Board of Trustees MeetingMay 7, 2014 | 8:30 a.m. - Noon EasternHyatt Regency Philadelphia at Penn’s Landing201 S. Columbus Blvd.Philadelphia, PA 19106
Consent Agenda
Regular Agenda
Opening Remarks by Board Chair
Remarks by FERC Commissioner Cheryl LaFleur
Remarks by FERC Commissioner Tony Clark
Remarks by Mr. Denis O’Brien CEO, Exelon Utilities
President’s Report
Standards
Mark Lauby, Senior Vice President and Chief Reliability OfficerBoard of Trustees MeetingMay 7, 2014
RELIABILITY | ACCOUNTABILITY10
Demand Data (MOD C) – MOD-031-1
• Reliability benefits Establishes consistency in data requirements and reporting procedures Provides the authority to collect data necessary for reliability Identifies responsible entities
• Action Adopt MOD‐031‐1 Demand and Energy Data and associated documents
RELIABILITY | ACCOUNTABILITY11
Voltage and Reactive Control – VAR-002-3
• Reliability benefits Ensures Generator Operators (GOPs) provide reactive and voltage support Enable GOPs to operate in controlling voltage or other mode as instructed by the Transmission Operator (TOP)
Requires GOPs to follow notification requirements established by the TOPs
• Action Adopt VAR‐002‐3‐Generator Operation for Maintaining Network Voltage Schedules and associated documents
RELIABILITY | ACCOUNTABILITY12
• Reliability Benefits Reliability‐related information for Emergency and non‐Emergency Operating Instructions is conveyed effectively, accurately, and consistently, in a timely manner towards mutual understanding by all key parties
• Action Adopt COM‐002‐4—Operating Personnel Communication Protocols and associated documents
Rescind approval of Interpretation of COM‐002‐2, effective upon implementation of COM‐002‐4 in substantially the form adopted by the Board
Communication Protocols COM-002-4
RELIABILITY | ACCOUNTABILITY13
• Background FERC directed modification of Violation Risk Factors (VRFs) and Violation Severity Levels (VSLs) in 11 Reliability Standards
• Action Adopt Violation Risk Factor/Violation Severity Level Revisions:
o TPL‐001‐4o CIP Version 5 (CIP‐003‐5, CIP‐004‐5.1, CIP‐006‐5, CIP‐008‐5, CIP‐009‐5)o MOD‐026‐1 and MOD‐027‐1o PRC‐005‐2 and PRC‐005‐3o BAL‐003‐1
Modify VRFs and VSLs as directed by FERC
RELIABILITY | ACCOUNTABILITY14
• Background FERC order issued on March 7, 2014, directed NERC to submit Reliability Standard(s) that require steps to address physical security risks and vulnerabilities within 90 days
• Final ballot update
Physical Security Standard
RELIABILITY | ACCOUNTABILITY15
Amendments to SERC Bylaws
State of Reliability Report
Howard Gugel, Director, Performance AnalysisBoard of TrusteesMay 7, 2014
RELIABILITY | ACCOUNTABILITY18
• Purpose – independent view of performance• Identify trends and risks to reliability• Provide recommendations• Serve as risk‐informed input to: Reliability Issues Steering Committee (RISC) project prioritization Standards projects Reliability assurance initiatives Event analysis reliability assessment, and critical infrastructure protection
State of Reliability
RELIABILITY | ACCOUNTABILITY19
Sustained High BPS Performance
RELIABILITY | ACCOUNTABILITY20
Frequency Response Remains Stable
RELIABILITY | ACCOUNTABILITY21
Protection System Misoperations and Failed AC Substation Equipment
‐0.06
‐0.04
‐0.02
0
0.02
0.04
0.06
0.08
RELIABILITY | ACCOUNTABILITY22
Transmission Outage Severity Correlation
Lightning
Weather, Excluding Lightning
Misoperation
Failed AC Substation Equipment
Power System Condition
0.12
0.13
0.14
0.15
0.16
0.17
0.18
0.19
0.2
‐0.06 ‐0.04 ‐0.02 0 0.02 0.04 0.06 0.08
Expe
cted
TADS
Event Se
verity
Correlation of Transmission Severity
RELIABILITY | ACCOUNTABILITY23
Use of EEA Level 3 Declines
2006 2007 2008 2009 2010 2011 2012 2013NERC 7 23 12 41 11 23 15 7FRCC 0 0 0 0 0 0 0 1MRO 0 0 0 0 0 0 0 0NPCC 0 0 1 1 0 0 0 0RFC 0 3 1 0 2 0 1 0SERC 4 14 2 3 4 2 7 0SPP 1 5 3 35 4 15 6 2TRE 0 0 0 0 0 1 0 0WECC 2 1 5 2 1 5 1 4
YearNumber of Events
RELIABILITY | ACCOUNTABILITY24
• Integrate RISC control projects• Physical and cyber security Develop security performance metrics
• Integrating variable resources Solar Wind
• Changes in historical resource mix Gas/coal Demand as a resource
• Validate analyses using Events Analysis insights
Focus on Reliability Risks
RELIABILITY | ACCOUNTABILITY25
2014 Summer Reliability Assessment
John Moura, Director of Reliability AssessmentsBoard of TrusteesMay 7, 2014
RELIABILITY | ACCOUNTABILITY27
1. All Regions Meet Summer Reference Margin ERCOT: sufficient margins dependent on in‐service dates of new generation MISO: retirements, derates, mothballing
2. Gas‐Electric Interdependencies – Considerations for Summer Year‐on‐year increasing dependence on gas‐fired generation Pipeline maintenance Natural gas storage
3. Continued Impacts of Baseload Retirements Contribute to tighter reserve margins Ontario retired last coal plant in April Localized reliability issues identified in operational planning
Key Findings - Summary
RELIABILITY | ACCOUNTABILITY28
• MISO‐South integration North‐south transmission constraints
• California drought impacts Conditions have improved since March “Extreme Drought” for most of California; some parts “Exceptional"
• Rail shipments of coal in the Midwest Generation impacts unlikely for summer peak Further evaluations warranted for longer‐term challenge
Other Summer Season Highlights
RELIABILITY | ACCOUNTABILITY29
• August in‐service date for needed capacity• Growth in Demand Response programs• Slower load growth projected, based on modified forecasting methodology
New Capacity in ERCOT Strengthening Reserve Margins
2,112 MW of new capacity by August
Slowed growth in load forecast
RELIABILITY | ACCOUNTABILITY30
• Retirements: 43 GW of capacity since 2011• Significant capacity reductions in Ontario and MISO• Continue to track long‐term impacts in the Long‐Term Reliability Assessment
Generator Retirements On-Pace with NERC Projections
RELIABILITY | ACCOUNTABILITY31
An Evolving Resource Mix
Natural Gas
Coal
Nuclear
Wind and Solar
RELIABILITY | ACCOUNTABILITY32
Substantial Growth in Solar Resources
On-Peak Solar Discounted
Solar Energy in WECC (primarily California)
Not counted to meet on‐peak capacity needs; potential operational
challenges
RELIABILITY | ACCOUNTABILITY33
Date Deliverables
Tuesday, April 29 Report Sent to PC, OC, and MRC for Review
Monday, May 5 Planning Committee Review & Vote to Approve Report
Tuesday, May 6 Send Report to Board of Trustees for Review
Tuesday, May 13 BOT Teleconference and Vote to Approve Report
Thursday, May 15 Target Release
Approval and Publishing Schedule
RELIABILITY | ACCOUNTABILITY34
ERO Strategic Plan Metrics
Canadian Affairs
Canadian Affairs Update
Jim BurpeePresident & CEO, Canadian Electricity AssociationNERC Board Meeting – Philadelphia, PennsylvaniaMay 7, 2014
Overview1. The Evolving Bilateral Electricity Relationship – Recent Events
• 2013 data on Canada-U.S. electricity trade
• New Minnesota-Manitoba transmission interconnection
2. CEA Policy Initiatives & Engagements – Recent Highlights• Vision 2050: The Future of Canada’s Electricity System
• EPA GHG Guidelines, Quadrennial Energy Review
• Bipartisan Policy Center Electric Grid Cybersecurity Initiative
3. Comments on Major NERC Projects & Initiatives• Physical security standard
• Risk-based registration
Page 38
1. Evolving Bilateral Electricity Relationship – Recent Events
Page 39
• Feb. 2014 – publication of 2013 NEB data on cross-border trade.
Data displayed are in gigawatt‐hours. Source: National Energy Board, Electricity Exports and Imports, 2013.
Page 40
• Key take-aways:o Exports from Canada rose 8% over 2012. U.S. exports remained even.
o 2013 continued the recent trend of increased exports from Canada.
o Most trading is transacted through the spot market (in 2013, 75%+). Long-term contracts represent <25% (and continue to decline).
o Historically, Canada has been a net exporter (exports = 5-10% of generation).
Great Northern Transmission Line• Apr. 16, 2014 – Minnesota Power applies for state and federal permits
for U.S. segment of new interconnection with Manitoba.
• Project being developed in partnership with Manitoba Hydro.
• 500 kV line from border to Iron Range; 750 MW transfer capacity.
• “Hydro by wire” from Manitoba enables “wind by wire” from North Dakota.
• Further diversifies Minnesota Power’s energy mix.
• Hydropower’s “load-following” capability and the unique “wind storage” provision add value to both wind and water assets.
• Overall project (energy + transmission line) enhances regional reliability and provides energy market benefits.
• Public engagement is ongoing for Manitoba’s segment of the line.
Page 41
Hydropower + Windpower: A Perfect MarriageManitoba Hydropower Facilitates North Dakota Windpower
Winnipeg
HVDC Line +/- 500kV(600 miles)
HVDC Line +/- 500kV(850 miles)
ManitobaHydro
Minnesota Power
New Line
Existing Line
Canada-U.S. Transmission Interconnections (Existing)
Source: National Energy Board
Page 43
2. CEA Policy Initiatives & Engagements – Recent Highlights
Page 44
Vision 2050: The Future of Canada’s Electricity System• Sheds light on the urgent need for informed decision-making –
in policy development and infrastructure investment – if Canada is to maintain a reliable, sustainable and affordable system.
• Frames context for decisions about electricity, including drivers of change, in next 5-10 years.
• Offers recommendations in areas most likely to produce the greatest transformations:o Accelerating innovation and customer management.
o Implementing financial instruments for CO2 reduction.
o Enabling electric vehicles.
o Expanding collaboration across borders.
• Serves as basis for all CEA work going forward.
Page 45
EPA GHG Guidelines, Quadrennial Energy Review• CEA is engaging in both initiatives. Similar key messages:
o Both should recognize & seek to expand benefits of U.S.-Canada integration:
Enhanced reliability and affordability; and
Reduced emissions (thru access to & support for low-carbon resources).
o More integration will help maximize North America’s clean energy potential.
• CEA appreciates the N. American scope to NERC’s QER comments.
Bipartisan Policy Center Cyber Security Report• Offers recommendations in four areas:
o Standards and best practices; info sharing; respondingto a cyber attack; and paying for cybersecurity.
• CEA participated in advisory board.
• Report’s ideas are thoughtful; a few, contentious.
3. Comments on Major NERC Projects & Initiatives
Page 46
Physical Security Standard• CEA was concerned about language in FERC Order signaling an
active role for regulatory authorities wrt to critical facilities lists.
• Draft standard has addressed this well and alleviated concerns.
• However, challenges look set to arise with 3rd-party verification:o What exactly does “verification” mean? How will verification be audited?
o How can or should compliance be linked to activities or recommendations of a 3rd-party, which falls outside of NERC and governmental oversight?
Risk-based Registration• Registration varies across Canada. Approaches build upon/are
modelled upon NERC’s program. (See CEA policy input).
• Different approaches; same goals, focus (w/positive outcomes).
Page 47
Questions?
For more information:
• Jim BurpeePresident and Chief Executive Officer(613) [email protected]
• Patrick BrownDirector, U.S. Affairs(613) [email protected]
Committee Reports
Operating Committee
Planning Committee
Critical Infrastructure Protection Committee
Member Representatives Committee
Personnel Certification Governance Committee
Standards Committee
Reliability Issues Steering Committee UpdateBob Schaffeld, Chair, NERC Reliability Issues Steering CommitteeNERC Board of Trustees MeetingMay 7, 2014
RELIABILITY | ACCOUNTABILITY56
• Process‐oriented Activities Completed Charter Changes and Triage Process Committee Interactions and ERO Planning Process Integration
• Membership Adjustments RISC Nominating Committee Process Extensions to Support Staggering and Continuity New Members
• Risk Management Activities Underway Execution in 2014 Business Planning and Budgeting for 2015 Analysis and Planning for the Future
RISC Update
RELIABILITY | ACCOUNTABILITY57
• Consistency Reviewed Standards Process Input Group (SPIG) recommendations and ensured alignment with original intent of committee creation
• Formatting Transfers charter to common NERC template
• Streamlining Moves “how” elements to member handbook, keeps “what” elements in charter
Clarifies how members are appointed to the RISC Removes MRC obligation to review charter every three years
Charter Changes
RELIABILITY | ACCOUNTABILITY58
• Execution in 2014 Triage and other process clarifications underway Reliability Leadership Summit scheduled Risk and action prioritization on schedule
• 2015 Business Plan and Budget Preparation BP&B in development, with discussion of activities linked to Reliability Risk Management
Goal: Ensure 2015 activities are aligned with Reliability Risk priorities
• Longer‐Term Detailed Risk Analyses and Strategic Planning underway Goal: Sustainable process, provides strategy and BP&B influence
Reliability Risk Management Process Status
RELIABILITY | ACCOUNTABILITY59
• Approve new Charter• Approve membership adjustments
Requested Actions
RELIABILITY | ACCOUNTABILITY60
Compliance and Certification Committee
Electricity Sub-Sector Coordinating Council
Forum and Group Reports
North American Energy Standards Board
Regional Entity Management Group
North American Transmission Forum
North American Generator Forum
Board Committee Reports
Corporate Governance and Human Resources Committee
Compliance Committee
Finance and Audit Committee
Enterprise-Wide Risk Committee
Standards Oversight and Technology Committee
RELIABILITY | ACCOUNTABILITY74