The National Electric Reliability Council is important. Now that the Federal Energy Regulatory Commission named it the Electric Reliability Organization the standards that it now sets -- with FERC's approval -- are mandatory, not voluntary.

Furthermore, fines imposed for violating these standards can range from $1,000 to $1 million per day per violation, explained Gerry Cauley, vice president and director of standards at the reliability council, or NERC, that is based in Princeton, N.J. Fines of $1 million per day capture the attention of any utility CEO or senior executive. Despite the hefty fines, Cauley is quick to point out that NERC will be evenhanded. "Our job isn't to... catch 200 people making a mistake. Our role is to make electric reliability better."

What's the major difference in NERC's new role as ERO compared with its former self-regulating role? "It's our opportunity to put teeth behind what NERC was doing on a volunteer basis," explained Rick Sergel, president and chief executive officer of NERC. "Voluntary standards aren't enough and weren't getting the job done."

NERC creates the standards and works with regional organizations to ensure compliance. In fact, it works closely with the eight regional regulatory organizations such as Electric Reliability Council of Texas, Northeast Power Coordinating Council, Southwest Power Pool and Western Electric Coordinating Council, which conduct audits and send investigators to ensure compliance.

In the past, utilities paid attention to standards, but often it might be a compliance officer or engineer's role to fix a violation, with the CEO and senior management team not getting involved. Insiders suggest some utilities showed a lack of urgency about complying with NERC's recommendations. Because NERC now operates as an Electric Reliability Organization and the stakes have been raised, meeting its standards has become part of a utility's risk management portfolio. "They'll pay more attention to where they are exposed and in violation. No one wants to get penalized," Cauley noted.

Having an independent organization such as NERC devise standards for the industry is critical to its success, suggested Richard Drouin, chairman of NERC's board of trustees, who is located in Quebec. "The independent part assures that the industry doesn't serve its own purposes, but focuses on the stakeholders and the public."

Furthermore, since the 2003 blackout affected Canada and the United States, NERC's efforts will soon create standards for both neighboring countries once the Canadian provinces pass the law as well. Ontario, Quebec and Manitoba have already done so, Drouin noted. He expects that all provinces will pass the law in 2007. "Getting both countries to cooperate under one umbrella will help ensure standards for the continent," he said. Eventually Drouin envisions that Mexico would participate as well, making the grid seamless throughout the three countries.

Utilities Ready

Utilities are responding to NERC's expanding role. At American Electric Power, for example, Scott Moore, its vice president in charge of transmission operations, said AEP has established a new executive-level reliability compliance committee. AEP has assigned "dedicated personnel to follow the process to ensure that after we're audited, documentation is in place" and recommendations are acted on. Compliance with NERC's standards at AEP, "gets much more attention. There's been a cultural change within the organization driving down to the lowest level."

"In general, because of the ability to assess monetary penalties, the focus will move from the regional reliability organizations to the NERC," added Herbert Schrayshuen, vice president of reliability compliance at National Grid. Making NERC's role mandatory not voluntary also strengthens its recommendations, he suggested.

NERC's ability to gain access to information will be enhanced. Cauley noted that by law utilities are now required to submit information and data to NERC. "We have clear authority to expect to receive data on their systems," he said. In the past, utilities might have claimed confidentiality or sensitivity to security data. Now, if NERC needs to know every transmission line that tripped over a year's time, utilities will be required to provide that information or face heavy fines.

NERC works closely with utilities to establish standards. Its standards authorizing committee consists of a wide range of utility executives who recommend experts to populate committees and establish standards. "We partner with utilities. We manage the process on behalf of the industry for FERC," Sergel noted.

NERC has been developing standards for nearly 40 years. After being named ERO, it started developing Version 0 standards, the aim of which is to formalize and update existing standards. Version 0 currently includes 115 standards, covering 14 different specialties including emergency preparedness, personnel performance, critical infrastructure protection, and resource and demand balancing.

"We expect a significant number of NERC's existing 115 electric reliability standards to be approved to become mandatory and enforceable by June 1, under the federal power act. This means that a violation of the standard and its requirements will be a violation of federal law," Sergel noted.

Asked which of these 115 standards are most noteworthy, Cauley pointed to demand balancing as one critical element in helping to prevent any future blackouts. One standard refers to utilities making sure that they have enough generation online to meet all power demands in real time, preventing any power shortages, and possessing enough electricity to meet customer demands, balanced with the needs of the electric grid. Balancing the electric grid is critical to preventing system collapse, he added.

NERC can also play a role in helping to set the agenda for meeting future power needs. NERC's responsibility is "to shine a bright line on it" and then let FERC and state regulatory commissions handle future power generation needs, adds Cauley.