Board of Trustees Compliance Committee August 13, 2014 | 10:00 a.m. – 11:00 a.m. Pacific
The Westin Bayshore1601 Bayshore DriveVancouver, BC V6G 2V4
Reliability Assurance Initiative (RAI) Progress ReportJerry Hedrick, Director of Regional Entity Assurance and OversightSonia Mendonca, Associate General Counsel and Director of EnforcementCompliance Committee Open MeetingAugust 13, 2014
RELIABILITY | ACCOUNTABILITY3
• RAI Project Overview• Progress Report• Compliance Exception Program• Aggregation / Logging Program• RAI Project Timelines• Regional Implementation Update• Joint Regional and Registered Entity RAI Discussions WECC / Tucson Electric SERC / Georgia Transmission Texas RE / ERCOT
Agenda
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• Compliance monitoring activities focused on risks to reliability• Enforcement resources focused on noncompliance that poses a
serious and substantial risk to reliability• Continued oversight and visibility• Discretion on whether to initiate an enforcement action to
resolve noncompliance
Overview
RELIABILITY | ACCOUNTABILITY5
Progress Report
• Develop industry and auditor training for risk elements and Inherent Risk Assessment
Resources and Tools
• Finalizing the Inherent Risk Assessment Guide and examples• Developing the Risk Elements methodology and procedures for the IP/AML• Beginning work on the Internal Control Evaluation Guide
Single Compliance Design
• Finalized user guides to support improved self-reporting process• Implemented improved process flow across ERO enterprise• Expanding aggregation/logging and compliance exception programs
Enforcement Processes
• Integrating program design feedback loops and processes• Finalizing program documents for multi-regional registered entities
Compliance and Enforcement Integration
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Compliance Exceptions Program
MRO, 14
NPCC, 3
RF, 3
SERC, 4
WECC, 4
Items Closed as of August 1, 2014
RELIABILITY | ACCOUNTABILITY7
Aggregation/Logging Program
Regional Entity Registered Entity Participants as of August 1, 2014MRO Alliant Energy East
Alliant Energy WestNebraska Public Power DistrictMidAmerican Energy CompanyAmerican Transmission Company
NPCC New York Power AuthorityRF American Electric Power (jointly with SPP and TRE)
PJM Interconnection (jointly with SERC)
SERC Associated Electric Cooperative, Inc.
TRE CenterPoint EnergyLuminant EnergyLuminant GenerationLower Colorado River Authority
RELIABILITY | ACCOUNTABILITY8
2015
Compliance and Enforcement Timeline
May 2014 User guides posted; Compliance Exceptions and Aggregation programs reviewed and expanded (throughout 2014)
July 2014 Published the Inherent Risk Assessment Guide for comment
Aug. 2014 Publish the Risk Elements Methodology for the modified Implementation Plan (IP) and Actively Monitored List (AML)Multi-Region Registered Entity (MRRE) program documents finalized (monitoring and enforcement activities)
Sept. 2014 Finalize Inherent Risk Assessment based on industry feedback
July Aug Sep Oct Nov Dec Jan Feb MarJuneMay2014
RELIABILITY | ACCOUNTABILITY9
Compliance and Enforcement Timeline
Oct. 2014 Publish the 2015 IP and AMLDevelop and begin delivering training on completed modules to industry and regional auditorsPublish the Internal Control Evaluation (ICE) and Compliance Monitoring and Evaluation Program (CMEP) Tools Modules
Q4 2014 FERC informational filing submitted Q1 2015 MRRE program implemented
Deploy ICE and Compliance Monitoring Tools
2015
July Aug Sep Oct Nov Dec Jan Feb MarJuneMay2014
RELIABILITY | ACCOUNTABILITY10
• Regional Lessons Learned From the Compliance Pilots Risk Assessment and Scoping Controls Evaluation and Testing Training and Education
• RAI Regional Program Implementation Compliance Activities Enforcement Activities
• Organizational Alignment Creation of Risk teams
Regional Implementation Update
Constance B. White Vice President of Compliance
WECC’s RAI ExperienceNERC Board Presentation
August 13, 2014
12
• IRA (Inherent Risk Assessment) o WECC reviewed TEPC’s compliance and event
history to determine any entity specific risks • ICE (Internal Controls Assessment) focused
on Operations and Planning Standards in the following risk areas: o Configuration Management o Operationso Information Managemento Planning
Tucson Electric Power –Preparation
13
• Sample Question 1: How do you control and manage changes to configuration of protection system devices?
• Controls Reviewed: Maintenance and testing program, systems and tools, interaction between systems
• Result: Risks identified
• Sample Question 2: Explain how you ensure Blackstart Resources are capable of meeting the requirements of its restoration plan
• Controls Reviewed: Annual testing of entity’s two Blackstart Resources, management observes testing, test results are documented and reviewed
• Result: Low Risk
Tucson Electric Power – ICE Example
14
• WECC identified some strong controls • Based on the results, the WECC audit team
customized the audito Removed 7 low risk requirements o Heightened focus on PRC-005 and PRC-008
• WECC plans to significantly reduce TEPC’s 2015 Self Certification
• WECC selected specific TEPC issues for the compliance exception process
Tucson Electric Power – ICE Results
15
• Entities are receptive • Training and education is necessary • Risk-based process is effective but will take
time to develop • WECC refined the processes for another
entity scheduled for audit and is focusing on CIP standards for the Internal Controls Evaluation process
• Additional clarity is needed
Tucson Electric Power – Lessons Learned
Tucson Electric Power Feedback
• Opportunity to allow for open dialogue and to tell/show our compliance “story”
• Opportunity for additional education and discussion on internal controls
• Reduced administrative burden • Suggestion: provide additional clarity of and
context for data requests in future reviews --may facilitate obtaining desired responses from registered entities
RAI Experience at SERCAugust 12, 2014Vancouver, BC
Angie SheffieldVP, General Auditor and Chief Regulatory Compliance Officer
Georgia Transmission Corporation
Scott HenryPresident and CEO
SERC Reliability Corporation
17
• Inherent Risk Assessment– Data collection regarding GTC risks through pre-audit
survey– SERC’s consideration of risks resulted in adjustment of
standards in scope as compared to AML Focus on communication and coordination of operators
due to arrangement of entity with other entities for performance of registered functions
Scope increased by eight Requirements
Pre-Audit Preparation
18
• Internal Controls Evaluation– SERC auditors reviewed GTC’s Independent Audit
Reports (IAR)– SERC accepted GTC’s IAR
For 18 of the 38 requirements in scope, SERC did little to no additional testing
Pre-Audit Preparation
19
• Audit team deemed IAR adequately addressed Standards/Requirements.
• IAR reflected an appropriate level of rigor for SERC staff to draw the same conclusions.
• Audit team determined the IAR was relevant to the audit period.
• Audit team requested minor supplemental evidence.
Independent Auditor Evaluation
20
• Improved focus from prior audit in 2008– Still required same level of effort from GTC– However, more focused on GTC’s inherent risk– Did not duplicate effort by re-testing areas that GTC was
adequately monitoring• Encouraged GTC to continue building its internal
control program and endorsed our focus on self-monitoring
Benefits
21
• Additional communication/collaboration should occur during IRA
• Further training for entity and regional staff is essential– Timing
• Audit should be focused on the “what”• Risk assessment results could be used to scope other
types of compliance monitoring– Self-certifications– Spot-checks
Lessons Learned
22
Curtis Crews, Texas Reliability Entity, Inc.Chuck Manning, Electric Reliability Council of
Texas
RAI within the ERCOT Region
24
ERCOT Audit/Spot Check Experience
● Registered as BA, IA, PC, RC, RP, TOP, TSP 2008 Compliance Violation Investigation 693 2008, 2009, 2010 693 Audit 2009 CIP Spot Check 2010 CIP Audit 2011 FERC, NERC and Texas RE Investigation
(Cold Weather) 2011, 2012 Four 693 Spot Checks 2012 693 Audit 2013 CIP Audit
NERC BOTCCAugust 2014
25
ERCOT 2012 and 2013 Engagements
Attention to high risk areas
Reliability-focused engagements
In-depth review Address risk appropriately
Risk Elementsw/ Key Resources
Risk-Based
Benefits to ERCOTAudit was efficient and focusedBoth teams had the same goal of reliability and securityRecommendations and concerns versus compliance onlyProductive recommendationsCuring period allowed for further dialogue among experts
NERC BOTCCAugust 2014
Physical Security ImplementationSteven Noess, Associate Director of Standards DevelopmentCompliance Committee MeetingAugust 13, 2014
RELIABILITY | ACCOUNTABILITY28
• CIP-014-1 Purpose: “To identify and protect Transmission stations and Transmission substations, and their associated primary control centers, that if rendered inoperable or damaged as a result of a physical attack could result in widespread instability, uncontrolled separation, or Cascading within an Interconnection.”*
*Note: (“widespread” proposed for removal by FERC in NOPR issued July 17, 2014)
Overview
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• Applies to certain Transmission Owners (TOs) and Transmission Operators (TOPs)
• Standard requires owners or operators to: Identify critical facilities on the Bulk-Power System Evaluate threats on those facilities Implement plans to protect critical facilities against those threats
Requirements
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All TOs and TOPs (CIP-014-1 not applicable to all)
Applicable TOs who must determine if stations/substations are “critical”
TOs/TOPs with critical facilities (full standard applies)
Tiered Applicability
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• Critical facility identification must be verified by third party Directed by FERC order Verifier must be a Planning Coordinator, Transmission Planner, Reliability
Coordinator, or entity with transmission planning experience Verification may recommend addition/subtraction
• Threat evaluation and security plan reviewed by third party Directed by FERC order Reviewer must meet certain experience criteria Review may recommend changes to security plan
Third-Party Verifications/Reviews
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• NOPR proposing approval issued July 17, 2014• Forty five-day comment period from federal register
publication, September 22, 2014• NOPR proposes to direct two modifications: Governmental authorities may add or subtract from critical facilities Revise certain wording that may narrow scope (“widespread”)
• NOPR proposes to direct two informational filings: “High Impact” Control Centers (six months of effective date of final rule) Possible resiliency measures, in addition to those required by standard,
following loss of critical facilities (one year of effective date of final rule)
FERC Proposes Approval
RELIABILITY | ACCOUNTABILITY33
• Critical facility identification: complete before effective date (six months following FERC approval) Standard filed with FERC May 23, 2014 NOPR proposing approval (with directives) issued July 17, 2014
• Tiered timeline for balance of requirements (within 15 months)• Training and other coordination Audit and Enforcement Common approaches (Planning Committee, regional groups, etc.)
Implementation
RELIABILITY | ACCOUNTABILITY34
• NERC Board of Trustees directed NERC management to monitor and assess implementation on ongoing basis: Number of assets critical under the standard Defining characteristics of the assets identified as critical Scope of security plans (types of security and resiliency contemplated) Timelines included for implementing security and resiliency measures Industry’s progress in implementing the standard
ERO to Monitor Implementation
RELIABILITY | ACCOUNTABILITY37
ERO Enterprise 2014 Goals—Compliance Enforcement
• Timeliness and transparency of compliance results (caseload index and violation aging)
• Promotion of self-identification of noncompliance
• Timeliness of mitigation • RAI enforcement reforms
2014 Goals
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Caseload Index as of July 1, 2014
Target: 7 months Threshold: 8 months
ERO
Enterprise
9.5 months
Regional Entities
8.3 months
NERC
1.2 months
* Excludes violations that are held by appeal, a regulator, or a court.
RELIABILITY | ACCOUNTABILITY39
Caseload Reduction as of July 1, 2014
Target: 0Threshold: 65
* Excludes violations that are held by appeal, a regulator, or a court.
RELIABILITY | ACCOUNTABILITY40
Violation Age in the ERO Enterprise
* Excludes violations that are held by appeal, a regulator, or a court.
RELIABILITY | ACCOUNTABILITY41
Violation Age in the ERO Enterprise –Inventory by Discovery Year
* Excludes violations that are held by appeal, a regulator, or a court.
RELIABILITY | ACCOUNTABILITY42
Promoting Self-Assessment and Identification of Noncompliance
Target: 75%Threshold: 70%
RELIABILITY | ACCOUNTABILITY43
Monitoring Mitigation Completion Pre-2014 Progress
Time frameProgress
toward the goal
Threshold Target
2013 56% 75% 80%
2012 87% 90% 95%
2011 94% 95% 98%2010 and
older 99% 98% 100%