 short-term reliability assessment (topic and release date to be determined), Distributed Energy Resources Task Force final report (December 2016), and Frequency Response for the Eastern Interconnection (end of year). He also highlighted three special reliability assessment pilots focusing on short-circuit strength, inter-area


oscillation baselining analysis, and probabilistic assessment of severe impact to natural gas supply and transportation.

An MRC member asked about what else could be done to gather data in a more safe and secure way to ensure that the data does not get into the wrong hands. Marc Sachs, senior vice president and chief security officer at NERC, noted that NERC is working to ensure that data is secure and has internal processes for protecting this information.

An MRC member asked about the process being used to ensure the assumptions are accurate. Mr. Coleman stated that stakeholder groups with subject matter experts and peer reviews are used to help validate data and assumptions.

MRC members and attendees raised concerns about the large number of assessments to be completed in 2016, the different types of assessments being conducted, the Planning Committees role in the assessments, and how stakeholders provide input.

Mr. Cauley noted that reliability assessments is a critical role for the ERO Enterprise and is more important now than ever with the changing resources. He summarized the following key takeaways to be addressed: (1) review the planned assessments and ensure all reports are essential, with a clear plan for 2016 and 2017; and (2) think about how to communicate better with stakeholders in terms of the plan, processes, and expectations of stakeholders.

ERO Enterprise Strategic Planning Framework Mark Lauby, senior vice president and chief reliability officer at NERC, noted that the focus of the policy input request was on the template and not necessarily the content. He noted that there are currently three strategic planning documents and the proposed framework consolidates the three documents and enhances the linkages among goals, metrics, risk priority recommendations identified by the Reliability Issues Steering Committee (RISC), and longer-term considerations. In addition, the schedule for the development of the business plan and budget is included as an appendix to the framework. Mr. Lauby also noted that during the strategic planning process this year, the ERO Enterprise will develop a reduced set of metrics for 2017 and refine them to be outcome-based. He reviewed the timeline, noting that the FERC technical conference is on June 1 and pulse point interviews will be conducted. He also noted that stakeholder input will be requested on content in July and input on the draft strategic plan will be requested in October, with the strategic plan being presented to the Board in November for approval. Mr. Lauby added that the ERO Enterprise plans on shifting the process over time for better alignment and a proposed timeline for this shift will be provided in the near future. Mr. Lauby highlighted the following comments received in response to the policy input letter: (1) some of the goals did not have a tie to risk areas and were more operational; (2) better mapping of high, medium, and low risk priorities is desired; (3) more transparency around prioritization is desired; and (4) some areas are too tactical.

An MRC member noted that the RISC identified five areas for strategic focus but it was not clear within the strategic plan if it was focusing on the top five areas or looking at all the areas. Mr. Lauby stated that NERC would clarify this when developing the content of the strategic plan.

An MRC member suggested increased transparency into prioritization.


Additional Policy Discussion of Key Items from Board Committee Meetings Attendees did not have any additional comments in response to the discussions from the Corporate Governance and Human Resources Committee or the Standards Oversight and Technology Committee meetings. Attendees shared the following comments in response to the discussions at the Compliance Committee and Finance and Audit Committee meetings. Compliance Committee

i. CIP Implementation

An attendee stated that there are a number of concerns about inconsistent audit approaches given the July 1 enforcement date. Ms. Agnew stated that the Regional Entities are working together to ensure monitoring approaches are generally consistent, but there is not one definitive answer as determinations for compliance are based on the registered entitys specific facts and circumstances. However, if there are specific instances of inconsistent approaches, entities are encouraged to report the details to NERC to be investigated.

A Board member encouraged attendees to use the Regional Entity Consistency Tool to address consistency concerns.

ii. Compliance Guidance Implementation

An attendee suggested adding a how to document to the compliance guidance webpage for submitting implementation guidance.

iii. Compliance Monitoring and Enforcement Program Quarterly Report

An MRC member noted that it seems there are still a large number of inherent risk assessments (IRA) to be completed and asked if there was a plan to ensure the IRAs are completed. Ms. Agnew noted that there are two ERO Enterprise metrics on this topic and the majority of the regions have a schedule to complete all IRAs this year. She also noted that Regional Entities are not conducting audits without an IRA completed.

An MRC member asked about the status of internal controls evaluations. An update will be provided at a future Board of Trustees Compliance Committee meeting.

An MRC member noted confusion regarding internal controls evaluations (ICE), stating that it appears there are requests for internal controls without having an ICE in place. Ms. Agnew stated that ICE is voluntary and while a region will ask an entity about the existence and functioning of any internal controls as part of its standard audit process, registered entities do not need to submit internal controls as part of an ICE.

Finance and Audit Committee

i. 2017 Business Plan and Budget Update

Some MRC members expressed concern about the size of the budget increase.


A Board member noted that this is the first year there is an assessment stabilization reserve and the goal over time should be to have an assessment increase close to the actual budget level and increase. The Board member noted that any concerns should be raised by stakeholders.

An MRC member suggested that, now that the ERO is mature, it may make sense to discuss whether a routine penalty amount should be added into the budget.

An MRC member suggest that, when looking at the IT budget, there should be corresponding savings at the regions given the work taken on by NERC.

Cost-Effectiveness Approach and Pilot Howard Gugel, director of standards at NERC, recognized that stakeholders have asked about lessons learned from previous pilots regarding cost effectiveness and what the Standards Committee is doing to address the issue of cost during standards development. Mr. Gugel provided an overview of the NPCC pilot on PRC-002-NPCC-01 and the subsequent continent-wide pilot, called the Cost Effective Analysis Process (CEAP), developed by the Standards Committee. The continent-wide pilot consisted of two phases, cost impact analysis and cost effectiveness analysis, and was used on PRC-025-1 and PRC-002-2. Mr. Gugel provided an overview of the lessons learned from these pilots, which included the following: (1) the more detailed the data requested, the fewer the responses; (2) the CEAP pilot did not address whether probability of a risk was low or high; (3) the CEAP questions were not specific enough to receive consistent and concise responses; (4) some stakeholders felt that the CEAP should identify the value of the benefit of the standard, both from reliability and societal perspectives; (5) societal costs of not addressing risk was desired but not considered in the pilot; (6) scope and cost estimates varied widely across participants; (7) CEAP questions needed to be very clear and concise to yield measurable and comparable answers; and (8) some expressed interest in an off ramp from the standards approach and wanted projects with low probability risk and higher costs to be considered for guidelines instead of standards. Brian Murphy, chair of the Standards Committee, spoke in support of the previous pilots and the ongoing effort to consider cost-effectiveness in the development of standards. He noted that the approach has been revised based on the previous lessons learned and a pilot is being conducted. Mr. Gugel noted that the pilot of the revised approach was being conducted with TPL-001-4, which includes two FERC directives. He noted that a survey was developed and posted on April 27 for a 30-day comment period. In addition, a webinar was conducted at the beginning of the week. The responses to the survey will be posted and provided to the drafting team as they consider changes to the standard. Depending on the outcome of the drafting teams work, phase 2 questions will be developed that are more specific and posted at a later time.

An MRC member noted that TPL-001-4 does not apply to the majority of registered entities and many small entities might not be able to respond to the questionnaire. The member suggested also using the approach with standards that apply to a broader set of entities. Mr. Gugel stated that TPL-001-4 was chosen because it was the only one at the pre-SAR stage at the time, but cost-


effectiveness is an evolving process and NERC expects to use the approach on other projects that may come up as well.

An MRC member noted support for this effort and encouraged all entities from whom the data is requested to participate as completely as possible.

An MRC member asked about the next steps after receiving the comments and whether there is a plan to respond back to stakeholders on their comments. Mr. Gugel noted that comments and a summary of responses would be posted on the website and, if desired, a webinar could be scheduled to review the comments and responses.

Clean Power Plan: Phase II Assessment Mr. Coleman provided an overview of the phase II assessment of the Clean Power Plan (CPP), which follows up on NERCs initial reliability review, reliability considerations, and phase I assessment. He noted three primary objectives of the assessment: (1) provide an independent assessment of reliability; (2) provide a range of resource adequacy evaluations; and (3) provide an additional framework for further analysis. Mr. Coleman reviewed the following five scenarios: (1) reference case; (2) CPP base case; (3) national trading case; (4) high renewable penetration case; and (5) accelerated nuclear retirements case. He also provided some highlights of the findings: (1) wind and solar experience large increases in capacity with or without the CPP; (2) coal declines from 270 GW to 220 GW in the reference case; (3) natural gas prices increase over time; (4) energy efficiency is increased through demand side programs; and (5) natural gas capacity increases from 235 GW to 280 GW. Mr. Coleman compared the reference case with the CPP base case, noting a significant change on wind and solar, a significant decline in coal, and a marginal difference in natural gas. He reviewed the following recommendations: (1) planning processes should already be underway; (2) Planning Coordinators should conduct system reliability evaluations using the NERC report as a framework; (3) the Reliability Considerations for CPP Development should be used; (4) agencies must continue to work together to ensure reliability; (5) planners must ensure adequate levels of essential reliability services; and (6) NERC should continue its work around sufficiency guidelines for essential reliability services. Mr. Coleman noted that the report is expected to be provided to the Board and MRC by the end of the week with a targeted release date of May 17.

An MRC member asked how much actual curtailments were modeled. Mr. Coleman noted that he would follow up on this question.

An MRC member asked whether demand response resources were attributed to anything in the study. Mr. Coleman stated that demand response resources were included in the energy efficiency study.

An MRC member asked whether there are any assumptions from a distributed generation perspective. Mr. Coleman stated that the only incorporation of distributed generation is around demand and the growth in demand is coming from the findings in the LTRA.

An MRC member noted that in California, there are a lot of studies that include curtailment, and in peak curtailment, the other critical assumption is how much they can provide load following down capability. Mr. Coleman stated that the issue of curtailments has come up and is a potential subject matter piece for a short-term special assessment.


An MRC member asked what transmission expansion assumption was used. Mr. Coleman stated that existing transmission was used, and did not include transmission already approved to be built.

An MRC member asked to what extent NERC is recommending that the planning process should already be underway, considering the final rule has been stayed. Mr. Coleman noted that NERC is aware that some states have stopped the process for right now, but the transformation is taking place outside of Clean Power Plan and that planning should be occurring now.

An MRC member asked why there isnt a larger increase in natural gas. Mr. Coleman noted that natural gas will help compliance with the Clean Power Plan and increasing natural gas prices will keep it relatively the same.

An MRC member asked how reliability is affected by the CPP. Mr. Coleman stated that one of the recommendations is to continue to develop sufficiency guidelines around essential reliability services to see if it is a reliability concern.

An MRC member suggested that it would be helpful to include a description of the models used in the final report.

An MRC member raised a concern that NERCs focus on assessments is supposed to be on reliability, but the report uses production cost models. Mr. Coleman noted that the value is not to look at economics, but to look at available resources and the reliability implications. He noted that NERC is not taking a stand economically, but has to consider economics as part of its analysis.

A Board member stressed that there must be identified decision points along the way.

An MRC member asked whether NERC was also looking at how the individual classes of generation might be affected by CPP. Mr. Coleman stated that NERC did take into account various operational characteristics.

Gas-Electric Interdependency Special Assessment Mr. Coleman provided an overview of the new short-term special assessments which will be topic-oriented reliability evaluations. The purpose of these evaluations are to provide details on potential reliability risks and emerging issues, with topics selected by NERC and the Regional Entities. Mr. Coleman noted that the first short-term special assessment is on gas-electric interdependency. He noted that when looking at the long-term projections of natural gas, NERC identified several areas that have greater than 40% natural gas generation penetration. Mr. Coleman reviewed the following key findings of the assessment: (1) single-fuel dependency increases the risk of BPS-impairing common-mode failures; (2) there are risks to natural gas generation during the summer season; (3) gas-electric planning and coordination should be expanded; and (4) operational coordination between gas and electric industries decreases the likelihood of a wide-spread outage. He also reviewed the timeline, noting that it would be provided to the Board and MRC by the end of the week with a targeted release date of May 17. Jim Robb, president and CEO of WECC, provided an overview of Aliso Canyon, a critical element of the Los Angeles Basin natural gas delivery system, where a gas leak was discovered in late 2015. He stated that the key challenge with the natural gas system is that it has always been built on an economic basis so it tends to be built around very large scale assets as opposed to the electric system. He noted that Aliso


Canyon currently has about 15 Bcf of working gas out of a total capacity of 86 Bcf and that injections will not resume until safety testing or isolation of remaining 114 wells is completed. Mr. Robb identified the reliability concerns of Aliso Canyon, which are around fuel availability for local generation, generation resource adequacy, electric import capacity (transmission), and operational realities. He also noted concern around interconnection-wide implications. 2016 State of Reliability Report James Merlo, senior director of reliability risk management at NERC, provided an overview of the following key findings of the 2016 State of Reliability report, which looks retrospectively over the past five years: (1) BPS resiliency to severe weather has improved; (2) event severity started to decrease; (3) the event analysis process is capturing lessons learned; (4) average transmission outage severity continued to decline; (5) misoperations rates are beginning to decline; and (6) frequency response trend varies by interconnection. He noted that the 2016 State of Reliability report would be shared with the Board and MRC by the end of the week with a targeted release date of May 19.

An MRC member asked how the definition of adequate level of reliability (ALR) drives the report. Mr. Merlo noted that chapter 4 of the report includes reliability indicator trends that tie the performance of the BPS to a set of reliability performance objectives included in the approved 2012 ALR definition.

An MRC member asked if there were any factors that contributed to protection system misoperations. Mr. Merlo stated that the report includes the top three contributors.

Current FERC Reliability Activities Michael Bardee, director of the office of electric reliability at FERC, provided an overview of several FERC reliability activities. Exemption for Wind Generators from Providing Reactive Power Mr. Bardee provided an overview of the Notice of Proposed Rulemaking (NOPR) proposing to revise two pro forma interconnection agreements, the large generator interconnection agreement and the small generator interconnection agreement, to eliminate the current exemption for new wind generators, noting that since the exemption started, costs have declined. He noted that comments were filed in January and most were supportive, but there were some issues to figure out before FERC issues a final rule. Proposal and Compensation of Primary Frequency Response Notice of Inquiry Mr. Bardee provided an overview of the Notice of Inquiry on primary frequency response, which requested comments on who should provide primary frequency response and how compensation should work. He noted that comments were filed in April and there was a lot of support for new facilities to have the capability to provide the service but less support for existing facilities. He noted that the comments on compensation included a wide range of views, but a number of commenters supported the use of market mechanisms. Mr. Bardee noted that the next step is for the Commission to issue a NOPR after reviewing the filed comments.


Ride-Through Requirements for Small Generators Mr. Bardee provided an overview of the NOPR on ride-through requirements for small generators, which proposed to impose requirements for small generators that match those that currently exist for large generators. He noted that comments are due on May 23. Geomagnetic Disturbance Mitigation Mr. Bardee provided an overview of the NOPR on TPL-007-1, the proposed standard on geomagnetic disturbance mitigation (GMD). In the NOPR, FERC proposed to generally accept the standard, but required some changes. Specifically, FERC proposed to require NERC to modify the benchmark for assessing the vulnerability to GMD and a work plan by NERC to continue on the research on various aspects of this issue. Mr. Bardee noted that comments reflected a wide range of views, with some supportive of the standard as filed and some suggesting that FERC should go further. He noted that FERC held a technical conference on March 1 and the remarks at the conference generally reflected the comments received. Supply Chain Management Mr. Bardee provided an overview of the NOPR related to supply chain management, noting that it focused on the risk to the cyber systems. He noted that many comments opposed the proposal saying there was enough guidance and this issue is already addressed by standards. FERC held a technical conference on January 28 and comments are still being received on this docket. Mr. Bardee noted that some issues that need to be addressed before proceeding include identifying the risks to be addressed and what a standard would need to accomplish. Restoration and Recovery Report Mr. Bardee provided an overview of the restoration and recovery report, issued in January 2016, which resulted from a joint review by FERC, NERC, and the Regional Entities. For the review, the team reviewed restoration and recovery plans after a major event from a sample of nine utilities. He stated that plans were generally thorough and highly-detailed. Mr. Bardee stated that he believes the report laid the foundation for future improvements. Data Sharing Mr. Bardee provided an overview of the NOPR on the availability of certain databases, which proposed to require that NERC provide FERC with non-public access to these databases, limited to data regarding U.S. entities. He noted that when the NOPR was issued, FERC outlined a need for enhanced access in order to improve its ability to identify the need for new or modified standards and to better understand NERCs periodic reliability and adequacy assessments. Mr. Bardee noted that most comments opposed the proposal, while some comments were supportive. There were some concerns raised about confidentiality of data. He also noted that there were concerns about data that is submitted voluntarily and if access was required, it would reduce the amount of data entities were willing to voluntarily provide.

An attendee noted that one of the topics during the recent technical conference on Geomagnetic Disturbance Mitigation (GMD) was around providing confidential data to academic participants and asked whether the data sharing legislation will address this concern. Mr. Bardee stated that he does not think that the legislation will have a big impact on access to GMD data.


Mr. Cauley thanked FERC for its action on essential reliability services and frequency response, and recognizing the early work being done and the recommendations being made to policymakers.

Mr. Cauley suggested additional focus on planning regulatory initiatives around priorities, as well as timelines to achieve balance over time through considering the whole life cycle of initiatives.

Accountability Matrix Ms. Iwanechko noted that NERC has been maintaining an accountability matrix to track all policy input and responses. The matrix has been modified to be more high level, rolling up the input into themes that NERC is committed to addressing. She noted that the matrix will be included in the MRC agenda packages going forward for increased transparency and is also posted on the Board agenda page on the NERC website. Regulatory Update Mr. Berardesco invited questions or comments regarding the regulatory report, which highlights Canadian and Mexican affairs, as well as past and future significant FERC filings. Future Meetings The following are future dates for the MRC Pre-Meeting and Informational Sessions:

July 13, 2016

October 4, 2016 The following are future NERC Board and MRC meetings dates and locations:

August 10-11, 2016 Halifax, Canada

November 1-2, 2016 Atlanta, GA Adjournment There being no further business, the meeting terminated at 5:01 p.m., Central. Submitted by,

Kristin Iwanechko Secretary

Draft Minutes Member Representatives Committee Pre-Meeting Informational Session Conference Call and Webinar July 13, 2016 | 11:00 a.m. 12:30 p.m. Eastern Introduction and Chairs Remarks Chair Nabil Hitti, with Vice Chair John Twitty present, convened a duly-noticed open meeting by conference call and webinar of the North American Electric Reliability Corporation (NERC) Member Representatives Committee (MRC) on July 13, 2016, at 11:03 a.m., Eastern. The meeting provided the MRC and other stakeholders an opportunity to preview proposed agenda topics for the MRC, Board of Trustees (Board) and Board Committee meetings scheduled to be held August 10-11, 2016, in Halifax, Nova Scotia, Canada. The meeting announcement, agenda, and list of attendees are attached as Exhibits A, B, and C, respectively. NERC Antitrust Compliance Guidelines and Public Announcement Kristin Iwanechko, committee secretary, directed the participants attention to the NERC Antitrust Compliance Guidelines and the public meeting notice included in the agenda. Schedule of Quarterly NERC Meetings and Conference Calls The draft schedule of events for the upcoming meetings in Halifax was included in the agenda package. Review of Proposed Board and Board Committees Meeting Agenda Items Charlie Berardesco reviewed the preliminary agenda items for the Board and Board Committee meetings scheduled for August 10-11, 2016, in Halifax identified in the slide presentation included in the informational session agenda package (Exhibit D). Mr. Hitti encouraged MRC members to review all agenda materials for the Board and Board Committee meetings, once posted and available on July 27, 2016, and attend as many of these meetings as possible, in advance of the MRCs meeting on August 10, 2016. Review of Proposed MRC Agenda Items for August 10 Mr. Hitti reviewed the preliminary MRC agenda items for the upcoming August 10, 2016, meeting in Halifax identified in the slide presentation included in the informational session agenda package (Exhibit D). Topics include:

Schedule for MRC officer and sector elections;

Board of Trustees Nominating Committee update;

Discussion of the responses submitted to the policy input request from the Board;

Agenda Name of Meeting - Date 2

Additional discussion of the issues presented at the Board Committee meetings on August 4 and August 10;

Reliability assessments:

Aliso Canyon facility status and continuing ERO assessments;

Short-term special assessment: single points of disruption on natural gas infrastructure;

Update on FERC reliability matters:

Accountability Matrix; and

Regulatory update. Policy Input Reminder Mr. Hitti announced that the Boards request for policy input is scheduled to be released on July 13, 2016, and responses are due by Wednesday, August 3, 2016, to Ms. Iwanechko. NERC staff provided updates on the following topics included in the policy input letter:

Reliability assessments planning and review process;

Scope and plans for Distributed Energy Resources Task Force; and

ERO Enterprise strategic planning and metrics. Informational Items NERC staff provided updates on compliance guidance implementation and the 2017 business plan and budget. Proxy Reminder Proxy notifications for the August 10, 2016, meeting must be submitted in writing to Ms. Iwanechko. Meeting Adjourned There being no further business, the call was terminated at 11:56 p.m., Eastern. Submitted by,

Kristin Iwanechko Secretary

Agenda Item 2 MRC Meeting August 10, 2016

Future Meetings

Action Information Summary The following are the future meeting dates for 2016 and 2017. The dates for the 2016 pre-meeting and informational webinars are also included below. 2016 Dates

October 4 Pre-Meeting and Informational Session

November 1-2 Atlanta, GA 2017 Dates

February 8-9 San Diego, CA

May 10-11 TBD

August 9-10 Ottawa, Canada

November 7-8 New Orleans, LA


Schedule for MRC Officer and Sector Elections

Action Information Background Chair Nabil Hitti will announce the upcoming nomination and election cycle for the Member Representatives Committee (MRC) officers and those members whose terms expire in February 2017. The tentative schedule is shown below. MRC Officer Elections Wednesday, August 31 nomination period opens Friday, September 30 nomination period closes Tuesday, November 1 election of officers for following year by current MRC members MRC Member Sector Nominations and Elections Friday, September 9 nomination period opens Tuesday, November 8 nomination period closes Friday, December 2 election begins Monday, December 12 election ends Reference Links Membership of the MRC for 2016-2018 NERC Bylaws

http://www.nerc.com/gov/bot/MRC/Nominations%20and%20Elections/Membership_of_MRC_2016-2018.pdfhttp://www.nerc.com/gov/Annual%20Reports/NERC_Bylaws-Effective-10142009.pdf


Update from the Board of Trustees Nominating Committee

Action Information Background On February 10, 2016, Chair Nabil Hitti invited Member Representatives Committee (MRC) members to volunteer to serve on the Board of Trustees Nominating Committee (BOTNC) and the following MRC members were named by the Board of Trustees to the BOTNC:

1. Nabil Hitti MRC Chair

2. John Twitty MRC Vice Chair

3. Michelle DAntuono Large End-Use Electricity Customer

4. Tony Montoya Federal/Provincial Utility

5. Nelson Peeler Investor-Owned Utility Ken Peterson, chair of the BOTNC, will provide a status report on the planned activities and schedule for the BOTNC.


Responses to the Board of Trustees Request for Policy Input

Action Discussion Background The policy input letter is issued by the Chair of the NERC Board of Trustees (Board) four weeks in advance of the quarterly meetings and includes relevant materials necessary to inform discussion. Written input from the Member Representatives Committee (MRC) and stakeholders is due one week before the meetings and is then revisited during a dedicated discussion time on the MRCs agenda, in the presence of the Board. Summary On August 10, 2016, MRC can expect presentations with additional information on the three policy input items at the MRC meeting: (1) the reliability assessements planning and review process; (2) scope and plans for the Distributed Energy Resources Task Force; and (3) ERO Enterprise strategic planning and metrics. The MRC can expect to participate in further discussion of the responses received to the policy input request that was distributed on July 13, 2016, and of the presentations given on the policy input items at the MRC meeting. The items included in the policy input letter were presented at the MRC Pre-Meeting and Informational Session webinar on July 13, 2016. Additional background information on each of the policy input items are included in the agenda package for the webinar. Deadline for submitting policy input responses is August 3, 2016, and should be sent to [email protected]. Attachment July 13, 2016, Boards Letter Requesting Policy Input

http://www.nerc.com/gov/bot/MRC/Agenda%20Highlights%20nad%20Minutes%202013/MRC_Informational_Session_Agenda_07-13-16.pdfmailto:[email protected]

July 13, 2016 Mr. Nabil Hitti, Chair NERC Member Representatives Committee Dear Nabil: I invite the Member Representatives Committee (MRC) to provide policy input on three issues of particular interest to the NERC Board of Trustees (Board) as it prepares for its August 10-11, 2016, meetings in Halifax, Nova Scotia, Canada. Additional background information is included in the July 13, 2016 MRC Informational Session agenda package to help MRC members solicit inputs from their sectors. As a reminder, please include a summary of your comments in your response (i.e., a bulleted list of key points) for NERC to compile into a single summary document to be provided to the Board for reference. Item 1: Reliability Assessments Planning and Review Process During the July 13 MRC Informational Session (see Item 3a), NERC staff provided an overview of the annual assessments that are developed under Section 800 of the NERC Rules of Procedure. These consist of one Long-Term Reliability Assessment, two Seasonal Assessments, one State of Reliability Report, two to three Special Assessments per year, for a total of six to seven reports per year. It is the ERO Enterprises objective to have a robust, but efficient planning and review process for Reliability Assessments. The assessment planning process includes scoping, identification of objectives, data collection, analysis, and developing conclusions and recommendations; work and scheduling actively coordinated with ERO staff and technical committees; and ensuring assessments and technical reports are properly staged for review periods and acceptance processes. As presented during the MRC Informational Session, ERO Enterprise reliability assessment leadership provides direct guidance on what assessments should be performed leveraging existing data and analysis, prioritizing emerging issues, and directing work to the technical committees. This group relies heavily on the findings of a variety of technical stakeholder groups, the Reliability Issues Steering Committee (RISC), regional technical groups, and the Board. NERC technical committees, the MRC, and the Board have an opportunity to review these reports as identified in the MRC Informational Session background materials. The Board requests MRC input on whether the presented framework (see Attachment A) provides sufficient clarity around the planning and review process for reliability assessments. Item 2: Scope and Plans for Distributed Energy Resources Task Force The Distributed Energy Resources Task Force (DERTF) has been established in response to Recommendation 4 of the Essential Reliability Services Task Force Measures Framework Report and a scope for the task force

3353 Peachtree Road NE Suite 600, North Tower

Atlanta, GA 30326 404-446-2560 | www.nerc.com

http://www.nerc.com/gov/bot/MRC/Agenda%20Highlights%20nad%20Minutes%202013/MRC_Informational_Session_Agenda_07-13-16.pdfhttp://www.nerc.com/gov/bot/MRC/Agenda%20Highlights%20nad%20Minutes%202013/MRC_Informational_Session_Agenda_07-13-16.pdfhttp://www.nerc.com/gov/bot/MRC/Agenda%20Highlights%20nad%20Minutes%202013/MRC_Informational_Session_Agenda_07-13-16.pdfhttp://www.nerc.com/comm/Other/essntlrlbltysrvcstskfrcDL/ERSTF%20Framework%20Report%20-%20Final.pdfhttp://www.nerc.com/comm/Other/essntlrlbltysrvcstskfrcDL/DERTF_Scope_Final.pdf

is posted on the NERC website. This task force will develop a report focused specifically on operational and planning impacts of Distributed Energy Resources (DERs) and examine potential reliability implications. This report will also explore existing policies oriented to support the reliable integration of DERs on the bulk power system and further examine the interplay with other essential reliability services. In developing this report, the task force will review the NERC Functional Model, existing NERC Reliability Standards, and coordinate with IEEE standard 1547 related efforts. Additionally, the task force will review definitions for Behind-the-Meter Generation (BTMG), Distributed Generation (DG), and other related terms to provide clear distinctions between each category for inclusion in the report. The DERTF will terminate upon finalization of a DER report, which will be submitted to the Board in early 2017. The Board requests MRC input on whether the scope of the DERTF reflects suitable focus areas for evaluation and recommendation development. Item 3: ERO Enterprise Strategic Planning and Metrics As noted during the July 13, 2016, MRC Informational Session, the existing ERO Enterprise strategic planning documents were consolidated to create a single document that integrates the ERO Enterprises goals, metrics, longer-term strategic planning considerations, and the risk priorities from the RISC. NERC is requesting MRC policy input on the content of the ERO Enterprise Strategic Plan and supporting activities for 2017-2020. The ERO Enterprise Strategic Plan has been updated to incorporate the following:

RISCs proposed risk profiles for 2016 (see Appendix 3this includes a brief description of the risk and the recommendations; the full risk profiles are available, which contain additional details on the risk descriptions);

Existing ERO Enterprise longer-term planning considerations (see Appendix 2);

ERO Enterprise strategic goals and associated contributing activities for the 20162019 planning period (see pp. 49); and

Proposed ERO Enterprise results-based reliability metrics, which measure desired outcomes (see Appendix 1). These metrics are intended to be measured and trended over time, with the sub-components for metric 3 evaluated annually to target key reliability risks. The proposed metrics are preliminary, and will continue to be developed over the next few months.

The Board requests MRC input on the following to inform the ERO Enterprise Strategic Plan for 20172020:

1. Do the RISCs risk profiles identify the most important emerging risks to reliability?

2. Are the longer-term considerations addressing key emerging risks to reliability?

3. Do the strategic goals and their current contributing activities focus on the right priorities for 20172020?

http://www.nerc.com/gov/bot/MRC/Agenda%20Highlights%20nad%20Minutes%202013/MRC_Informational_Session_Agenda_07-13-16.pdfhttp://www.nerc.com/gov/bot/MRC/Documents/Draft%20ERO%20Enterprise%20Strategic%20Plan_07%2012%2016.pdfhttp://www.nerc.com/comm/RISC/Documents/All%20profiles.pdf

4. Do the proposed metrics focus on, and drive mitigation for the most important risks to provide more enduring, measurable progress in improving and maintaining reliability?

As a reminder, the full agenda packages for the Board, Board Committees and MRC meetings will be available on July 27, 2016. I encourage the MRC to review the agenda materials for the August 2016 Board and MRC meetings, once available, and offer any additional input that is meaningful and timely to industry and stakeholders. Written comments should be sent to Kristin Iwanechko, MRC Secretary ([email protected]) by August 3, 2016, for the Board to review in advance of the meetings scheduled for Halifax. Sincerely,

Fred W. Gorbet, Chair NERC Board of Trustees cc: NERC Board of Trustees Member Representatives Committee

mailto:[email protected]

Attachment A Policy Input Letter July 13, 2016

Reliability Assessments Framework

The ERO Reliability Assessment program has established a framework for its core reliability assessments, as provided in the table below:

Agenda Item 5a MRC Meeting August 10, 2016

Reliability Assessments Planning and Review Process

Action Discussion Background It is North American Electric Reliability Corporation (NERC) and the Electric Reliability Organizations (EROs) objective to have an expeditious and efficient planning and review process for Reliability Assessments. In the planning and review process, it is important that the process provide for administrative preparation and adequate review time by relevant participants and contributors, including NERC Management and staff, stakeholder groups, NERC Technical Committees, the Member Representatives Committee (MRC), and the Board of Trustees (Board). The ERO Reliability Assessment program has established a framework for its core reliability assessments, as provided in the table below:

In terms of annual production, the NERC Reliability Assessment team will develop work and review plans that do not overlap and achieve a balance of providing adequate technical and policy-oriented stakeholder reviews and delivering timely information to industry and policy makers. The ERO expects to publish a total of six to seven reports per year under Section 800 of the NERC Rules of Procedure. These include one Long-Term Reliability Assessment, two Seasonal Assessments, one State of Reliability Report, and two to three Special Assessments. Special Assessments can be short-term (similar to the recent assessment on natural gas and operational risk) or they can be longer-term assessments on a specific topic (similar to NERCs

Clean Power Plan analysis, essential reliability services report and the upcoming Distributed Energy Resources Task Force final report). Additional information on short-term special assessments is included in the scoping document on the NERC website. In addition, providing front-end input into selection of special reliability assessments (e.g., short-term assessment) and other assessment reports is important to the ERO. A group of ERO Enterprise reliability assessment and performance analysis leadership provides direct guidance on what assessments should be performed leveraging existing data and analysis, prioritizing emerging issues, and directing work to the technical committees. This group relies heavily on the findings of a variety of technical stakeholder groups, the Reliability Issues Steering Committee, regional technical groups, and the Board. Additional efforts are underway through the ERO Enterprise reliability assessment and system analysis leadership to improve visibility and ensure that there are no duplicative efforts between NERC and the Regions. NERC will continue to work with the Regions to promote alignment for developing and implementing assessment activities that are most aligned with the highest priority reliability issues. This alignment will also extend to NERCs Stakeholder Committees, enabling a uniform approach for report development, providing input into assessments, and reviewing and endorsing final reports.

http://www.nerc.com/comm/PC/Reliability%20Assessment%20Subcommittee%20RAS%202013/Short-Term%20Special%20Assessments%20Overview.pdf

Agenda Item 5b MRC Meeting August 10, 2016

Scope and Plans for Distributed Energy Resources Task Force

Action Discussion Background The Distributed Energy Resources Task Force (DERTF) was established in response to Recommendation #4 of the Essential Reliability Services Task Force (ERSTF) Measures Framework Report. This task force will develop a report focused specifically on operational and planning impacts of Distributed Energy Resources (DERs) and examine potential reliability implications. This report will also explore existing policies oriented to support the reliable integration of DERs on the bulk power system (BPS) and further examine the interplay with other Essential Reliability Services (ERSs). In developing this report, the task force will review the NERC Functional Model, existing NERC Reliability Standards, and coordinate with the Institute of Electrical and Electronics Engineers (IEEE) standard 1547 related efforts. Additionally, the task force will review definitions for Behind-the-Meter Generation (BTMG), Distributed Generation (DG), and other related terms to provide clear distinctions between each category. The scope for the DERTF is posted on the NERC website. Summary The DERTF will examine existing practices for incorporating DERs into planning models and studies, identify operational impacts to the BPS, and review existing NERC standards to ensure that DERs can be integrated reliably on the BPS. In addition, the task force is coordinating efforts with the IEEE standard 1547 group to ensure essential services such as voltage and frequency support are maintained. Lastly, the DERTF will review the NERC Functional Model in comparison to definitions of DERs. A final report is expected to be accepted by the Planning and Operating Committees by the end of this year. Final stakeholder review will occur in January 2017, and the report will be sent to the NERC Board of Trustees in February 2017. The MRC is encouraged to submit comments through policy input to support the development of the report. NERC is also hosting a DER workshop that will invite participation from industry, stakeholders, and regulatory entities to discuss four specific topics in relation to DERs. The topics are:

1. Aligning the definitions of DERs

2. Load and Generation Modeling

3. Voltage, Frequency Performance, and ERSs

4. Observability and Control More information on the workshop to be held on August 2-3, 2016, in Atlanta, GA can be obtained on NERC Website.

http://www.nerc.com/comm/Other/essntlrlbltysrvcstskfrcDL/ERSTF%20Framework%20Report%20-%20Final.pdfhttp://www.nerc.com/comm/Other/essntlrlbltysrvcstskfrcDL/ERSTF%20Framework%20Report%20-%20Final.pdfhttp://www.nerc.com/comm/Other/essntlrlbltysrvcstskfrcDL/DERTF_Scope_Final.pdfhttp://www.nerc.com/news/Pages/Make-Plans-to-Attend-Distributed-Energy-Resources-Workshop.aspx

Agenda Item 5c MRC Meeting August 10, 2016

ERO Enterprise Strategic Planning and Metrics

Action Discussion Background During the May 2016 Member Representatives Committee (MRC) meeting, NERC presented an ERO Enterprise Strategic Plan document that integrates the ERO Enterprises goals, metrics, longer-term strategic planning considerations, and the risk priorities from the Reliability Issues Steering Committee (RISC). On July 13, 2016, NERC requested MRC policy input on content for the ERO Enterprise Strategic Plan. This included input on the following:

The RISCs proposed risk profiles for the 2016 ERO Reliability Risk Priorities Report, which set forth the most pressing risks to reliability. Currently, there are nine risk profiles with accompanying proposed recommendations;

The existing ERO Enterprise longer-term planning considerations;

The ERO Enterprise strategic goals and associated contributing activities for the 20162019 planning period, and whether they focus on the right priorities for 20172020; and

Proposed ERO Enterprise results-based reliability metrics, which are intended to be trended over time to measure progress on reliability improvement to inform the goals and activities in the strategic plan. Metric 3 is designed to adjust annually to address trends in current risks, and contains five sub-metrics for 2017.

The development schedule for the 2017 Business Plan and Budget (BP&B) is also included in the ERO Enterprise Strategic Plan. While the ERO Enterprise continually reviews priorities and resource allocations in response to the strategic plan, in 2017 the ERO Enterprise will more closely align the 2018 BP&B development, strategic plan annual review, and metrics adjustments. An enhanced schedule for the 2018 BP&B and 20182021 Strategic Plan will be included with the final 20172020 ERO Enterprise Strategic Plan provided in November. The MRC comments, along with contributions from the NERC Board of Trustees (Board), Regional Entity Boards, and ERO Enterprise senior leadership, will be used to update the ERO Enterprise Strategic Plan and associated activities for the 20172020 planning period. The MRC will have the opportunity to provide additional feedback on the finalized draft prior to Board approval in November.

http://www.nerc.com/gov/bot/MRC/Documents/Draft%20ERO%20Enterprise%20Strategic%20Plan_07%2012%2016.pdfhttp://www.nerc.com/gov/bot/MRC/Documents/Draft%20ERO%20Enterprise%20Strategic%20Plan_07%2012%2016.pdfhttp://www.nerc.com/comm/RISC/Documents/All%20profiles.pdf


Additional Policy Discussion of Key Items from Board Committee Meetings

Action Discussion of specific items presented at the Board of Trustees (Board) Committee meetings. Staff presentations made at the Board Committee meetings will not be duplicated at the Member Representatives Committee (MRC) meeting. Summary On August 10, 2016, the MRC can expect to continue its increased participation and dialogue during the Board Committee meetings in Halifax. The MRC will have additional time for policy discussion, as part of its own agenda, to respond to the information that is presented during the Committee meetings. The Standards Oversight and Technology Committee will hold its open meeting via conference call on August 4, 2016, instead of meeting in-person in Halifax. The agendas and associated background materials are posted approximately one week in advance of the meetings on the following webpages: Standards Oversight and Technology Committee The August 10, 2016, Board committee agendas and associated background materials are posted on the following webpages: Corporate Governance and Human Resources Committee Compliance Committee Finance and Audit Committee

http://www.nerc.com/gov/bot/BOTSOTC/Pages/StandardsOversightandTechnologyCommittee(BOTSOTC).aspxhttp://www.nerc.com/gov/bot/GOV/Pages/CorporateGovernanceandHumanResourcesCommittee(GOVERNANCE).aspxhttp://www.nerc.com/gov/bot/BOTCC/Pages/ComplianceCommittee(BOTCC).aspxhttp://www.nerc.com/gov/bot/FINANCE/Pages/2013FinanceandAuditCommittee.aspx

Agenda Item 7a MRC Meeting August 10, 2016

Aliso Canyon Facility Status and Continuing ERO Assessments

Action Update Aliso Canyon Facility Status Update The Aliso Canyon Storage closure in Southern California has underscored the risk of increasing natural gas and electricity interdependency with significant reliance on gas-fired electric generating capacity, as well as increasing solar generation. This single point of disruption directly impacts 9,800 MWs of electric generation in Southern California. Jim Robb, Chief Executive Officer at the Western Electricity Coordinating Council (WECC), will briefly highlight the status of the storage facility closure, recent observations, mitigation measures employed, and the need to shift focus to the winter season when core loads will compete for natural gas. Update on Continuing ERO Assessments In consideration of the identified risk as it relates to future bulk power system (BPS) reliability, three focus areas are relevant:

1. WECC Independent Assessment (Completed) WECCs review of generation availability, transmission capability, and voltage stability provides baseline and scenario assessment.

2. Short-Term Special Assessment: Single Points of Disruption on Natural Gas Infrastructure (In-Progress, To be released in Q2 2017) Identification of other Aliso Canyon-like natural gas infrastructure that may potentially pose risks to generator availability and operational reliability. This assessment may include a post-seasonal evaluation of summer 2016 and winter 2016/2017 operations in WECC as a result of the Aliso Canyon storage facility outage.

3. Long-Term Natural Gas Assessment in the Western Interconnection (Conceptual stage) North American Electric Reliability Corporation (NERC) and WECC are considering an assessment. Conceptually, this assessment would provide insights on the trend of increasing natural gas-fired generation, identify threats, and determine what infrastructure or enhancements are needed to maintain BPS reliability.

Agenda Item 7b MRC Meeting August 10, 2016

Short-Term Special Assessment: Single Points of Disruption on Natural Gas

Infrastructure Action Update Background The North American bulk power system is undergoing an unprecedented change in the composition of the resource mix. Coal units are retiring at an unprecedented rate and are being replaced largely by natural gas and renewable energy resources. Environmental regulatory rulings are driving the rapid growth of renewable energy resources, while historically low natural gas prices are further creating incentives for new natural gas-fired generating facilities to replace retiring baseload capacity. Given these trends, NERC has increased its attention to assess and address the key risks associated with the increasing dependency on natural gas. As highlighted in numerous NERC reliability assessments, the increasing reliance on a single fuel type can lead to potential single points of disruption, exposing reliability risks that may not be studied or expected. Single points of disruption associated with natural gas infrastructure can range from disruptions with natural gas pipelines, a disruption of liquefied natural gas (LNG) transport operations, or natural gas storage disruptions. The Aliso Canyon Storage closure in Southern California has underscored this risk with significant reliance on gas-fired electric generating capacity, as well as increasing solar generation. This single point of disruption directly impacts 9,800 MW of electric generation in Southern California. Whereas resource adequacy assessments may show satisfactory reserve margins, one single point of disruption can lead to significant losses of generation and create wider-spread reliability issues on the transmission system. Scope of Short-Term Special Assessment Single points of failure associated with natural gas infrastructure can range from disruptions with natural gas pipelines, a disruption of LNG transport operations, or natural gas storage disruptions. The NERC short-term assessment will broadly evaluate natural gas infrastructure that could pose reliability risks should an outage occur. NERC staff is working closely with Argonne National Laboratory to leverage on-going and related evaluations. At the time of preparing this background document, ERO Enterprise Staff and the Reliability Assessment Subcommittee have not yet endorsed or approved a final scope for this short-term special assessment; however, the topic has been selected and the assessment approach is currently being evaluated. Additionally, the assessment will provide an update on the Aliso Canyon Storage outage, the mitigation measures implemented, and an evaluation of the impacts, should they occur during the upcoming summer or winter periods.

NERCs Reliability Assessment staff will be working with the Reliability Assessment Subcommittee to refine and finalize the scope and to gather the pertinent data for the assessment. A report will be developed and submitted for acceptance by the NERC Planning Committee in Q2 of 2017. The report is expected to be released at the end of second quarter of 2017 following acceptance from the NERC Board of Trustees.

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Summary of Current FERC Reliability Activities

Action Information Background Provided below is a summary of current activity of the Federal Energy Regulatory Commission (FERC or the Commission) impacting NERC matters. A presentation of these items will be given by Michael Bardee, Director, Office of Electric Reliability, FERC, during the August 10, 2016 MRC meeting. Summary Essential Reliability Services Reactive Power Requirements for Non-Synchronous Generation (Order No. 827) On November 19, 2015, FERC issued a Notice of Proposed Rulemaking (NOPR) proposing to revise the pro forma Large Generator Interconnection Agreement and Small Generator Interconnection Agreement (Interconnection Agreements) to eliminate exemptions for wind generators from the requirement to provide reactive power and impose reactive power requirements on non-synchronous generators. The Commission stated that its proposal would create comparable reactive power requirements for non-synchronous and synchronous generators and ensure sufficient reactive power is available on the electric grid as more non-synchronous generators seek to interconnect.

On June 16, 2016, the Commission issued Order No. 827, approving the elimination of the exemption for wind generators to provide reactive power requirements and establishing reactive power requirements for all newly interconnecting non-synchronous generation. The order takes effect 90 days after publication in the Federal Register. Ride-Through Requirements for Small Generators On March 17, 2016, FERC issued a NOPR under section 206 of the Federal Power Act (FPA) proposing to revise the pro forma Small Generator Interconnection Agreement (SGIA) to require new small generation facilities to ride through and stay connected during abnormal frequency and voltage events. In particular, the Commission proposed to add new Section 1.5.7 to the SGIA to require that (i) interconnection customers maintain frequency and voltage ride through capability and not disconnect after a frequency or voltage event; and (ii) transmission providers coordinate the small generating facilitys protective equipment settings with any automatic load shedding program. On July 21, 2016, FERC issued a final rule revising the pro forma SGIA to include a requirement that small generating facilities ride through frequency and voltage disturbances. In addition, the

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final rule requires that the transmission provider coordinate the small generating facilitys protective equipment settings with any automatic load shedding program. The order takes effect 65 days after publication in the Federal Register. Security of Grid Order Denying Rehearing of Order No. 822 On January 21, 2016, the Commission issued Order No. 822 approving seven CIP Reliability Standards and several new and modified definitions.1 The Commission also directed NERC to develop certain modifications to those standards. On February 22, 2016, the Foundation for Resilient Societies and Isologic LLC separately filed requests for rehearing of Order No. 822. The requests for rehearing raised issues regarding (1) development of a definition for the term communications network for inclusion in the NERC Glossary, (2) excluding substations from the CIP standards, and (3) requiring removal of cyber malware embedded in the Bulk-Power System based on concerns related to the Ukraine incident. The Foundation also requested modification of Order No. 822 to clarify that it is not the intent to preclude complementary operational cybersecurity programs. On July 21, 2016, the Commission issued Order No. 822-A, denying the requests for rehearing. The Commission stated that there is no support for the assertion that section 215 of the FPA requires the development of a NERC Glossary definition of communication networks. The Commission also rejected the claim that substations are excluded from protection under the CIP Reliability Standards as bulk electric system substations within the Commissions jurisdiction are protected under the CIP standards. As to the concern regarding the Ukraine incident, the Commission noted that it ordered NERC to study remote access issues and is concurrently issuing a Notice of Inquiry (NOI), discussed below. Lastly, the Commission stated that nothing precludes entities from implementing additional measures to address cybersecurity threats. Order No. 822-A takes effect 60 days after publication in the Federal Register.

Supply Chain Management (Order No. 829) On July 16, 2015, FERC issued a NOPR related to proposed revisions to the cybersecurity Critical Infrastructure Protection Reliability Standards (CIP Revisions NOPR). While proposing to approve the revisions to the CIP standards, the Commission, among other things, proposed to direct NERC to develop a new or modified Reliability Standard to provide security controls for supply chain management for industrial control system hardware and software, and computing and networking services associated with Bulk Electric Systems operations. On January 21, 2016, the Commission issued Order No. 822, approving the revisions to the CIP standards and directing NERC to make certain modifications to those standards. Order No. 822, however, did not address the proposed supply chain management directive as, based on the comments on the NOPR, the Commission scheduled a staff-led technical conference for later in the month to facilitate a structured dialogue on supply chain risk management issues prior to making any determination on the proposal. On January 28, 2016, the Commission hosted the supply chain management technical conference.

1 The seven standards are CIP-003-6, CIP-004-6, CIP-006-6, CIP-007-6, CIP-009-6, CIP-010-2, and CIP-011-2.

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On July 21, 2016, the Commission issued Order No. 829, directing NERC to develop a forward-looking, objective-based Reliability Standard that addresses supply chain management for industrial control system hardware, software, and services associated with bulk electric system operations within one year of the effective date of the order. More specifically, the order explains that the new or modified Reliability Standard should require each affected entity to develop and implement a plan that includes security controls to address the following security objectives related to supply chain management: (1) software integrity and authenticity; (2) vendor remote access; (3) information system planning; and (4) vendor risk management and procurement controls. The order does not require NERC to impose specific controls, nor mandate a one-size-fits-all approach. Instead, the order allows for the standard to provide flexibility to responsible entities as to how they meet the four supply chain security objectives articulated in the order. The order also states that NERCs response to this directive should (a) respect section 215 jurisdiction by only addressing the obligations of responsible entities and (b) not directly impose obligations on suppliers, vendors, or other entities that provide products and services to responsible entities. Commissioner LaFleur dissented from the Commissions order, arguing that the record does not support issuance of the final rule at this time. She expressed concern that, due to the complexity of the issues, the Commission has not adequately considered or vetted the Final Rule, which could hamper the development and implementation of an effective, auditable, and enforceable standard. For instance, she noted that the four security objectives discussed in the order were not identified in the NOPR and could benefit from stakeholder comment. In her presentation at the open meeting, Commission LaFleur asserted that the order lacks clear and structured guidance to result in timely development and implementation. Commissioner LaFleur stated that the more prudent course of action would be to issue Order No. 829 as a Supplemental Notice of Proposed Rulemaking (Supplemental NOPR), which would provide NERC, industry, and stakeholders the opportunity to comment on the Commissions proposed directives.

Order No. 829 takes effect 60 days after publication in the Federal Register.

NOI on Cyber Systems in Control Centers (Docket No. RM16-18-000) On July 21, 2016, the Commission also issued an NOI requesting comment on the need to modify the CIP standards to address certain issues related to the protection of cyber systems in control centers. Specifically, the Commission requests comment on possible modifications regarding: (1) isolation between the internet and cyber systems in control centers performing transmission operator functions; and (2) mandatory application whitelisting for all cyber systems in control centers. One of the impetuses for this NOI is the 2015 cyberattack in Ukraine, which is an example of how cyber systems used to operate and maintain interconnected networks more efficiently can have the unintended effect of creating cyber vulnerabilities. The Commission stated that [w]hile certain controls in the CIP Reliability Standards may reduce the risk of such attacks, the Commission seeks comment on whether additional controls should be required. The issues in the NOI also relate to issues raised in the requests for rehearing of Order No. 822. Comments are due 60 days after publication of the NOI in the Federal Register.

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Data Sharing Data Sharing Order On September 17, 2015, FERC issued a NOPR to require that NERC make its Transmission Availability Data System (TADS), Generating Availability Data System (GADS), and protection system misoperations databases available for review by FERC and its staff (Database NOPR). Specifically, FERC proposed to require that NERC provide FERC with access (i.e., view and download data), on an ongoing and non-public basis, to the TADS, GADS, and protection system misoperations databases. FERC stated that its proposed access, limited to data regarding U.S. facilities, is necessary for FERC (1) to evaluate the need to direct new or modified Reliability Standards; and (2) to better understand NERCs periodic assessments and reports. NERC filed comments in response to the Database NOPR on December 15, 2015, proposing an alternative that would provide the Commission with anonymized versions of TADS, GADS, and protection system misoperations data under a two-phase approach facilitated by a Commission and NERC staff Information Sharing Working Group established within 90 days of the Commissions order on the NOPR. On June 16, 2016, the Commission issued Order No. 824, approving Availability of Certain North American Electric Reliability Corporation Databases to the Commission. Order No. 824 requires that NERC provide the Commission and its staff with access to TADS, GADS, and protection system misoperations databases. New regulation 18 C.F.R. 39.11(c) now expressly clarifies that, [s]uch access will be limited to: (1) data regarding U.S. facilities and (2) data that is required to be provided to the ERO. The Commission determined that its approach to limit access to data that is related to U.S. facilities and provided on a mandatory basis should mitigate concerns raised by NERC and other commenters regarding potential impacts on the level and quality of voluntary information-sharing.

Finally, to address concerns regarding confidentiality, the Commission noted that its final rule will not become effective until implementation of provisions under the FAST Act (Regulations Implementing FAST Act Section 61003 - Critical Electric Infrastructure Security and Amending Critical Energy Infrastructure Information) to secure sensitive energy infrastructure information. Simultaneous with Order No. 824, the Commission issued the FAST Act NOPR (discussed immediately below).2

The order will take effect upon a final rule implementing the FAST Act procedures.

2 Regulations Implementing FAST Act Section 61003 Critical Electric Infrastructure Security and Amending Critical Energy Infrastructure Information, 155 FERC 61,278, at n. 13 (2016) (FAST Act NOPR) (noting, Information downloaded by Commission staff from private databases that are accessed pursuant to Commission order or regulation will be maintained as non-public information consistent with the Commissions internal controls. [citing Order No. 824] If the commission receives a request for access to downloaded information, the Commission will evaluate whether the information meets the definition of CEII or is proprietary information or otherwise privileged or non-public and will provide the owneropportunity to comment.).

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NOPR on Regulations Implementing FAST Act Section 61003 Critical Electric Infrastructure Security and Amending Critical Energy Infrastructure Information On June 16, 2016, the Commission issued a NOPR proposing to implement provisions of the FAST Act related to designation, protection, and sharing of CEII. The NOPR proposes to amend the Commissions CEII regulations by (i) establishing criteria and procedures for designating information as CEII, (ii) prohibiting unauthorized disclosure of CEII, (iii) establishing sanctions for FERC employees and certain other individuals who knowingly and willfully make unauthorized disclosures, and (iv) facilitating voluntary sharing of CEII among federal, state, political subdivision, tribal authorities, NERC, Regional Entities, owners, operators, and users of CEII, and other entities deemed appropriate by the Commission. Comments are due 45 days after publication of the NOPR in the Federal Register. Reliability Standards

NOPR on Disturbance Control Standard-Contingency Reserve for Recovery from a Balancing Contingency Event Reliability Standard On January 29, 2016, NERC filed a petition for approval of proposed Reliability Standard BAL-002-2 (Disturbance Control Standard-Contingency Reserve for Recovery from a Balancing Contingency Event Reliability Standard). Proposed Reliability Standard BAL-002-2 is designed to ensure that these entities are able to recover from system contingencies by deploying adequate reserves to return their Area Control Error (ACE) to defined values and by replacing the capacity and energy lost due to generation or transmission equipment outages. On February 12 and March 31 2016, NERC filed clarifying supplemental information to the petition. On May 19, 2016, the Commission issued a NOPR proposing to approve Reliability Standard BAL-002-2 and eight new and revised NERC Glossary definitions.

The Commission states in the

NOPR that the standard improves upon currently-effective Reliability Standard BAL-002-1 by consolidating the number of requirements to streamline and clarify the obligations related to maintaining adequate reserves. In proposing to approve BAL-002-2, the Commission proposes to direct NERC to develop modifications regarding the 15-minute ACE recovery period in Requirement R1 and the 90-minute Contingency Reserve Restoration Period in Requirement R3. In addition, the Commission proposes to direct NERC to develop a new or modified Reliability Standard that addresses the reliability impact of megawatt losses above a responsible entitys Most Severe Single Contingency (MSSC). Finally, the Commission proposes to direct NERC to assign a high Violation Risk Factor to proposed Reliability Standard BAL-002-2, Requirements R1 and R2. In addition to seeking comments on each of its proposals, the Commission seeks comment on whether the definition of Contingency Reserve should reference the NERC Glossary definition for the term Demand-Side Management.

Comments on the NOPR are due sixty days (60) after publication in the Federal Register.


Accountability Matrix

Action Information Background The Accountability Matrix tracks key action items resulting from the quarterly MRC and Board of Trustee meetings and the policy input letter responses. The Accountability Matrix is updated quarterly and posted on the NERC website. Attachment

1. Accountability Matrix July 27, 2016

Accountability MatrixJuly 27, 2016

Identifier Topic Summary of Commitment Comments/Status Open/Closed

2016-01

ERO Enterprise Strategic Planning

Redesign and Metrics

(1) Consolidate strategic planning documents to ensure clearer linkages to the various inputs.

(2) There should be a reduced set of metrics that are outcome and results-based.

In May 2016, NERC presented a consolidated ERO Enterprise Strategic Plan document that integrates the ERO Enterprise's goals, metrics, longer-term strategic planning considerations, and the risk priorities from the RISC. In July 2016, policy input on the content for the strategic plan, including draft outcome and results-based metrics for 2017 was requested. Input will then be requested on the proposed strategic plan and metrics in October before submitting to the Board for approval in November. Open

2016-02

2017 Business Plan and Budget

Linkage to Strategic Plan

Include clearer linkages in the 2017 BP&B to the strategic plan goals.

Additional documentation has been included in the 2017 BP&B and associated presentation materials regarding the alignment between departmental activities and the strategic plan, as well as RISC priorities. Management will continue to review incorporating additional enhancements in future business plans and budgets. Open

2016-03

Efficiences from Program Area

Transformations in 2017 Business Plan and Budget

The 2017 BP&B should identify efficiences gained from the maturation and transformation of various program areas (i.e., risk-based CMEP, standards).

The 2017 BP&B includes comments about steady state and efficiencies in several areas. The standards (draft 1, page 24) and compliance (draft 1, page 28) sections note the departments have achieved, or are moving toward the achievement of, stability. Both departments reflect a decline in allocated FTEs. Comments related to budget assumptions, including the prioritization of resources for efficiency, is also included (draft 1, page 12) and extensive discussion of efficiencies gained through new technology is found in the Information Technology section (draft 1, page 70). Open

2016-04

Communication of Action Plans in

Response to Survey Results

Provide more clarity around action items from survey results.

NERC revisited the 2015 survey results and developed action plans to address concerns regarding regional consistency in registration and in compliance monitoring and enforcement. NERC is also analyzing the 2016 survey results to identify any additional themes and develop action plans to address those. The 2015 and 2016 action plans, as well as a final report of the survey results, will be presented at the August 10 CGHRC meeting. Open

2016-05Internal Controls Evaluations (ICE)

Increase registered entity engagement with internal controls evaluations.

The ERO Enterprise is working to enhance the evaluation of internal controls to increase the benefit to registered entities. Open

2016-06

Review and Timeline of Reliability

Assessments

Review the plan for reliability assessments planned for 2016 and 2017 and develop a timeline for each assessment that includes industry touchpoints and sufficient time for industry review. Ensure that the schedule stages the release of assessments so multiple reports are not being reviewed at the same time. Leverage work already being conducted by industry to avoid duplication.

NERC has reviewed its existing timelines to refine the timing of delivery of assessments to ensure that adequate time has been provided for stakeholder review as well as MRC and Board review and approval. NERC intends to more fully leverage its stakeholder committees, such as the Planning Committee, Reliability Assessment Subcommittee, and ERO Enterprise leadership, to ensure that the right studies are being conducted that most effectively drive BPS reliability. This involves coordination between RISC, MRC, Board, technical committees, and the ERO Enterprise leadership. Open

2016-07MRRE Program

ConsistencyDevelop follow-up actions to ensure consistency and address lessons learned from the MRRE program.

In the first quarter of 2016, NERC and Regional Entity executives approved a task force, made up of representatives from NERC and each of the Regional Entities, focused on coordinated oversight to enhance the Multi-Region Registered Entity (MRRE) process. The task force, in conjunction with ERO Enterprise compliance leadership, provides outreach to MRREs participating in the Coordinated Oversight Program and develops procedures for use throughout the ERO Enterprise. The task force issued a survey in June 2016 to seek MRRE feedback on the program. Survey results will be presented to ERO Enterprise compliance leadership in the third quarter of 2016. The task force will use the survey results and other inputs to inform process improvements that optimize efficiency of, and consistency in, coordinated oversight activities. Implementation of communication and training for new coordinated oversight of MRRE ERO Enterprise Procedure will occur in the first quarter of 2017. Open

2016-08Confidentiality of

InformationEnsure that controls are in place within the ERO Enterprise on handling sen

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