Energy Law

Severity Levels to Determine Penalties for Violating NERC Reliability Standards

By Kristin McKeown

In a June 19 order FERC approved with minor exceptions the Severity Levels that the North American Electric Reliability Corporation has proposed for violating requirements of its reliability standards.  In an earlier order FERC requested NERC expedite development of Severity Levels to be used in setting penalties for reliability standard violations.

A violation may be assessed "Lower", "Moderate", "High", or "Severe".  The Severity Level will be used to set a Base Penalty Amount in accordance with the Base Penalty Amount Table provided in NERC's Sanction Guidelines.  Severity Levels do not consider adjustment factors that are evaluated in a later step in the penalty assessment process.  FERC does not consider Severity Levels to be a part of the Reliability Standards; this treatment is similar to FERC's treatment of Violation Risk Factors and Sanction Guidelines.  Instead, Severity Levels will be appended to NERC's Rules of Procedure. 

NERC also offered for informational purposes only guidelines for reviewing future Severity Level, but FERC chose to adopt its own guidelines.  When reviewing future Severity Levels, FERC's guidelines require that the levels:  (1) not induce lower levels of compliance; (2) ensure uniformity and consistency in penalty determinations; (3) to be consistent with the corresponding reliability standard requirement; and (4) be based on a single violation, and not cumulative violations. 

Full post as published by Energy Legal Blog on July 10, 2008 (boomark / email).