MRS Inquiry Report v-13 - FINAL...2013/09/16 · . . . /2 IN THE MATTER OF the Utilities Commission...

ERICA HAMILTON COMMISSION SECRETARY

[email protected] web site: http://www.bcuc.com

SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, BC CANADA V6Z 2N3

TELEPHONE: (604) 660‐4700 BC TOLL FREE: 1‐800‐663‐1385 FACSIMILE: (604) 660‐1102

Log No. 41453

PF/BCUC/MRS/09‐16‐2013_BCUC MRS Report

VIA EMAIL September 16, 2013 To: All Registered Parties (BCUC – MRS Inquiry)

Re: British Columbia Utilities Commission Project No. 3698595/R‐72‐12

An Inquiry into Potential Adjustments for the British Columbia Mandatory Reliability Standards Program

Further to British Columbia Utilities Commission Order R‐72‐12 establishing an inquiry into potential adjustments to the British Columbia Mandatory Reliability Standards Program, enclosed please find Order R‐33‐13 and attached Report. Yours truly, Erica Hamilton

SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, BC V6Z 2N3 CANADA web site: http://www.bcuc.com

BRIT I SH COLUMBIA

UTIL I T I ES COMMISS ION ORDER NUMBER R‐33‐13

TELEPHONE: (604) 660‐4700 BC TOLL FREE: 1‐800‐663‐1385 FACSIMILE: (604) 660‐1102

. . . /2

IN THE MATTER OF the Utilities Commission Act, R.S.B.C. 1996, Chapter 473

and

An Inquiry into potential adjustments for the British Columbia Mandatory Reliability Standards Program,

to consider (a) changes to the BC Rules of Procedure for a possible exception process, and (b) processes for assessing severity and risk for violations

BEFORE: D.M. Morton, Commissioner September 16, 2013

O R D E R WHEREAS: A. The Government of British Columbia’s 2007 “BC Energy Plan: A Vision for Clean Energy Leadership” included

Policy Action No. 14, to “ensure that the province remains consistent with North American transmission reliability standards”;

B. The North American Electric Reliability Corporation (NERC) and Western Electricity Coordinating Council (WECC) are recognized as standard‐making bodies for purposes of the reliability standards pursuant to section 125.2(1) of the Utilities Commission Act (UCA), which defines a reliability standard as follows:

“reliability standard” means a reliability standard, rule or code established by a standard‐making body for the purpose of being a mandatory reliability standard for planning and operating the North American bulk power system, and includes any substantial change to any of those standards, rule or codes”;

C. Pursuant to section 125.2(2) of the UCA, the British Columbia Utilities Commission (Commission) has exclusive

jurisdiction to determine whether a reliability standard is in the public interest and should be adopted in British Columbia;

D. Sections 125.2(6) and (7) of the UCA provide that the Commission must adopt the reliability standards presented in British Columbia Hydro and Power Authority’s assessment report in order to maintain or achieve consistency between British Columbia and other jurisdictions that have adopted mandatory reliability standards, unless the Commission concludes after a hearing that it is not in the public interest to do so;

E. Sections 125.2(8) and (9) of the UCA provide that the reliability standards adopted by the Commission apply to every “(a) prescribed owner, operator and direct user of the bulk power system, and (b) prescribed generator and distributor of electricity,” despite any exemptions under other sections of the UCA;

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. . . /3

BRIT ISH COLUMBIA

UTIL IT IES COMMISS ION ORDER NUMBER R‐33‐13

F. The Mandatory Reliability Standards Regulation (BC Reg 32/2009, Ministerial Order M039) (MRS Regulation) defines the bulk power system and other terms related to the BC MRS Program and prescribes the entities that are subject to reliability standards in British Columbia;

G. Pursuant to section 125.2(10) of the UCA which provides for the administration of adopted reliability standards, the Commission by Order G‐123‐09 adopted Rules of Procedure for Reliability Standards in BC (the BC Rules of Procedure), including a Registration Manual and a Compliance Monitoring Program for the BC MRS Program, which are similar but not identical to NERC Rules of Procedure, Statement of Compliance Registry Criteria and Compliance Monitoring and Enforcement Programs that are not part of the BC MRS Program;

H. The Commission adopted various iterations of the NERC Glossary of Terms Used in Reliability Standards, most

recently the August 4, 2011 version of the NERC Glossary adopted on October 21, 2011, in Commission Order G‐162‐11;

I. Following the Commission’s adoption of the August 4, 2011 NERC Glossary for the BC MRS Program, NERC recommended significant changes to the definition of Bulk Electric System (BES) and revisions to the NERC Rules of Procedure to provide an exception process to be used in conjunction with its proposed new BES definition;

J. In its Notice of Proposed Rulemaking (NOPR) issued on June 22, 2012 the U.S. Federal Energy Regulatory Commission (FERC) indicated that it proposed to approve NERC’s recommendations for the new BES definition and exception process following extensive development work at NERC and detailed stakeholder and regulatory consideration;

K. NERC’s proposed new BES definition embodied a process that would not be fully consistent with the definition of bulk power system embedded in the MRS Regulation in British Columbia;

L. The UCA and the MRS Regulation do not provide for a Commission exception process as part of the BC MRS Program;

M. Part 8.1 of the UCA and the Administrative Penalties Regulation (BC Reg 316/2012, OIC No. 731) empowers the Commission to impose administrative penalties and set financial limits for contraventions of BC Reliability Standards;

N. On October 9, 2012, the Commission issued Order R‐72‐12, establishing an Inquiry into potential adjustments to

the BC MRS Program to consider (a) changes to the BC Rules of Procedure to provide for a possible exception process, and (b) a process for assessing severity and risk for violations;

O. The process for the Inquiry included an Information Workshop, the circulation of “Straw‐Dog” drafts of proposed changes to the BC Rules of Procedure, written comments on the drafts, information requests and final submissions;

P. The Commission posted three Straw‐Dog drafts of proposed changes to the BC Rules of Procedure on December 20, 2012, with a request for Interveners to submit comments on the drafts by January 31, 2013;

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ORDERS/R‐33‐13_BCUC MRS Inquiry Report

BRIT ISH COLUMBIA

UTIL IT IES COMMISS ION ORDER NUMBER R‐33‐13

Q. Comments on the staff Straw‐Dogs were received from seven Interveners. Information Requests were delivered

by Commission staff and certain Interveners and responded to. Final Submissions were received from six Interveners;

R. By FERC Order No. 773 issued December 20, 2012, FERC approved the new NERC BES Definition. By FERC Order 773A issued April 18, 2013, FERC reaffirmed the new NERC BES Definition.

S. The new NERC BES Definition and NERC Rules of Procedure exception process are to become effective July 1, 2014;

T. The Commission Panel has considered the evidence and submissions filed. NOW THEREFORE for the reasons set out in the Report issued concurrently with this Order, the Commission orders as follows: 1. Subject to the Mandatory Reliability Standards Regulation (and the Utilities Commission Act, if necessary) being

amended to allow for the adoption in British Columbia of the new NERC BES Definition and an exception process, the BC Rules of Procedure will be revised to provide for the exception process described in the Report unless the legislative amendments provide otherwise.

2. The BC Rules of Procedure will be revised to provide for:

(a) the implementation of a process consistent with the North American Electric Reliability Corporation’s (NERC) Find, Fix, Track process; and

(b) the adoption of NERC’s Violation Risk Factors and Violation Severity Levels as Compliance Provisions and for the incorporation of penalty ranges consistent with the NERC penalty ranges in the BC Penalty Matrix.

3. The revisions to the BC Rules of Procedure will not provide for a Technical Advisory Committee. 4. All other minor revisions to the BC Rules of Procedure described in the Report will be made. 5. The revised BC Rules of Procedure will be made available for review and comment for a period of 30 days from

the date that the revisions are made publically available. DATED at the City of Vancouver, in the Province of British Columbia, this 16th day of September 2013. BY ORDER Original signed by: D.M. Morton Commissioner Attachment

IN THE MATTER OF

BRITISH COLUMBIA UTILITIES COMMISSION

INQUIRY INTO POTENTIAL ADJUSTMENTS TO THE BRITISH COLUMBIA MANDATORY RELIABILITY STANDARDS PROGRAM

REPORT

September 16, 2013

Before:

D.M. Morton, Commissioner

TABLE OF CONTENTS

Page No.

EXECUTIVE SUMMARY ............................................................................................................... i 1 INTRODUCTION .................................................................................................................. 1

1.1 MRS Program Evolution ................................................................................................ 1 1.2 The Regulatory Process for the Inquiry ........................................................................ 2 1.3 Assumptions .................................................................................................................. 3

2 ADJUSTMENTS TO THE BC RULES OF PROCEDURE FOR A BC EXCEPTION PROCESS ............. 4 2.1 Proposed BC Exception Process .................................................................................... 4

2.1.1 Proposed Partial Exclusion Exception Process ......................................................... 9 3 ADJUSTMENTS TO THE BC RULES OF PROCEDURE FOR A PENALTY PROCESS .................... 10

3.1 Find, Fix, Track Option for Possible Violations ............................................................ 11 3.1.1 Assessing Severity and Risk for Violations ............................................................. 13 3.1.2 Penalty Process in Relation to Factors and Amounts ............................................ 14 3.1.3 Opportunities to Comment on or Oppose Penalties ............................................. 16

4 POTENTIAL REGISTRATION CHANGES ............................................................................... 17 5 CHANGES TO THE MRS REGULATION ................................................................................ 19

5.1 Adopting NERC’s BES Definition in the BC MRS Program ........................................... 19 5.2 The Bulk Electric System and the Bulk Power System ................................................ 24 5.3 BES Definition Effective Date ...................................................................................... 24

6 FUTURE PROCESS ............................................................................................................. 26 7 OTHER MATTERS .............................................................................................................. 26 Appendix A ‐ NERC BES Definition Appendix B ‐ BC Hydro proposed Changes to the MRS Regulation Appendix C ‐ AMPC Proposed Changes to the MRS Regulation Appendix D ‐ Glossary

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EXECUTIVE SUMMARY The North American Electric Reliability Corporation (NERC) has developed a new Bulk Electric System (BES) Definition to provide a consistent and clear demarcation for applying reliability standards across North America. On July 1, 2014, this new BES Definition will come into force. As a result, the new BES Definition will be inconsistent with the definition of “bulk power system” now found in the Mandatory Reliability Standards (MRS) Regulation unless the MRS Regulation is amended to adopt the new BES Definition and provide for a comparable exception process. In November 2012, Part 8.1 of the Utilities Commission Act (UCA) and the Administrative Penalties Regulation came into force, providing the Commission with the power to impose administrative penalties and setting the penalty limits for contraventions of BC Reliability Standards. However, the Commission has not yet established a process for the determination of contraventions of Reliability Standards and the imposition of administrative penalties where it finds that contraventions have taken place. Accordingly, the Commission established the MRS Inquiry in anticipation of the need to implement the new BES Definition and exception and penalty processes in BC to ensure consistency with North American transmission reliability standards. The scope of the Inquiry was to consider:

(a) changes to the BC Rules of Procedure to provide for a possible exception process; and (b) a process for assessing severity and risk for violations.

Subject to the MRS Regulation (and the UCA, if necessary) being amended to allow for the adoption in British Columbia of the new BES Definition and an exception process the Panel is of the view that that the BC Rules of Procedure should be changed in the manner directed in this Report. The Panel provides directives concerning the form of the exception process in the event that the legislative amendments are made and unless the legislative amendments provide otherwise. In addition, amongst other directives, the Panel directs revisions to the BC Rules of Procedure that provide for:

(a) the implementation of a process consistent with NERC's Find, Fix, Track process; and

(b) the adoption of NERC’s Violation Risk Factors and Violation Severity Levels as Compliance Provisions and for the incorporation of penalty ranges consistent with the NERC penalty ranges in the BC Penalty Matrix.

The Panel also directs that the BC Rules of Procedure revisions be made available for review and comment by the parties for a period of 30 days from the date that the revisions are posted on the Commission's website. A Technical Advisory Committee was proposed in the Straw Dogs to evaluate Exception Requests and any implications of adopting NERC’s Violation Risk Factors and Violation Severity Levels factors in BC. The Panel does not approve a Technical Advisory Committee at this time.

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A number of parties provided comment on changes to the MRS Regulation and the Rules of Procedure that may be required in order to implement the new BES Definition and facilitate a closer alignment of aspects of the BC MRS program with NERC’s MRS program. However, the Panel is of the view these matters are not to be decided here, given the scope of the Inquiry. Instead, the Panel recommends that the Commission undertake a process to receive submission on these matters. Given that the new NERC definition will come into force on July 1, 2014, this process should be undertaken on an expedited basis to take into account that amendment to the UCA, in addition to changes to the Regulation, may be required.

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1 INTRODUCTION

1.1 MRS Program Evolution The British Columbia Mandatory Reliability Standards Program (BC MRS Program) establishes the rules for applying and complying with BC Mandatory Reliability Standards, which support reliability of the interconnected North American bulk electric transmission grid. Section 125.2 of the Utilities Commission Act (RSBC 1996, c. 473) (UCA) requires the Commission to adopt Reliability Standards as defined in that section that are established by a “standard‐making body” and that have been reviewed and made the subject of recommendations for adoption in British Columbia (BC) by the British Columbia Hydro and Power Authority (BC Hydro) in a report filed with the Commission, unless the Commission determines after a hearing that the Reliability Standard is not in the public interest. The UCA defines ”standard‐making body” as the North American Electric Reliability Corporation (NERC), the Western Electricity Coordinating Council (WECC) and a prescribed standard‐making body. The BC MRS Program is comparable to the broader NERC MRS Program for the applicability of Reliability Standards and compliance processes, with adjustments for provincial jurisdiction and the regulatory framework in BC. The British Columbia Utilities Commission (Commission) has established Rules of Procedure for Reliability Standards in British Columbia (BC ROP) for administration of the BC MRS Program. In the NERC MRS Program, a Bulk Electric System (BES) Definition is used together with NERC’s Statement of Compliance Registry Criteria to identify BES elements and Entities that are subject to Reliability Standards in the United States (US). In BC, the Mandatory Reliability Standards Regulation (BC Reg 32/2009, Ministerial Order MO39) (MRS Regulation) defines the “bulk power system” and various other terms related to the BC MRS Program. It is the legislative instrument which prescribes the Entities to which the Reliability Standards adopted in section 125.2(6) of the UCA apply. NERC has developed a new BES Definition to provide a consistent and clear demarcation for applying reliability standards across North America. The new BES Definition uses technical criteria to identify elements as inclusions to or exclusions from the BES, and provides for exceptions to be made where appropriate for Reliable Operation1 of the interconnected North American bulk electric transmission grid. After extensive stakeholder consultation throughout 2012, the US Federal Energy Regulatory Commission (FERC) approved a new BES Definition and exception process for the NERC MRS Program in late 2012. When it becomes effective on July 1, 2014, the new BES Definition will be

1 Capitalized words used in this Report that are not defined in this Report have the same meaning as in the Straw‐Dog drafts provided by Commission Staff in the course of this Inquiry. Straw‐Dog #1 noted that: “definitions already included in the BC Rules of Procedure or the NERC Glossary of Terms approved for use in BC will apply, unless otherwise indicated.”

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inconsistent with the definition of “bulk power system” now found in the MRS Regulation and the approach used in the BC MRS Program unless the MRS Regulation is amended to adopt the new BES Definition and provide for a comparable exception process. In November 2012, Part 8.1 of the UCA and the Administrative Penalties Regulation (BC Reg 316/2012, OIC No. 731) came into force, providing the Commission with the power to impose administrative penalties and setting the penalty limits for contraventions of BC Reliability Standards. However, the Commission has not yet established a process for the determination of contraventions of Reliability Standards and the imposition of administrative penalties where it finds that contraventions have taken place. The Commission established the MRS Inquiry in anticipation of the need to implement the new BES Definition and exception and penalty processes in BC to ensure consistency with North American transmission reliability standards. By Order R‐72‐12, the scope of the Inquiry was established as follows:

(a) changes to the BC Rules of Procedure to provide for a possible exception process; and

(b) a process for assessing severity and risk for violations. The scope of the Inquiry was developed in the context of concerns expressed by BC MRS Program stakeholders to the Commission. Many of the concerns raised related to a lack of flexibility, and the Inquiry provided an opportunity for the Commission to engage with stakeholders on how to allow for any unique characteristics of BC’s electricity system while maintaining compatibility with the NERC MRS Program in the WECC region.

1.2 The Regulatory Process for the Inquiry On October 9, 2012, the Commission issued Order R‐72‐12 establishing this Inquiry into potential adjustments for the BC MRS Program (Exhibit A‐1). Nineteen Interveners and thirteen Interested Parties registered for the Inquiry. Seven of the Interveners made written submissions and comments in the course of the Inquiry. The Panel’s determinations throughout this Report are made in consideration of the comments and submissions received in the Inquiry. All of these materials can be found on the Commission’s website. FERC and NERC materials are referenced in a number of the submissions as well, and these materials may be found on the FERC and NERC websites. BC MRS Program current and potential participants and other stakeholders were encouraged to attend an initial Information Workshop at the commencement of the Inquiry, to obtain further information about the Inquiry, the BC MRS Program, the anticipated new BES Definition and related NERC exception process, and to facilitate informed and effective participation in the Inquiry. Commission staff developed and issued three Straw‐Dog drafts to encourage input and facilitate discussion in the Inquiry:

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• Straw‐Dog #1: Proposed Changes for the BC Rules of Procedure to Include a Possible Exception Process (Exhibit A‐7) ‐ provided a possible BC Exception Process for use with a new BES Definition.

• Straw‐Dog #2: A Proposed BC‐Specific Process for Assessing Severity and Risk of Violations and Determination of Penalties (Exhibit A‐8) ‐ provided a possible approach for assessing severity and risk of violations and determining penalties.

• Straw‐Dog #3: Technical Advisory Committee (TAC) Terms of Reference (Exhibit A‐9) ‐ provided for a possible TAC, to provide the Commission with particular information and recommendations on BC‐specific technical issues as directed by the Commission.

The Initial Regulatory Timetable was revised in Order R‐10‐13 to include an opportunity for further informal discussion, as requested by Inquiry participants. The Revised Regulatory Timetable attached as Appendix B to Order R‐10‐13 (Exhibit A‐11) describes the timelines for the Inquiry concluding with the dates for Final Submissions. Comments on the Straw‐Dogs were received from seven Interveners: the Association of Major Power Consumers (AMPC), the British Columbia Municipal Electrical Utilities (BCMEU), the British Columbia Hydro and Power Authority (BC Hydro), the Clean Energy Association of B.C. (CEA), Columbia Power Corporation (CPC), FortisBC Inc. (FortisBC) and Teck Metals Ltd. (Teck). Commission staff, BC Hydro, FortisBC and AMPC provided Information Requests (IRs) to various Interveners who had contributed comments on the Straw‐Dog drafts. All IRs and responses were posted on the Commission website during the Inquiry process. FERC Order No. 773, issued December 20, 2012, approved NERC’s new BES Definition and the related revisions to the NERC Rules of Procedure. FERC Order No. 773‐A, issued April 18, 2013, denied rehearing in part, granted limited rehearing in part, and otherwise reaffirmed FERC’s determinations in FERC Order No. 773. FERC approved a 24‐month transition period after the effective date before full compliance would be required in the US for Elements that would be newly included with the new BES Definition. The new BES Definition can be found in Appendix A of this Report. Most recently, on June 13, 2013, after the filing of Final Submissions in the Inquiry, FERC granted NERC’s request to extend the effective date of the new BES Definition and Rules of Procedure exception process to July 1, 2014.2 In announcing the extension, NERC’s website reports that NERC is addressing revisions to the BES Definition (clarifications for Exclusions E1 and E3) directed in FERC Order Nos. 773 and 773‐A and flowing from NERC’s Phase II initiative.

1.3 Assumptions The new BES Definition was developed for North America through broad and inclusive NERC processes, with extensive technical work and consultation conducted in an open and public process. The BES Definition is an integral component for the NERC MRS Program and its adoption 2 The order was issued Thursday, June 13, 2013, by FERC in Docket Nos. RM12‐6‐000 and RM12‐7‐000.

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in BC is required so that BC remains consistent with North American transmission reliability standards as contemplated in Policy Action No. 14 of British Columbia’s 2007 “BC Energy Plan: A Vision for Clean Energy Leadership.”3 Accordingly, the Inquiry proceeded on the assumption that the Commission would subsequently recommend that the MRS Regulation be amended to adopt the new BES Definition and enable a corresponding exception process in the BC MRS Program.

The suitability of the new BES Definition itself or mechanisms for adopting the new BES Definition in BC were not included in the scope of the Inquiry. However, some submissions were received with comments on various aspects of the adoption of the new BES Definition. The Panel finds these submissions to be helpful in addressing the need for ongoing consistency with the broader North American MRS Program. The determinations in this Report that relate to a BC Exception Process are therefore based upon the assumption that the MRS Regulation will be amended to adopt the new BES Definition and enable the corresponding exception process that has been approved by FERC in the US.

2 ADJUSTMENTS TO THE BC RULES OF PROCEDURE FOR A BC EXCEPTION PROCESS

2.1 Proposed BC Exception Process In the NERC MRS Program, the new BES Definition refers to a NERC exception process, set out in the NERC ROP, whereby specific Elements (as defined in the NERC Glossary of Terms) that are otherwise classified as part or not part of the BES can potentially be included or excluded by exception. In the NERC framework, Regional Entities (e.g. WECC) process the exception requests and NERC confirms or denies exceptions. A similar exception process, adjusted for the Commission (rather than NERC) to consider and approve or reject exception requests for BC Entities, can be introduced into the BC ROP if the MRS Regulation (and the UCA, if necessary) is amended to adopt the new BES Definition and allow for an exception process. Such an exception process would enable the Commission to: (a) include within the BES an Element that is otherwise excluded under the new BES Definition; or (b) exclude from the BES an Element that is otherwise included, as considered necessary for Reliable Operation of the interconnected bulk‐power transmission system. The majority of Interveners’ submissions expressed general support for adding some form of BC Exception Process to the BC ROP:

• CPC submits: “the Exception Process proposed in Straw‐dog #1 should be streamlined and reasonable in terms of time, process, and cost” (Exhibit C19‐2, p. 2);

• BC Hydro confirms that: “[i]n principle, BC Hydro is supportive of the adoption of a BC Exception Process whereby Entities may request that specific Elements that would be

3 Policy Action at p. 12 “ensure that the province remains consistent with North American transmission reliability standards.”

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classified as either part/not part of the BES as a result of the new definition could be included or excluded after further consideration” (BC HYDRO Final Submission, p. 6);

• BCMEU: “[s]upports the concept that there should be an exception process and does not have any specific suggestions for revisions to the Straw Dog #1 proposals” (Exhibit C13‐2, p. 1);

• “FortisBC is also supportive, subject to the submissions below in regard to the proposed partial exclusion process, of the proposal for the adoption of the exception process as described in draft Straw Dog No.1” (FortisBC Final Submission p. 7);

• “AMPC supports the basis for Exceptions contained in Section 3.1. The Commission should maintain significant procedural flexibility regarding filing requirements and procedures, at least during the initial years of the Exception process” (AMPC Final Submission p. 12).

Emphasizing the importance of consistency with the NERC exception processes, AMPC states: “BC must not have a different standard from NERC/FERC. The goal of MRS is to protect the North American bulk power system and that can only be done through uniform definitions with a consistent exception process” (AMPC Final Submission, p. 11). However, AMPC also advocates that the Commission “maintain significant procedural flexibility” (Exhibit C14‐3, p. 3). Further, the form of BC Exception Process proposed in Straw‐Dog #1 included an additional feature, a Technical Advisory Committee (TAC), to provide the Commission with BC‐specific technical information in relation to bulk electric system configurations and operations in BC, and to review and make recommendations to the Commission on Exception Requests, for Commission determination and Order. Such a TAC was envisioned to serve as an advisory group with no other functions, activities or mandate beyond those directed by the Commission. BC Hydro submits:

“…it is essential that WECC, as the Administrator, perform the initial review of any Exception Request to determine whether an Element is necessary for the reliable operation of the interconnected bulk‐power transmission system based on criteria that are consistent with those applied across the rest of the Western Interconnection. Any recommendation by WECC could then be sent to the TAC to complete its review based on any BC‐specific criteria it develops. At minimum, a review process that follows these essential steps will ensure consistency across the WECC region, which is an identified policy goal of the BC government and of this Inquiry” (BC Hydro Final Submission, p. 7).

While CPC submits: “[t]he Commission should provide more detailed criteria for exclusion exceptions and identify any additional decision‐making criteria that it may use” (Exhibit C19‐2, p. 2). AMPC observes: “[t]he basis for the TAC is to develop these criteria” (Exhibit C14‐9, p. 14, BCUC IR 11.1). In response to the Commission’s request for comments on potential conflict between WECC and TAC recommendations (Exhibit A‐12, p. 9, BCUC IR 16.2), AMPC suggested a brief written process could be convened by the Commission (Exhibit C14‐9, p. 19, BCUC IR 16.2). However, BC Hydro suggested that: “[s]hould the BCUC be faced with significant differences in recommendations from

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the TAC and WECC, it has a complete record before it (such as reports from WECC, BC Hydro in its capacity as BA [Balancing Authority], and the TAC, as well as any comments from the Applicant) to aid in its ultimate determination” (BC Hydro Final Submission, p. 8). BC Hydro submits that the proposed form of BC Exception Process: “…does not provide other parties with adequate notice and an opportunity to be heard nor does it allow the Applicant to comment on any recommendations provided to the BCUC or challenge an Order by the BCUC approving or disapproving its Exception Request” (BC Hydro Final Submission, p. 6). In its Final Submission, BC Hydro recommends a modified BC Exception Process, which includes the following components:

• Exception Requests that have been accepted for consideration will be provided to each of:

o The Western Electricity Coordinating Council (WECC), in its capacity as Administrator, who will provide substantive review and recommendation to the BCUC

o BC Hydro, in its capacity as the BA, who will limit its review to providing comments and recommendations on those issues within its Scope of Responsibility[footnote omitted]

o The TAC, who will limit its review to providing comments and recommendations on BC‐specific technical criteria after receipt and review of WECC’s substantive review

• WECC and BC Hydro, in its capacity as the BA, will complete their review and provide recommendations to the BCUC, the TAC, the Applicant and each other within 6 months, unless the BCUC approves an alternative time period • The TAC will complete its review and provide recommendations on BC‐specific criteria to the BCUC, the Applicant, WECC and BC Hydro, in its capacity as BA, within 30 days from its receipt of the WECC report, unless the BCUC approves an alternative time period • Each of BC Hydro, in its capacity as the BA, and the Applicant have 30 days to submit comments on any recommendations provided to the BCUC by WECC, the TAC, and BC Hydro, in its capacity as the BA • The BCUC will issue a determination within 60 days from the close of submissions (BC Hydro Final Submission, pp. 6‐7).

CPC observes that the TAC: “…will play an important role in advising the Commission on critical decisions and assisting in developing the MRS Program to fit the circumstances in British Columbia” (Exhibit C19‐2, p. 2). BC Hydro proposed an alternative to the TAC proposal in Straw‐Dog #1. Under the BC Hydro alternative, WECC would perform the primary substantive review of Exception Requests and make its recommendation to the Commission, with a more limited review from BC Hydro (as the sole Balancing Authority in the Province) providing comments and recommendations on issues within the Balancing Authority’s Scope of Responsibility, followed by a TAC review limited to providing comments and recommendations on BC‐specific technical factors after TAC receives and reviews WECC’s review (Exhibit C17‐3, p. 8).

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However, BC Hydro: “…supports the formation of a TAC and the notion that the TAC be limited to serving as an advisory body to the BCUC on BC‐specific technical criteria” (BC Hydro Final Submission, p. 14). “FortisBC is supportive of the proposal in Straw Dog No. 3 for the creation of a Technical Advisory Committee for the purpose of the MRS Program. FortisBC understands that the TAC is formed at the discretion of the Commission, however, it must be emphasized that the success of such an advisory non‐binding committee is achieved through the dedication of the members of committee and the Commission to achieve the objectives. This will likely be an evolving process” (FortisBC Final Submission, p. 10). Commission Determination Subject to the MRS Regulation (and the UCA, if necessary) being amended to allow for the adoption in British Columbia of the new BES Definition and an exception process and unless, legislative amendments provide otherwise, the Panel directs that the BC ROP be revised to include a BC Exception Process. The Panel agrees with comments of the parties that in order to maintain consistency with the NERC MRS Program and WECC, the BC MRS Program will require an Exception Process. This will ensure that the BC MRS Program remains aligned with NERC’s MRS Program. Using criteria that are developed by NERC and WECC for considering exception requests would align with a desire for consistent exception process. However, the Panel recognizes that, in some cases, there may be a need to consider specific BC technical issues. Commission’s Status Quo vs. a Technical Advisory Committee In the Commission’s existing regulatory process (“status quo”), Exceptions could be handled in the same way in the BC MRS Program as in the NERC MRS Program, substituting Commission approval in place of NERC approval as an example of the type of changes that would be required in the ROP in order to translate the NERC process into the BC MRS Program’s regulatory and jurisdictional framework. The Commission could seek out technical input as and when appropriate, including on any BC‐specific technical factors that might be recommended for consideration, before the Commission approves or rejects an Exception Request. However, a more involved regulatory process may occur if an Entity challenges the technical analysis underlying the Commission’s decision to accept or reject an Exception Request. An alternative to the “status quo” process outlined above is the option proposed in Straw‐Dog #1, to establish a BC TAC and arrange for the TAC to review Exception Requests and provide technical recommendations to the Commission from a BC‐informed perspective. The TAC as a group would include individuals with knowledge and experience regarding bulk electric system configurations and operations in BC. The Commission would remain able to seek additional technical input and support from WECC and other parties to assist the Commission in its deliberations.

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The Panel notes that BC Hydro’s role as Balancing Authority is different from the engagement of a BC Hydro employee as a member of the TAC; the Balancing Authority role includes active operational responsibilities, interaction with Entities in the Province and in adjacent regions, and compliance with Reliability Standards applicable to Balancing Authority functions. The Balancing Authority role is fundamentally different from engagement of a TAC member with TAC activities limited to addressing BC‐specific technical factors as directed by the Commission. The Panel is of the view that while a TAC may be able to provide the Commission with useful technical insight and opinions, it has not been persuaded that such a committee should be formed at this time. The Commission’s existing processes appear to be sufficient to adequately deal with “made in BC” issues in the BC Exception Process. Accordingly, the Panel directs that the “status quo” approach be applied in the administration of the BC Exception Process. If at some point in the future a need arises for a Technical Advisory Committee, this issue can be revisited at that time. Process for Reviewing Exception Requests The Panel agrees with BC Hydro’s submission that, to support consistency with the exception process in the US portion of the Western Interconnection, the primary review of Exception Requests should be made by the Administrator. The Panel observes that the requirements in Straw‐Dog #1 for submitting Exception Requests, including form and content and circulation to appropriate parties, are generally consistent with the NERC process, and finds that it is appropriate for this general consistency to be maintained. However, the Panel sees merit in BC Hydro’s proposal that Exception Requests should also be provided to the Balancing Authority (BC Hydro) as a matter of course, and that the Applicant should subsequently have an opportunity to submit comments on any recommendations provided to the Commission by WECC and the Balancing Authority. Accordingly, the Panel directs that the Exception Request process include the following:

• Submission of the Exception Request by an Applicant in a required form and format that will be included in the BC ROP and available through the Commission’s website.

• Filing of information in support of the Exception Request that is consistent with the information filed in the NERC Exception Process, to the extent applicable.

• Review of the Exception Request by Commission Staff to ensure that it meets the requirements detailed in section 4.0 of Part B of Straw‐Dog #1 (to ensure completeness and confirm that the Exception Request is sufficient for consideration and has been distributed to the parties as stipulated in Part B of Straw‐Dog #1).

• Distribution of Exception Requests that have been accepted for consideration by Commission Staff to each of:

WECC as the Commission’s Administrator in the BC MRS Program for substantive review and recommendation to the Commission based on consistent criteria as developed for use in the Western Interconnection;

The Balancing Authority (BC Hydro), for review, comments and recommendations on those issues within its Scope of Responsibility as defined in the NERC Glossary of Terms.

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• Completion of the review and delivery of recommendations by WECC and the Balancing Authority to the Commission, regarding the Exception Request within 6 months after receiving the Exception Request, unless the Commission authorizes an alternative time period.

• The opportunity for the Applicant to submit comments on the WECC and Balancing Authority recommendations within 30 days after the later of the delivery of the WECC and Balancing Authority recommendations, unless the Commission authorizes an alternative time period.

• The opportunity for the Balancing Authority to submit comments on the WECC recommendations within 30 days after delivery of the WECC recommendations, unless the Commission authorizes an alternative time period.

• Determination by the Commission, either accepting or rejecting the Exception Request within 60 days from the filing of submissions unless the Commission determines further time is necessary for it to make its determination.

Any unresolved differences between the recommendations of the Administrator and the Balancing Authority, and the comments of the Applicant and any other party stipulated in section 4.0 of Part B of Straw‐Dog #1 will be addressed in the Commission’s review of the Application. The Panel is of the view that the BC Exception Request process will generate an appropriate record for the Commission to consider any differences relating to different parties’ technical recommendations. The Panel notes that a timely responses from WECC as Administrator is required in order to ensure an efficient process for Exceptions.

2.1.1 Proposed Partial Exclusion Exception Process Commission Staff’s Straw‐Dog #1 also included a “Partial Exclusion Exception,” as a possible means of introducing further flexibility into the BC MRS Program. An Entity would request a Partial Exclusion Exception on the grounds that it is not necessary for one or more aspect(s) of the Entity’s operations to be considered for the purpose of specific Reliability Standards or a specific function for the Reliable Operation of the interconnected bulk‐power transmission system. The TAC would be required to recommend specific criteria for the Commission to use in evaluating Partial Exclusion Exception requests. To qualify for a Partial Exclusion Exception, the Entity would be required to satisfy the relevant criteria that were to have been recommended by the TAC and approved by the Commission. In response to BCUC IR 13.1, AMPC stated that it:

“sees value in the Partial Exception Process to address situations not conveniently, or inefficiently addressed by the new BES definition and Inclusion/Exception processes. If, for example, an Entity is reasonably subject to MRS standards by the new BES definition, and an Exclusion application would be ill‐advised for clear reasons, but many of the resulting MRS standards are not relevant or not helpful to maintain system reliability, then a Partial Exception Process is reasonable way to balance reliability concerns with cost‐effectiveness” (Exhibit C14‐9, p. 16, BCUC IR 13.1).

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FortisBC is opposed to the Partial Exclusion Exception concept, asserting it would: “weaken the program,” “introduce confusion,” and “pose risk of additional burdens on major utilities and the Commission in the implementation and administration of the BC MRS Program” (FortisBC Final Submission, p. 7). BC Hydro notes that: “there have been no specific examples given that provide any rationale for the need for a Partial Exclusion Exception” and asserts that it “introduces the concept of an a‐la‐carte approach to compliance with reliability standards in B.C. and BC Hydro does not believe that is consistent with ensuring the reliable operation of the BES” (Exhibit C17‐3, p. 5). BC Hydro concludes that “adequate flexibility” will already be provided in the Exception Process and “the adoption of a Partial Exclusion Exception will have a direct detrimental impact on the overall reliability of the BES because reliability standards would no longer be applied consistently across Entities” (BC Hydro Final Submission, p. 8). Commission Determination While AMPC sees potential for value, both FortisBC and BC Hydro strongly object to the Partial Exclusion Exception proposal. In the absence of any demonstrated need for a Partial Exclusion Exception concept and noting the objections to the concept, the Panel determines that a Partial Exclusion Exception is not required in the BC MRS Program. There is sufficient flexibility provided by the BC Exception Process such that a Partial Exclusion Exception is not required.

3 ADJUSTMENTS TO THE BC RULES OF PROCEDURE FOR A PENALTY PROCESS In this section, the Panel reviews submissions on the Penalty process. In some cases, submissions were made with the assumption that there would be a TAC available to conduct reviews as required. However, as noted in Section 2.1.1, the Panel has not been persuaded that a TAC should be established at this time. Straw‐Dog #2 proposed a BC‐specific process for assessing severity and risk of violations and determining penalties. The Straw‐Dog #2 draft referred to Violation Severity Levels (VSL) and Violation Risk Factors (VRF) developed by NERC, and possible BC‐specific technical factors if identified by the TAC. It also proposed a “Find, Fix, Track” (FFT) process to address lesser‐risk possible violations without penalty. Straw‐Dog #2 provided a matrix of penalty ranges for reference, subject to Commission discretion. The Straw‐Dog #2 draft recognized that the Commission may not find a contravention of a reliability standard, and is not required to impose an administrative penalty even where it finds a contravention.

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3.1 Find, Fix, Track Option for Possible Violations NERC’s MRS Program has adopted a Find, Fix, Track process that enables WECC to respond to possible violation situations and require mitigation with no other violation and penalty processes. Under NERC’s FFT process, WECC can determine that a possible violation of Reliability Standards appears to pose minimal risk to the bulk power system (for example with certain administrative, documentation, maintenance or testing program implementation failures); in such cases, where an Entity has an acceptable compliance program and record, as determined by WECC, WECC can report the situation and its mitigation or remediation to NERC, rather than issuing a Notice of Alleged Violation (NOAV) under NERC’s more involved NOAV process. Straw‐Dog #2 proposed a process similar to NERC’s FFT initiative to increase BC MRS Program efficiency and effectiveness by addressing lesser‐risk possible violations without requiring an administrative penalty. Part A of Straw‐Dog #2 fully describes the proposed process. FortisBC observes that the FFT process: “allows a responsible entity to comply with the BC MRS Program in a reasonable fashion and to respond and mitigate events which are appropriately resolved without any necessity for further MRS process involving a finding of contravention or penalty” (FortisBC Final Submission, p. 8). BC Hydro asserts: “[t]he NERC FFT Process has resulted in significant gains in administrative efficiency [Footnote omitted] which is precisely what the BC MRS Program should seek to mimic and BC Hydro is encouraged that the BCUC appears supportive of adoption of the NERC FFT Process in its entirety and with no modification” (BC HYDRO Final Submission, p. 9). Noting that further enhancements to the FFT process are in the process of being made in the NERC MRS Program: “BC Hydro recommends that the BCUC adopt an FFT Program for BC that mimics the NERC FFT Program, as amended from time to time” (BC HYDRO Final Submission, p. 10). The BCMEU: “[s]upports the concept of a Find, Fix, Track and Report process. In particular the BCMEU supports the concept of administrative efficiency as one of the goals of the FFT process” (Exhibit C13‐2, p. 1). Teck finds that FFT: “…appears to be a good option for possible violations” but suggests “WECC could send possible violation to the TAC for consideration, and the TAC would recommend to the BCUC whether to proceed with the NOAV process or the FFT process” (Exhibit C4‐2, p. 1).

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On June 20, 2013, after the filing of Final Submissions in the Inquiry, FERC issued an Order4 approving various enhancements proposed by NERC. These included allowing FFT treatment for some possible violations of moderate risk, removing the requirement that possible violations must be completely mitigated prior to being considered for FFT treatment, and providing for US FFTs to be publicly posted and a sample of the postings to be reviewed by NERC. FERC’s Order, posted on the NERC and FERC websites, requires NERC to report back to FERC within a year with additional information on the types of FFTs that were considered “moderate risk” possible violations, the factors used in making this determination, and an explanation of the steps NERC has taken to ensure that risk is determined consistently. FERC clarified that a possible violation under the FFT program with ongoing mitigation would not be “closed” until the mitigation is complete. No Interveners express opposition to an FFT process. Commission Determination The Panel directs that the BC ROP be revised to implement a process consistent with NERC’s FFT process in the BC MRS Program. The Panel accepts that the FFT process as described in Straw‐Dog #2 could enhance administrative efficiency in the BC MRS Program. FFT focuses attention on reliability by encouraging proactive compliance without a finding of contravention or penalty in appropriate cases. As the Commission’s Administrator in the BC MRS Program, WECC is already engaged to review potential violation situations to determine whether a Notice of Alleged Violation should be issued. In addition, WECC subject matter experts are actively engaged in determining whether possible violations in the NERC MRS Program should proceed under the Alleged Violation or the alternative FFT process. In the event that an Entity disagrees with WECC’s recommendation, that Entity can apply to the Commission for a reconsideration. The Panel determines that future enhancements to the NERC FFT process are to be considered for the BC MRS Program if they appear to present material benefits for furthering reliability objectives and promoting administrative efficiencies for the BC MRS Program. The Panel directs that relevant process enhancements consistent with those approved in FERC’s June 20, 2013 Order be incorporated in the BC ROP, and future enhancements or other changes to the NERC FFT process be considered for the BC MRS Program on a go‐forward basis when such changes are approved by FERC for the NERC FFT process.

4 FERC Order on Compliance Filing in Docket Number RC 11‐6‐004 issued June 20, 2013.

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3.1.1 Assessing Severity and Risk for Violations The NERC MRS Program uses VSL and VRF as Compliance Provisions that accompany the Reliability Standards in the US. The Commission may adopt NERC VSL and VRF elements as Compliance Provisions to accompany the Reliability Standards in BC. Straw‐Dog #2 proposed a process for the Commission to refer to the NERC VRF and VSL as well as engaging the TAC to recommend any BC‐specific technical reasons why VRF and VSL factors developed by NERC would yield different results for BC, and to identify and recommend to the Commission any additional BC‐specific technical factors that may be necessarily and materially relevant for assessing Reliability Standards violation risk and severity. In its initial comments, BC Hydro recommended that: “for the initial adoption of the VRF and VSL factors in BC, instead of the TAC assessing the VRF and VSL factors, BC Hydro include the review of the VRF and VSL factors as part of its obligations in producing the annual assessment reports” (Exhibit C17‐3, p. 11). However, BC Hydro noted in its subsequent response to BCUC IR 6.1: “BC Hydro recognizes that the VRF and VSL factors should be evaluated on a broader basis than is done in the annual assessment report process” (Exhibit C17‐12, BCUC IR 6.1). In responding to Commission IR 6.1, BC Hydro and FortisBC took a different approach. BC Hydro ultimately: “recommends the TAC complete the review based on the impact to the interconnected grid” (Exhibit C17‐12, BCUC IR 6.1). However: “FortisBC supports an initial review of the factors by BC Hydro prior to involvement of the TAC” (Exhibit C18‐8, p. 4, BCUC IR 6.1). Also in response to Commission IR 6.1, in reference to BC Hydro’s initial recommendation that BC Hydro assess the VRF and VSL factors, AMPC noted that: “procedurally one benefit of BC Hydro’s approach is that the TAC and other parties’ submissions concerning the VRF/VSL factors would be public. That said, AMPC does not support an expansion of BC Hydro’s role into the enforcement of MRS standards” (Exhibit C14‐10, p. 3, BCUC IR 6.1). Commission Determination The Panel directs that the BC ROP be revised to adopt NERC’s VRF and VSL factors as Compliance Provisions. A basis on which to assess penalties that is consistent with the basis used in other jurisdictions is required. NERC’s VRF and VSL factors will provide this consistency. In addition to the VRF and VSL Compliance Provisions as developed by NERC, the Panel recognizes the potential for BC‐specific technical factors to be identified that may be generally relevant as potentially aggravating or mitigating factors in relation to potential administrative penalties in the BC MRS Program. The Panel directs that stakeholders are to be provided with an opportunity to submit information and recommendations on any such BC‐specific technical factors to the Commission when the draft form of revised BC ROP is made available for comment, before the Commission approves the revised BC ROP provisions relating to penalty processes. Earlier in this Report, the Panel stated its view that:

“while a TAC may be able to provide the Commission with useful technical insight and opinions, it has not been persuaded that such a committee should be formed at this time.

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The Commission’s existing processes appear to be sufficient to adequately deal with “made in BC” issues in the BC Exception Process. Accordingly, the Panel directs that the “status quo” approach be applied in the administration the BC Exception Process. If at some point in the future a need arises for a Technical Advisory Committee, this issue can be revisited at that time.”

The reasons for the Panel’s finding that a TAC was not necessary for the administration of the Exception Process in Section 2.1.1 and repeated above, apply equally to the suggestion of the involvement of a TAC in the assessment of violation risk and severity issues. Accordingly, the Panel directs that the revisions to the BC ROP not include the engagement of a TAC in BC MRS Program penalty processes at this time.

3.1.2 Penalty Process in Relation to Factors and Amounts Straw‐Dog #2 proposed a penalty matrix for consideration, observing that while the Commission may refer to a matrix it retains its full discretion in each case regarding appropriate administrative penalties, within the limits established pursuant to section 109.2 of the UCA and the Administrative Penalties Regulation. For example, the Commission is required to consider a number of factors identified in section 109.2(3) of the UCA, “in addition to considering anything else the commission considers relevant.” In considering the gravity and magnitude of contraventions, a number of factors relating to actual or potential impact of the contravention and degree or level of non‐compliance must be considered, as well as potentially aggravating or mitigating factors. Straw‐Dog #2 proposed a BC‐specific Impact and Non‐Compliance Matrix with a potential range of penalty amounts within the limit provided in the Administrative Penalties Regulation. Regardless of any matrix or listing of factors, the Commission retains the discretion to determine that an administrative penalty is not appropriate despite the finding of a contravention or to impose an amount of an administrative penalty to the maximum limit provided in the Administrative Penalties Regulation. In imposing a penalty, however, it must take into account the factors set out in section 109.2(3) of the UCA. In commenting on the Straw‐Dog #2, Teck suggests the Commission: “[a]bandon the NERC penalty table and task the TAC with developing a BC‐specific penalty table which would take into account the impact and severity to the BC system” (Exhibit C4‐2, p. 1 ).

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However, BC Hydro suggests the penalty process for the BC ROP and its BC Penalty Matrix should be consistent with the NERC model. In reference to the Straw‐Dog #2 approach, BC Hydro submits:

“BC Hydro does not support the process as outlined above because it combines an assessment of subjective criteria (e.g., impact on other parties, impact within BC, degree by which the Reliability Standard performance was not met, and the all‐encompassing ‘any other factors the Commission in its discretion may consider relevant’ ) with VRF and VSL factors in arriving at an initial penalty amount. This process does not provide an entity with an understanding as to how the violation was assessed based on the VRF and VSL factors and also how it was subsequently adjusted based on the subjective factors” [footnote removed] (BC Hydro Final Submission, p. 12).

“BC Hydro therefore recommends that the BCUC adopt the NERC process for determining penalties except that the BCUC may consider the factors listed in Part D of Exhibit A‐8 in place of NERC’s subjective factors. In order to enable such a process change, BC Hydro recommends the adoption of the NERC Table wholesale and replacing the proposed “Impact” and “Non‐Compliance axes with “VRF” and “VSL” axes respectively” [footnote removed] (BC Hydro Final Submission, p. 13).

All Interveners submitting comments took issue with the penalty ranges in the draft matrix. For example, BCMEU expresses: “general agreement with the proposed Part D process, except that the penalty matrix appears to be overly onerous at the high end of the penalty range.” (Exhibit C13‐2, p. 2), and CPC concludes: “[t]he penalty ranges proposed in Straw‐dog #2 are disproportionate in comparison to the penalty ranges adopted in other provinces in Canada and the NERC Sanction Guidelines and should be lowered” (Exhibit C19‐2, p. 4). Commission Determination Subject to modification in the case of penalty ranges for individuals, the Panel directs that penalty ranges consistent with the NERC penalty ranges are to be incorporated in the draft BC penalty matrix in revisions to the BC ROP. Section 109.2 of the UCA and the Administrative Penalties Regulation approach penalties in a way that is generally similar to the NERC Sanction Guidelines. However, somewhat different terms are used. The UCA refers to “gravity” and “magnitude” rather than “violation risk factor” and “violation severity level.” Section 109.2(3) of the UCA sets out a number of specific factors that the Commission must consider in imposing an administrative penalty, for example “the degree and quality of cooperation during the commission’s investigation” or “any undue hardship that might arise from the amount of the penalty” (UCA, section 109.2(3), (j) and (h)).

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The penalty ranges in each of Straw‐Dog #2 and the NERC Penalty Matrix are within the maximum penalty range provided under the Administrative Penalties Regulation (up to $1 million per day in the case of corporations) and the Commission does have the discretion to provide for no penalty in appropriate circumstances. After considering the Interveners’ submissions that the ranges in Straw‐Dog #2 are higher than the NERC ranges, and the fact that Straw‐Dog #2 does not provide reasons for higher ranges, the Panel directs that $0 be used as the appropriate monetary minimum for each range. The Panel also directs that the BC ROP revisions which relate to administrative penalties provide for relevant factors other than VRF and VSL, including any BC‐specific technical factors that may be considered by the Commission, when the Commission is adjusting the magnitude of the specific penalties within the base penalty ranges included in the BC Penalty Matrix. The Panel recognizes that section 3(4) of the Administrative Penalties Regulation distinguishes between corporations and individuals, and that the maximum penalty for an individual for each offence is $100,000, while section 109.2(2) of the UCA provides a penalty may be imposed for each day of contravention. The Panel therefore directs that the BC Penalty Matrix accordingly provide for a lower penalty range for individuals and for potential penalties for each day of contravention.

3.1.3 Opportunities to Comment on or Oppose Penalties The existing NOAV process in the BC ROP provides an opportunity for an Entity to dispute an alleged violation. Straw‐Dog #2 contemplated a Commission Order confirming a violation before the Commission considers any penalty for the contravention. In establishing a penalty, Straw‐Dog #2 envisioned that the Commission would consider the VRF and VSL factors, the Administrator’s Reliability Impact and Severity Assessment for the specific situation, generally applicable BC‐specific technical factors and any other mitigating or aggravating factors. The Straw‐Dog proposed that the Commission could, but would not be required to, request additional information from the Entity, the Administrator or other parties. When satisfied that it had the necessary information, the Commission could order a Notice of Penalty or advise an Entity that no penalty would be assessed. BC Hydro submits that a Notice of Alleged Violation should be accompanied by a suggested penalty amount at the outset, to enable an Entity to accept a violation but contest a proposed penalty amount; BC Hydro observes:

“there are currently only two options for an Entity that receives a Notice of Alleged Violation (NOAV), either, (a) agree with the violation, or, (b) contest the violation. However, what is missing in this process is the provision by the BCUC of what the suggested penalty amount is. In contrast, the NERC process provides an Entity that receives a NOAV with a suggested penalty amount. The NERC Rules of Procedure therefore provide for a third option which allows an Entity to agree with the violation but contest the proposed penalty amount” (BC Hydro Final Submission, p. 10).

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BC Hydro also: “recommends that the BCUC adopt a process that allows a party to dispute a penalty before the ‘Order of Notice of Penalty’ has been issued by the BCUC” (BC Hydro Final Submission, p. 10). FortisBC argues for:

“the importance of legal and administrative fairness in the determination of contravention and the imposition of penalties for violations of the BC MRS Program. Fairness can only be achieved where there is certainty as to the process for, not only the finding of a violation, but the imposition of a monetary penalty. It is essential that there be full disclosure by the Commission to the subject person and an opportunity of that person to make a full and fair argument prior to the Commission finding a contravention and fixing a penalty amount” (FortisBC Final Submission, p. 9).

Commission Determination The Panel finds merit in the BC Hydro and FortisBC’s submissions, as noted above, suggesting that an Entity should have an opportunity to have its argument considered at the Commission in regard to either or both of: (i) the Entity’s position that there has been no contravention; or (ii) the Entity’s position that even with a contravention there should be no administrative penalty or a relatively lesser administrative penalty should be imposed. The Panel notes section 109.1(1)(b) of the UCA requires the Commission to provide a person alleged to have contravened a Reliability Standard with the opportunity to be heard. The Panel directs that the ROP revisions provide that the NOAV template be accompanied by or include a reference to the relevant base penalty range for the potential contravention under the BC Penalty Matrix, and refer to the Entity’s opportunity to: (i) dispute the alleged violation and make a submission on points relevant to the dispute; or (ii) accept the alleged violation and make a submission on points relevant to the potential penalty; or (iii) accept the alleged violation and make no submission on penalty.

4 POTENTIAL REGISTRATION CHANGES FERC Order No. 773, issued after Straw‐Dog #1 was released, provides that in the US “a registered entity that concludes that an element is no longer part of the bulk electric system must notify the Regional Entity of such change.” (FERC Order No. 773, paragraph 317). Subsequently in Order No. 773‐A, , FERC ordered that: “…[i]n the absence of bad faith, if a registered entity applies the bulk electric system definition and determines that an element no longer qualifies as part of the bulk electric system, upon notifying the appropriate Regional Entity that the element is no longer part of the bulk electric system the element should not be treated as part of the bulk electric system unless NERC makes a contrary determination in the exception process” (FERC Order No. 773‐A, paragraph 110). Straw‐Dog #1 made a distinction between: (a) circumstances where Elements may be excluded by the new BES Definition without changing the Entity’s overall registration profile; and (b) circumstances where the exclusion results in the potential for the Entity to be deregistered in

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respect of a functional category (Transmission Owner, Operator, etc.). The Straw‐Dog #1 draft suggests that in a de‐registration situation it would it be appropriate for the Administrator to review and make a recommendation on deregistration to the Commission. Most Interveners suggest that de‐registration as proposed in Straw‐Dog #1 is cumbersome. In general, BCMEU: “urges the commission to strive for regulatory simplicity and expediency to the degree possible as it considers the straw dogs and the related submissions from the registered parties” (BCMEU Final Submission, p. 2). Teck asserts:

“…[t]he exclusion process proposed for entities that are already registered appears to be overly onerous. In most cases, the existing registered entities voluntarily registered based on the BES definition that was provided and in effect at that time. The entities should also be allowed to deregister on the same basis. If an entity chose to deregister the administrator could object to the deregistration, within a specified time period, and provide the entity with evidence as to the material reliability effects” (Exhibit C4‐2, p. 1).

AMPC’s initial comments also proposed a more streamlined process. BC Hydro supported AMPC’s initial proposal which BC Hydro described as a process:

“… wherein an Entity is able to de‐register upon its assessment that as a result of the new BES Definition they are no longer required to be registered as a Registered Entity function. Under AMPC’s proposal, de‐registration would be subject to a 30‐day notice period whereby the Administrator could object to the Entity’s application, or, bring an application to have the Entity remain included. BC Hydro recommends the addition of one further step in AMPC’s streamlined proposal, the provision of notice to the Balancing Authority (BA) by an Entity wishing to de‐register. This streamlined process strikes BC Hydro as more efficient than the one currently proposed in BCUC Straw‐Dog #1” (BC Hydro Final Submission, pp. 5‐6).

However, AMPC’s position changed in the course of the Inquiry, following the release of FERC Order No. 773‐A. In AMPC’s Final Submission, quoting from FERC Order No. 773‐A, AMPC recommends that the Commission should:

“[a]dopt FERC/NERC rules for transition to the new BES and not the process proposed by part A of Straw Dog No. 1. Specifically, the Commission should confirm that … “in the absence of bad faith, if a registered entity applies the bulk electric system definition and determines that an element no longer qualifies as part of the bulk electric system, upon notifying the appropriate Regional Entity[WECC and the Commission] that the element is no longer part of the bulk electric system the element should not be treated as part of the bulk electric system unless NERC [the Commission] makes a contrary determination in the exception process.” (strikeouts and bracketed additions made to the FERC quote to reflect BC circumstances)” [footnote removed] (AMPC Final Submission, p. 2) .

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Commission Determination The Panel does not agree that registration is voluntary, observing that the BC ROP requires Entities as prescribed by the MRS Regulation to register under the BC MRS Program. AMPC’s final proposal, which provides for notice to the Commission and WECC when an Entity determines that an Element is no longer included under the new BES Definition, allows for the Commission to make a contrary determination under the Exception Process, and further provides that the Element would not be treated as a BES Element unless such a determination is made. The Panel finds this proposal to be reasonable. The Panel directs that revisions to the BC ROP include a process for notifying the Commission and WECC, to provide that an Element could be treated as excluded from the BES consistent with AMPC’s proposal and FERC’s Order No. 773‐A. The Panel also directs that the development of notification and deregistration processes relating to excluded Element(s) in the US portion of the Western Interconnection be monitored by Commission Staff and the ROP be revised to include comparable processes to be implemented in the BC MRS Program. The Panel notes that registration requirements are considered in relation to an Entity’s functional responsibilities; registration is not maintained on an Element by Element basis. An application for deregistration may be appropriate, and it could be useful as a trigger for compliance monitoring activities to cease for a particular function. It may be that US processes will include a de‐registration application where a change to an Entity’s registration may be anticipated as a result of exclusion of Element(s).

5 CHANGES TO THE MRS REGULATION Although not within the scope of this Inquiry, some Interveners made submissions on how the MRS Regulation could be amended to accommodate the change to the definition of the Bulk Electric System, and, more generally, facilitate a closer alignment of aspects of the BC MRS program with NERC’s MRS program. These submissions are summarized below, followed by a Panel discussion and recommendations.

5.1 Adopting NERC’s BES Definition in the BC MRS Program As noted in Section 3.1, this Inquiry proceeded on the assumptions that the Commission would be recommending adoption of the new BES Definition, as developed by NERC and approved by FERC, in place of the “bulk power system” definition in the current MRS Regulation and that the MRS Regulation will be amended accordingly. Straw‐Dog #1 focused on potential changes to the BC Rules of Procedure to provide for a BC Exception Process to be used in conjunction with the new BES Definition. The potential for future changes to the BES Definition, after NERC’s “Phase II BES review initiative,” was noted (Exhibit A‐7, pp. 1‐2).

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The BES Definition does not by itself identify Entities that are subject to Reliability Standards; the BES Definition describes Elements that are part of the BES. The Reliability Standards will apply in relation to the Entities ‐ owners, operators and users of the BES – that own, operate and use the elements described in the BES Definition. Most Interveners expressed support for the adoption, in a timely fashion, of the BES Definition in BC. BC Hydro refers to the “express policy objective of the Government of BC to ensure that the province remains consistent with North American transmission reliability standards“, concluding that NERC’s new BES Definition and revisions to Rules of Procedure are “significant changes” such that “BC must correspondingly consider and issue changes to its Rules of Procedure to ensure consistency and alignment between jurisdictions” (BC Hydro Final Submission p. 1). FortisBC confirms its support for adoption of the new BES definition: “as well as the legislative and administrative amendments that will be required in order to implement the change” and “also understands that there may be multiple phases to the definition over time” (FortisBC Final Submission p. 7). Teck does not support the new BES Definition, suggesting: “[i]t should be considered that BC have a definition for the Bulk Electric System that makes sense for the situation in BC. This would then adequately reflect the fact that we only have one Balancing Authority (BA) in BC as opposed to multiple BA’s (both small and large) in the US” (Exhibit C4‐2, p. 1). However, AMPC observes:

“FERC’s order [Order No. 773 approving the new BES Definition] was made following extensive consultations and deliberations by NERC that led to an application to FERC to approve proposed terms. The consultation and approval processes were on a scale and level of detail that simply cannot happen in Canada. Because of this extensive consultation, the fact that the BC electrical system is connected to the US and is very much a part of the regional MRS situation, and the clear wording of Sec. 125.2 of the Act, FERC’s decisions must at minimum be given a great deal of weight, and in AMPC’s submission, must be followed in this proceeding” (AMPC Final Submission, p. 6).

Both BC Hydro and AMPC have provided the Panel with draft amendments to the MRS Regulation which would incorporate the new BES Definition into the MRS Regulation (BC Hydro Final Submission pp. 3‐4 and Exhibit C14‐3, Appendix A). These amendments are attached for reference as Appendices B and C to this Report. The BC Hydro draft amendment incorporates the new BES Definition by reference to the BC ROP. AMPC’s draft amendment provides a definition of BES which is subject to inclusions and exclusions identified in Schedule A to its draft. However in response to IR1.1 on Straw‐Dog #1, AMPC stated in part, “[t]he potential for being out of step with the NERC definition is a reason to incorporate the BES definition by reference into the MRS Regulation, subject to variation by order of the Lieutenant Governor in Council (LGIC)” (Exhibit C4‐19, p. 1).

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In regard to the possibility of future changes to the BES Definition, AMPC observes: “[t]he potential for being out of step with the NERC definition is a reason to incorporate the BES definition by reference into the MRS Regulation, subject to variation by order of the Lieutenant Governor in Council” (Exhibit C14‐9, p. 1, BCUC IR 1.1). BC Hydro similarly suggests: “…that the BCUC propose that the MRS Regulation be amended to incorporate by reference the new NERC BES Definition” (BC HYDRO Final Submission, p. 4); and that “the new NERC BES Definition be contained in the BC Rules of Procedure” (BC Hydro Final Submission, p. 4). AMPC’s draft MRS Regulation revision, submitted with AMPC’s initial comments on the Straw‐Dog drafts, did not include definitions for “direct user,” “generator” and “distributor” as provided in the current MRS Regulation; AMPC submitted as follows:

“The statutory mechanics of implementing the new BES definition are relatively straightforward: the MRS Regulation must be changed to amend the “bulk power system” definition and to provide the BCUC with the power to create exceptions to who reliability standards apply to (i.e., enabling the inclusion/exclusion process proposed for the BC Rules of Procedure). A draft amended regulation which demonstrates the ease with which this objective can be achieved is attached for discussion purposes.” “The draft generally incorporates the language of FERC into the existing MRS Regulation. The draft also drops the concept of a Direct User from the existing regulation because it is not used by FERC and is redundant and confusing. Under the new BES, responsibility for facilities used by a Direct User will appropriately fall on the owner or operator of the Transmission Element used to provide service to the Direct User.” (Exhibit C14‐3, p. 6)

In BCUC IR 2.1 on Straw‐Dog #1, Commission staff asked the following question:

“2.1 If definitions for “direct user,” “generator” and “distributor” were removed as appears to be suggested in the draft amendments to the MRS Regulation submitted with AMPC’s comments, how would those classes of entities be “prescribed” as required by UCA s. 125.2(8)?” (Exhibit A‐12, p.2).

AMPC responded t stating in part that:

“If one or more of the definitions are no longer required as a result of the insertion of the new BES definition, or as a result of any other changes to the language of the MRS Regulation, then the definitions should not be prescribed” (Exhibit C14‐9, pp. 2‐3, BCUC IR 2.1).

Further, in its response to BCUC IR 2. 3 on Straw‐Dog #1, AMPC stated that “definitions currently contained in the Utilities Commission Act and the MRS Regulation that establish the scope of the MRS Regime should not be retained if they complicate implementing the common ‘bright line’ standard reflected by the new FERC BES definition” (Exhibit C14‐9, p. 3, BCUC IR 2.3). On the other hand, FortisBC’s response to BCUC IR 2.3 on Straw‐Dog #1 indicated: “that the definitions for ‘Direct User’, ‘Generator’ and ‘Distributor’ should be prescribed by regulation as contemplated by UCA [Utilities Commission Act] section 125.2(8)” (Exhibit C18‐8, p. 2, BCUC IR 2.3).

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BC Hydro did not respond to BCUC IR 2.1 on Straw‐Dog #1 in its responses to BCUC IR No. 1 on Straw‐Dog #1 (Exhibit C17‐11). However, in its Final Submission: “BC Hydro suggests that the definitions of ‘direct user’, ‘distributor’, and ‘generator’ will no longer be required” (BC Hydro Final Submission, p. 4). In summary, both BC Hydro and AMPC suggested that various definitions contained in the current MRS Regulation may be dispensed with in the course of adopting the new BES Definition, and FortisBC did not agree. FortisBC, AMPC and BC Hydro also responded on the potential for the BC ROP to include provisions comparable to the NERC Statement of Compliance Registry Criteria.

The Statement of Compliance Registry Criteria, appended to the NERC ROP on the NERC website and approved by FERC in the US, states:

“Organizations will be responsible to register and to comply with approved Reliability Standards to the extent that they are owners, operators, and users of the Bulk Power System, perform a function listed in the functional types identified in Section II of this document, and are material to the Reliable Operation of the interconnected Bulk Power System as defined by the criteria and notes set forth in this document.”

Revision 5.1 of the NERC Statement of Compliance Registry Criteria, as posted on the NERC website to be effective on the date the new BES Definition is effective in the US (July 1, 2014), describes how NERC bases registration and applicability of the Reliability Standards on four groups of criteria (Sections I‐IV) and a guidance statement (Section V):

1. Section I determines if the Entity is an owner, operator, or user of an Element of the Bulk Electric System.

2. Section II provides for registration in appropriate functional categories including in reference to Load.

3. Section III establishes threshold levels below which Entities may not be required to register or comply with Reliability Standards, based on factors such as size, capacity, connection characteristics, responsibility for protection systems or components, blackstart role, and critical Facilities lists.

4. Section IV refers to potential for joint registrations. 5. Section V provides for NERC and Regional Entities (e.g. WECC) to add Entities that have not

registered as they should, subject to the Entity’s right to challenge. BC Hydro: “sees value in having a guidance document with respect to the registration process in B.C. that provides Entities with more detail about the steps they need to take to register than is currently contained in the B.C. Registration Manual”; although it “does not believe that this guidance document needs to be in the same format as the Statement of Compliance Registry Criteria” (Exhibit C17‐11, p. 2, BCUC IR 2.2). FortisBC directed attention to NERC’s updated Statement of Compliance Registry to accompany the BES Definition after FERC approval, stating: “[a] Statement of Compliance Registry Criteria, as part

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of the Rules of Procedure, would be a helpful resource for an entity”; and “a helpful resource in the administration of the BC MRS Program”, and that “it would be appropriate for the MRS Regulation to empower the Commission to adopt, administer and adjust a Statement of Compliance Registry Criteria” (Exhibit C18‐8, pp. 3‐5, BCUC IR 2.2, 2.5 and 2.8). AMPC noted: “[a]ny Statement of Compliance Registry Criteria should implement a common BES definition established in the MRS Regulation, and not expand on or derogate from it” (Exhibit C14‐9, p. 4, BCUC IR 2.5). AMPC “does not support a Statement of Compliance Registry Criteria that would introduce supplemental criteria that would broaden the applicability of the MRS regime beyond the BES definition” (Exhibit C14‐9, p. 3, BCUC IR 2.2). AMPC suggests that: “If ‘a Statement of Compliance Registry Criteria’ operates as a Commission‐prescribed BES definition, then it would provide more flexibility. It could also provide more regulatory uncertainty if the definition is repeatedly susceptible to change.” AMPC asserts a “balanced approach” would be “criteria contained in regulation, incorporated by reference, subject to Commission‐administered exceptions” (Exhibit C14‐9, pp. 5‐6, BCUC IR 2.8). Overall, Interveners appear to acknowledge what BC Hydro has described as: “the importance of identifying areas where BC may differ from other jurisdictions and as such, ‘made‐in‐BC’ solutions will be appropriate” as well as “the importance of balancing flexibility in the BC MRS Program with clear direction and guidelines so that entities can ensure compliance” (BC Hydro Final Submission, p. 2). FortisBC asserts:

“…[w]hile it is in the public’s interest to have the best MRS Program possible for British Columbia, any variance from the standards, rules or codes established by a standard‐making body such as NERC or the Western Electricity Coordinating Council (“WECC”) gives rise to a risk of inconsistency in the program, posing challenges for administration, compliance and enforcement” (FortisBC Final Submission, p. 7).

Accordingly, FortisBC suggests there be: “… [a] clear, rational and strong foundation for any BC‐specific variances from NERC to be included in an amended BC MRS Program” (FortisBC Final Submission, p. 6). CPC in turn: “supports the Commission’s goal of tailoring the MRS Program to be responsive and flexible enough to fit the circumstances in British Columbia while meeting the policy objectives of the broader MRS Program” (Exhibit C19‐2, p. 3).

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5.2 The Bulk Electric System and the Bulk Power System It has been noted in the proceeding that the terms “bulk electric system” and “bulk power system” are often used interchangeably. The term “bulk power system” (BPS) has been generally used in legislation or regulation in BC and the US in connection with facilities that are subject to Mandatory Reliability Standards (Exhibit A‐7, p. 1), and to describe the scope of the regulator’s jurisdiction (Exhibit A‐12, p. 3, BCUC IR 5.0). The NERC April 10, 2012 memorandum (NERC Memorandum) (attached to C18‐8, FortisBC response to AMPC IR 1.0 and referenced in Exhibit C18‐3, p. 2) pre‐dates the new BES Definition, and is in the context of US statutory authority over the BPS, as defined pursuant to the US Energy Policy Act of 2005 and US Federal Power Act. For example, the NERC Memorandum advises that:

“while the NERC Reliability Standards generally apply to the BES, the Energy Policy Act grants authority to NERC over the BPS. Therefore, standards should be written to apply to the BES (or portions of the BES) but may also include other elements necessary for the reliable operation of the bulk power system” (NERC Memorandum, p. 3).

However, FortisBC “suggests that in regard to the definition of the ‘bulk electric system’ and the ‘bulk power system’, using those terms interchangeably raises a risk of uncertainty” (FortisBC Final Submission, p. 7). In responding to the Commission staff “Straw‐Dogs,” FortisBC asserted:

“Mandatory Reliability Standards are intended to be applicable to the Bulk Electric System but not necessarily applicable to the Bulk Power System because the BPS reaches farther than those facilities included in the BES. NERC issued a memorandum on April 10, 2012 explaining the difference between the BPS and the BES. As the standards making body does differentiate between these two terms, there may be issues in terminology moving forward within BC if no such distinction is made. Therefore, the BCUC’s recommendation to the government should address the distinction between the terms ‘Bulk Power System’ and ‘Bulk Electrical System’” (Exhibit C18‐3, p. 2).

BC Hydro does not object to a clarification that the terms “bulk power system” and “BES” may be used interchangeably “if it provides industry with greater clarity and reduces confusion in BC” (BC HYDRO Final Submission, p. 4). BC Hydro’s Final Submission is that: “BC Hydro supports the recommendation that the BCUC propose that the MRS Regulation be amended to clarify that the terms bulk power system and BES may be used interchangeably” (BC HYDRO Final Submission, p. 5).

5.3 BES Definition Effective Date Each of AMPC, FortisBC and BC Hydro submitted comments in relation to the timetable and transition process for implementing the new BES Definition and BC Exception Process in the BC ROP.

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While AMPC recommends that the Inquiry: “[c]onfirm the desirability of adopting the revised FERC/NERC definition of the BES … as soon as possible”, AMPC’s Final Submission clarifies that; “AMPC does not propose or expect that the new BES should be implemented in BC prior to its implementation in the United States. It does submit that the new BES should be implemented in BC as soon after it is implemented in the US as possible.” (AMPC Final Submission, pp. 1‐2 and Footnote 1). FortisBC identifies: “[a] fair transition process for the implementation of any amended BC MRS Program” as a “key issue” in the Inquiry” (FortisBC Final Submission, p. 6). Both FortisBC and BC Hydro recommend a 24‐month transitional period for newly‐included Elements before compliance is required (BC Hydro Final Submission, p. 5; Exhibit C18‐3, p. 1). Discussion and Recommendation As noted in section 1.3, the suitability of the new BES Definition itself, or mechanisms for adopting the new BES Definition in BC were not included in the scope of the Inquiry. Despite this, both AMPC and BC Hydro submitted draft revisions for the MRS Regulation which they suggest would allow for the incorporation of the BES definition by reference and allow the Commission to make exceptions to that definition. Neither draft revision includes a definition for “direct user,” “generator” or “distributor” found in section 125.2(8) for the reasons referred to above. FortisBC states that definitions for those terms should be prescribed. Further, both revisions introduce the term “bulk electric system” which is not presently found in section 125.2 of the UCA. As the Panel has not been tasked with recommending changes to the MRS Regulation, it will only offer some general comments on four issues concerning the draft revisions submitted by AMPC and BC Hydro. The first issue is whether delegation of powers through incorporation by reference can take place as suggested by the AMPC and BC Hydro submissions and their draft revisions to the MRS Regulation. Both AMPC and BC Hydro (and any other parties that support incorporation by reference of the new BES Definition and the apparent delegation of powers to the Commission to amend the new BES Definition from time to time) will need to provide legal argument to support such an approach. The Panel is not persuaded that that the amendments are as “relatively straight–forward and easily accomplished” as BC Hydro suggests at page 3 of its Final Submission. The second issue is whether changes to section 125.2 of the UCA are required in addition to amendments to the MRS Regulation. For example, does section 125.2(8) need to be amended to delete references to “direct user,” “generator” or “distributor”? Should a reference to “bulk electric system” be added to the definition of “reliability standard” in section 125.2(1) and to section 125.2(8) or should it replace the reference to “bulk power system” in those sections? The third issue is that if “bulk power system” is retained, should it be defined to mean “bulk electric system”. The Panel notes that the NERC Glossary of Terms (updated August 19, 2013) contains different definitions for “bulk electric system” and “bulk power system”. Further, the NERC

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Memorandum describes the “bulk electric system” as a subset of the “bulk power system” (Exhibit C18‐8, AMPC IR 1.1, p. 1 at p. 3 of the NERC Memorandum). Given that there may be advantages to maintaining definitions of “bulk electric system” and “bulk power supply” that are consistent with NERC definitions, why should the definition of “bulk electric system” be the same as the NERC definition and the “bulk power system” be different from the NERC definition? Finally, there are terms used in the UCA that are defined and/or used by NERC (i.e., owner, operator). There are also terms used in the UCA that are not defined and/or used by NERC (i.e., direct user). How should these terms be defined in BC’s MRS program? As stated previously, the Panel is of the view these are not matters to be decided here, given the scope of the Inquiry. However, the Panel is of the view that the Commission would benefit from submissions on these issues, supported by legal authorities in the case of the first and second issues, prior to making any recommendations to Government on changes to the MRS Regulation. Accordingly, the Panel recommends that the parties provide further submissions on these issues.

The Panel recommends that the Commission undertake a process to receive submission on these matters. Given that the new NERC definition will come into force on July 1, 2014, this process should be undertaken on an expedited basis to take into account that amendment to the UCA, in addition to changes to the Regulation may be required.

6 FUTURE PROCESS Several Interveners have indicated they would appreciate an opportunity to review draft BC ROP provisions concerning matters considered in the course of this MRS Inquiry. The Panel directs that the BC ROP revisions be made available for review and comment for a period of 30 days from the date that the revisions are posted on the Commission's website. Some details addressed in Straw‐Dog drafts and Inquiry submissions, such as specific definitions, are to be considered in due course as revisions for the BC ROP are prepared and reviewed. However, where a determination has already been made in this Inquiry, further comments on the draft BC ROP in this respect are to be limited to whether the proposed wording of the changes to the BC ROP adequately reflects the determinations made in this Report.

7 OTHER MATTERS

The Panel thanks all stakeholders who have taken an interest in the continuing development of the BC MRS Program. The Panel acknowledges the valuable contributions made by all parties in this Inquiry. The Inquiry has provided an opportunity for productive engagement between the Commission and stakeholders. The various exchanges of information and perspectives in the course of the Inquiry have been helpful in increasing the overall level of understanding and enabling informed consultation and input to BC MRS Program evolution.

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The NERC MRS Program and NERC/WECC processes continue to evolve. For example, NERC’s website describes a current Reliability Assurance Initiative to identify and implement changes that may enhance MRS Program efficiency while delivering effective means to support BES reliability. As NERC focuses on relative risks, streamlined standards, and more efficient processes, it should be possible to incorporate further process improvements into the BC MRS Program.

APPENDIX A to the BCUC MRS Inquiry Report

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APPENDIX A to the BCUC MRS Inquiry Report

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APPENDIX B to the BCUC MRS Inquiry Report

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BC Hydro’s Proposed Changes to the MRS Regulation Blacklined against the existing MRS Regulation January 31, 2013 – For Discussion Purposes Only


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Page 3 of 5


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APPENDIX C to the BCUC MRS Inquiry Report

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AMPC Proposed Changes to the MRS Regulation Blacklined against the existing MRS Regulation January 31, 2013 – For Discussion Purposes Only


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Page 3 of 7


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APPENDIX D to the BCUC MRS Inquiry Report

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GLOSSARY AMPC Association of Major Power Consumers

BA Balancing Authority

BC Hydro British Columbia Hydro and Power Authority

BCMEU British Columbia Municipal Electrical Utilities

BC ROP BC Rules of Procedure

BES Bulk Electric System

CEA Clean Energy Association of B.C.

CPC Columbia Power Corporation

FERC Federal Energy Regulatory Commission

FFT Find, Fix, Track process that enables WECC to respond to possible violation situations and require mitigation with no other violation and penalty processes

FortisBC FortisBC Inc.

MRS Mandatory Reliability Standards

NERC North American Electric Reliability Council

ROP Rules of Procedure

TAC Technical Advisory Committee

Teck Teck Metals Ltd.

VRF Violation Risk Factors

VSL Violation Severity Levels

WECC Western Electricity Coordinating Council

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