sufficiently clear and objective to provide guidance for compliance.
    299. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard EOP-003-0 as
mandatory and enforceable. In addition, pursuant to section 215(d)(5)
of the FPA and Sec.  39.5(f) of our regulations, the Commission
proposes to direct that NERC submit a modification to EOP-003-0 that
(1) specifies the minimum load-shedding capability that should be
provided and the maximum amount of delay before load shedding can be
implemented; (2) requires periodic drills of simulated load shedding;
and (3) contains Measures and Levels of Non-Compliance.
e. Disturbance Reporting (EOP-004-0)
i. NERC Proposal
    300. Proposed Reliability Standard EOP-004-0 establishes
requirements for reporting system disturbances to the regional
reliability organization and the ERO. It also establishes requirements
for the analysis of these disturbances. NERC indicates that the
Reliability Standard's purpose is to minimize the likelihood of similar
events in the future. NERC states that EOP-004-0 is linked to DOE
disturbance reporting requirements and Energy Information
Administration (EIA) Form 417.
ii. Staff Preliminary Assessment
    301. Commission staff noted that EOP-004-0 does not address the
Blackout Report's recommendation that a standing framework be
established for conducting future blackout and disturbance
investigations. Staff noted that the U.S. Department of Energy (DOE)
made a presentation to the NERC Board of Trustees on preparing for an
investigation, priority actions following a blackout, and the
investigation process. Staff also noted that NERC has prepared a
procedure for responding to major events that affect the bulk electric
system. Staff indicated it believes that the DOE presentation and the
NERC procedure provide a reasonable basis for revising EOP-004-0. In
addition, staff noted that the Reliability Standard does not contain
any Measures or Levels of Non-Compliance. Staff acknowledged that NERC
has indicated this deficiency will be addressed and that the
Reliability Standard will be resubmitted for Commission approval in
November 2006.
iii. Comments
    302. NERC states that procedures to conduct future blackout and
disturbance investigations should not be included in the Reliability
Standards. NERC states that it has developed these procedures and that
they are provided as an appendix to its proposed ERO Rules of
Procedure.
    303. MRO supports staff's conclusion that this Reliability Standard
does not address the Blackout Report's recommendation that a standing
framework be established for conducting future blackout and disturbance
investigations. MRO maintains that NERC and the DOE procedures provide
a formal process for investigating disturbances.
iv. Commission Proposal
    304. The Commission agrees with the MRO that this Reliability
Standard does not address the Blackout Report's Recommendation No. 14
to establish a standing framework for conducting of future blackout and
disturbance investigations and proposes that the Reliability Standard
be modified to specify those requirements included in the ERO Rules of
Procedure that apply to users, owners and operators of Bulk-Power
System. NERC states that it has developed these procedures, and they
are provided as an appendix to its proposed ERO Rules of Procedure.
Although the Commission acknowledges that, under Sec.  39.2 of our
regulations, all users, owners and operators of the Bulk-Power System
must comply with the ERO Rules, which includes its Rules of Procedure,
we believe that requirements outlined in these procedures that apply to
users, owners and operators of the Bulk-Power System must be included
in this Reliability Standard, but not the rules of procedure
themselves, so that they become mandatory and enforceable. The
Commission believes that including these requirements in this
Reliability Standard will promote system reliability by ensuring that
users, owners and operators of the Bulk-Power System provide data to
assist NERC investigations and ensuring that the Reliability Standard
is clear and complete. Such requirements include the provision of
system disturbance data, voice recordings and other information
collected during the event to support the analysis of the event after
the fact. Therefore, we propose to direct that NERC modify EOP-004-0 to
include any requirements necessary for users, owners and operators of
the Bulk-Power System to provide data that will assist NERC in the
investigation of a blackout or disturbance.
    305. While the Commission has identified concerns with regard to
EOP-004-0, we believe that the proposal serves an important purpose in
establishing requirements for reporting and analysis of system
disturbances. While the Commission believes that additional
Requirements are needed, the proposed Requirements set forth in EOP-
004-0 are sufficiently clear and objective to provide guidance for
compliance.
    306. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard EOP-004-0 as
mandatory and enforceable. In addition, pursuant to section 215(d)(5)
of the FPA and Sec.  39.5(f) of our regulations, the Commission
proposes to direct that NERC submit a modification to EOP-004-0 that:
(1) includes any requirements necessary for users, owners and operators
of the Bulk-Power System to provide data that will assist NERC in the
investigation of a blackout or disturbance; and (2) includes Measures
and Levels of Non-Compliance.
f. System Restoration Plans (EOP-005-1)
i. NERC Proposal
    307. Proposed Reliability Standard EOP-005-1 \156\ deals with
system restoration plans and requires that plans, procedures, and
resources be available to restore the electric system to a normal
condition in the event of a partial or total system shut down. The
Reliability Standard requires transmission operators, balancing
authorities, and reliability coordinators to have effective restoration
plans, to test those plans, and to be able to restore the
interconnection using them following a blackout. It also requires
operating personnel to be trained in these plans.
---------------------------------------------------------------------------

    \156\ On August 28, 2006, NERC submitted EOP-005-1 for approval,
which replaces EOP-005-0. EOP-005-1 is the same as EOP-005-0 except
for the changes noted above. Thus, comments submitted in response to
the Staff Preliminary Assessment on EOP-005-0 apply equally to EOP-
005-1.
---------------------------------------------------------------------------

    308. NERC's August 28, 2006 Supplemental Filing included a revised
version of EOP-005, designated EOP-005-1. The revised Reliability
Standard includes two new Requirements, R9 and

R10, and two revised requirements, R4 and R8. The new Requirement R9
requires that the transmission operator document the cranking paths,
including initial switching requirements, between each blackstart
generating unit and the unit(s) to be started. The new Requirement R10
requires the transmission operator to demonstrate through simulation or
testing, the blackstart units can perform their intended function and
that simulation or testing be performed at least once every five years.
The revised Requirement R4 requires the transmission operator to
coordinate its restoration plans with the generator owners in addition
to others. The revised Requirement R8 requires transmission operators
to verify that the number, size, availability, and location of system
blackstart generating units are sufficient to meet regional reliability
organization restoration plan requirements for the transmission
operator's area.
ii. Staff Preliminary Assessment
    309. Staff noted that, while EOP-005-0 requires that operators be
trained in the implementation of the restoration plan, it does not
require this to be done periodically. In addition, the Reliability
Standard contains Levels of Non-Compliance but no Measures. Staff noted
that NERC has not identified this Reliability Standard as one that
would be modified and resubmitted for Commission approval in November
2006.
iii. Comments
    310. MRO comments that EOP-005-0 should identify the timeframes for
operator training and restoration plan review. National Grid comments
that the Staff Preliminary Assessment does not offer any specific time
interval over which periodic training of operators should occur and
that the Commission and NERC should work together to establish a
balanced training interval when establishing requirements for periodic
training on restoration plan procedures.
    311. Alcoa states that two Requirements of EOP-005-0 either overlap
with or are duplicative of Requirements contained in other proposed
Reliability Standards, in particular COM-001-0. Alcoa states that any
overlapping or duplicative requirements that can lead to multiple
interpretations regarding compliance which could hinder system
reliability. Alcoa suggests that the Reliability Standard can be
improved by defining minimum requirements relating to the periodic
monitoring of telecommunications facilities and by giving some
attention to the technical requirements of ``essential
telecommunications facilities.''
    312. Alberta states that EOP-005-0 is an example of a Reliability
Standard that should not be approved but should continue as a voluntary
Reliability Standard unless it is determined that the Reliability
Standard would have an adverse effect on system reliability. Alberta
states that Requirement R1 of the Reliability Standard is missing
elements--although it does not identify them--and lacks measurability,
and it therefore should remain voluntary until it is revised.\157\
---------------------------------------------------------------------------

    \157\ Requirement R1 provides that ``[e]ach Transmission
Operator shall have a restoration plan to reestablish its electric
system in a stable and orderly manner in the event of a partial or
total shutdown of its system, including necessary operating
instructions and procedures to cover emergency conditions, and the
loss of vital telecommunications channels. Each Transmission
Operator shall include the applicable elements listed in Attachment
1-EOP-005-0 in developing a restoration plan.''
---------------------------------------------------------------------------

iv. Commission Proposal
    313. The Commission agrees with MRO and National Grid that the
Reliability Standard should identify time frames for training, drills
and review of restoration plan requirements to simulate contingencies
and prepare operators for anticipated and unforeseen events. Periodic
training, drills and plan review is necessary to ensure that the
Reliability Standard effectively promotes Bulk-Power System
reliability, and specific training and review time frames will enhance
the effectiveness of the Reliability Standard.
    314. The Commission does not agree with Alcoa that the
telecommunication testing requirements in COM-001-0 and EOP-005-0 can
lead to multiple interpretations regarding compliance.
    315. The Commission believes that new Requirements R9 and R10
included in EOP-005-1 would contribute to maintaining or enhancing
system reliability and therefore proposes to accept them.
    316. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard EOP-005-0 as
mandatory and enforceable. In addition, pursuant to section 215(d)(5)
of the FPA and Sec.  39.5(f) of our regulations, the Commission
proposes to direct that NERC submit a modification to EOP-005-1 that
(1) includes Measures; and (2) identifies time frames for training and
review of restoration plan requirements to simulate contingencies and
prepare operators for anticipated and unforeseen events.
g. Reliability Coordination-System Restoration (EOP-006-0)
i. NERC Proposal
    317. Proposed Reliability Standard EOP-006-0 deals with reliability
coordination and system restoration. It establishes specific
requirements for reliability coordinators during system restoration,
and it states that reliability coordinators must have a coordinating
role in system restoration to ensure that reliability is maintained
during restoration and that priority is placed on restoring the
Interconnection.
ii. Staff Preliminary Assessment
    318. The Staff Preliminary Assessment noted that EOP-006-0 requires
only that reliability coordinators, which are the highest authority
responsible for overall system restoration, are aware of the
restoration plan of each transmission operator in its reliability
coordination area, but it does not require that they be involved in the
plan's development or approval. Staff also noted that the Reliability
Standard does not contain any Measures, metrics or processes to assess
compliance with its requirements or any Levels of Non-Compliance. Staff
acknowledged that NERC has indicated that the Reliability Standard will
be modified to address these deficiencies and resubmitted for
Commission approval in November 2006.
iii. Comments
    319. NERC states that Requirement R3 of EOP-006-0 requires the
reliability coordinator to have an area restoration plan. NERC asserts
that the reliability coordinator will have input into the transmission
operators' restoration plans to ensure those plans are coordinated.
NERC acknowledges that there may be merit in requiring reliability
coordinators to approve the restoration plans.
    320. MRO agrees with staff in that reliability coordinators should
be required to be involved in the development and approval of
restoration plans. MRO supports the inclusion of Measures and Levels of
Non-Compliance.
    321. Southern submits that the role of the reliability coordinator
as currently established is appropriate and is consistent with the role
of the reliability coordinator in maintaining reliability. It states
that while the reliability coordinator should be aware of the

restoration plan required by the Reliability Standard, approval of that
plan would have no clear benefit.
iv. Commission Proposal
    322. The Commission agrees with MRO and NERC that the reliability
coordinators should be involved in the development and approval of the
restoration plans. The reliability coordinator's position as the
highest authority responsible for system reliability and system
restoration justifies its involvement in the development and approval
of these plans. The Commission thus disagrees with Southern that the
reliability coordinator's involvement would have no clear benefit. The
Commission proposes that the Reliability Standard be modified to
require that the reliability coordinator be involved in the development
and approval of restoration plans. The Commission also proposes to
direct NERC to include Measures and Levels of Non-compliance.
    323. While the Commission has identified concerns with regard to
EOP-006-0, we believe that the proposal serves an important purpose in
promoting reliability coordination and system restoration. Further, the
proposed Requirements set forth in EOP-006-0 are sufficiently clear and
objective to provide guidance for compliance. Accordingly, giving due
weight to the technical expertise of the ERO and with the expectation
that the Reliability Standard will accomplish the purpose represented
to the Commission by the ERO and that it will improve the reliability
of the nation's Bulk-Power System, the Commission proposes to approve
Reliability Standard EOP-006-0 as mandatory and enforceable. In
addition, pursuant to section 215(d)(5) of the FPA and Sec.  39.5(f) of
our regulations, we propose to direct that NERC submit a modification
to EOP-006-0 that: (1) requires that the reliability coordinator be
involved in the development and approval of restoration plans; and (2)
includes Measures and Levels of Non-Compliance.
h. Establish, Maintain, and Document a Regional Blackstart Capability
Plan (EOP-007-0)
i. NERC Proposal
    324. NERC states that proposed Reliability Standard EOP-007-0,
which deals with establishing, maintaining and documenting regional
blackstart capability plans, ensures that the quantity and location of
system blackstart generators are sufficient and that they can perform
their expected functions as specified in the overall coordinated
regional system restoration plans.
ii. Staff Preliminary Assessment
    325. Staff noted in the Staff Preliminary Assessment that
Reliability Standard EOP-007-0 lists only the regional reliability
organization as the applicable entity and stated that the
appropriateness of designating the regional reliability organization as
the applicable entity is a concern in the new mandatory Reliability
Standard structure.
iii. Comments
    326. ReliabilityFirst states that the blackstart procedures
developed by the individual regions need to be merged to develop
consistent procedures.
    327. EEI states that, for the most part, the Reliability Standard
involves collection management and reporting requirements, although it
notes that blackstart generation plans have reliability operation
implications. MRO expresses concern that EOP-007-0 is an operating
function rather than a Reliability Standard. MRO states that if EOP-
007-0 remains a Reliability Standard, it should be revised to require
that operating entities have a restoration and blackstart capability
plan, and EEI states that it should be redrawn so that compliance
obligations are assigned directly to those entities that provide the
data and other information. In addition, MRO states that the regional
reliability organization should be removed as an applicable entity.
iv. Commission Proposal
    328. Consistent with our discussion in the Common Issues section
above, the Commission will not propose to accept or remand EOP-007-0,
as it applies only to regional reliability organizations. The
Commission believes that, in the long-run, the Regional Entities should
be responsible for establishing, maintaining and documenting regional
blackstart capability plans. However, during the current period of
transition, the regional reliability organizations should continue to
perform this role as they have in the past.
i. Plans for Loss of Control Center Functionality (EOP-008-0)
i. NERC Proposal
    329. Proposed Reliability Standard EOP-008-0 deals with plans for
loss of control center functionality. It requires that each reliability
coordinator, transmission operator and balancing authority have a plan
to continue reliable operations and to maintain situational awareness
in the event its control center is no longer operable.
ii. Staff Preliminary Assessment
    330. Staff noted that EOP-008-0 requires the applicable entities to
have a backup plan, but it does not specifically require that backup
capabilities be provided. The Reliability Standard does not address
requirements for independence from the primary control center, provide
for prolonged operation or provide the minimum tools and facilities
consistent with the roles, responsibilities and tasks of the different
entities to which it applies.
iii. Comments
    331. NERC agrees with Commission staff that the proposed
Reliability Standard does not adequately address the requirements for
backup of critical control center functionality, and it proposes that
such a Reliability Standard should be developed. NERC states that the
possible solutions for providing backup of critical Bulk-Power System
operating functionality are not limited to a redundant control center.
Neighboring systems can provide such functionality as contracted
services, or they can be provided through backup equipment within a
separate existing facility.
    332. EEI supports EOP-008-000 as technically sound. It states that
the Reliability Standard requires implementation of the plan by
defining as a Level 4 violation a failure to implement the plan. This
clearly establishes that backup capabilities must exist as reflected in
the plan. According to EEI, entities must have communications
facilities that do not rely on the primary control center; and that
procedures must be in place for monitoring and controlling critical
facilities, and for maintaining voice communications capability with
other areas.\158\
---------------------------------------------------------------------------

    \158\ EEI Comments at 10.
---------------------------------------------------------------------------

    333. MRO, ReliabilityFirst and the ISO/RTO Council agree with
staff's evaluation of EOP-008-0. MRO states that this Reliability
Standard requires a backup plan, but does not address the requirements
for independence from the primary control center, does not provide for
prolonged operation, does not provide the minimum tools and facilities
consistent with the roles, responsibilities and tasks of the different
entities. MRO suggests that NERC should modify this Reliability
Standard accordingly. MRO notes that today many companies simply have a
plan and do not have an actual backup

facility. It states that the new requirements would have to take effect
at some time in the future and that this Reliability Standard needs to
make clear that the backup site should be capable of withstanding
anticipated disasters, such as the hurricanes in Florida.
ReliabilityFirst states that EOP-008-0 should include additional detail
on dealing with prolonged primary control center inoperability. The
ISO/RTO Council states that meeting the shortcomings staff identified
in EOP-008-0 will require identification of minimum required tools and
facilities and definition of the appropriate entities responsibilities.
iv. Commission Proposal
    334. Staff raised the concern that EOP-008-0 requires the
applicable entities to have a backup plan, but it does not specifically
require that backup capabilities be available. EEI comments that the
Reliability Standard implicitly requires backup capabilities because a
Level 4 violation occurs when an entity fails to implement such a plan.
The Commission disagrees with EEI that such a Requirement can be
discerned from Level 4 Non-Compliance. As we explained in our policy
discussion in Measures and Levels of Non-Compliance, NERC has stated
that the ``Requirements'' within a Reliability Standard define what an
entity must do to be compliant and establish an enforceable obligation,
and the presence or absence of Measures or Levels of Non-Compliance
should not be the sole determining factor as to whether a Reliability
Standard meets the statutory test for approval.
    335. Thus, the Commission believes that provision for backup
capabilities should be an explicit Requirement. Such backup capability,
at a minimum, must: (1) Be independent of the primary control center;
(2) be capable of operating for a prolonged period of time; and (3)
provide for a minimum set of tools and facilities to replicate the
critical reliability functions of the primary control center.\159\ The
Commission proposes that NERC modify the standard accordingly. In
addition to the three capability requirements identified above, the
Commission is interested in comments from industry concerning other
specific capabilities.
---------------------------------------------------------------------------

    \159\ Facilities examples include telecommunications, backup
power supplies, computer systems, and security systems
---------------------------------------------------------------------------

    336. The Commission understands that backup control facilities can
be costly but, when needed, are essential for reliability. To address
the balance between cost and reliability benefits, there needs to be
some flexibility on how the capability is achieved. For example, the
mechanism to provide these capabilities may include building fully
redundant physical back up control centers or, as NERC suggests,
contracting back up control services or through backup equipment within
a separate existing facility. However, the Commission proposes that the
extent of the backup capability be consistent with the impact of the
loss of the entity's primary control center on the reliability of the
Bulk-Power System. Further, the Commission proposes to direct NERC to
modify the standard to include a Requirement that all reliability
coordinators have full backup control centers since they are essential
to Bulk-Power System reliability. In addition, the Commission is
interested in comments on what other entities should have full backup
centers for reliability such as balancing authorities and large
transmission operators.
    337. While the Commission has identified concerns with regard to
EOP-008-0, we believe that the proposal serves an important purpose in
ensuring that applicable entities have a backup plan in the case of
loss of control center functionality. While the Commission believes
that additional Requirements are needed, the proposed Requirements set
forth in EOP-008-0 are sufficiently clear and objective to provide
guidance for compliance. Accordingly, giving due weight to the
technical expertise of the ERO and with the expectation that the
Reliability Standard will accomplish the purpose represented to the
Commission by the ERO and that it will improve the reliability of the
nation's Bulk-Power System, the Commission proposes to approve
Reliability Standard EOP-008-0 as mandatory and enforceable. In
addition, pursuant to section 215(d)(5) of the FPA and Sec.  39.5(f) of
our regulations, we propose to direct that NERC submit a modification
to this Reliability Standard that includes a Requirement that provides
for backup capabilities, as described above.
j. Documentation of Blackstart Generating Unit Tests Results (EOP-009-
0)
i. NERC Proposal
    338. Proposed Reliability Standard EOP-009-0 deals with
documentation of blackstart generating unit test results. NERC states
that this Reliability Standard ensures that the quantity and location
of system blackstart generators are sufficient and that these
generators can perform their expected functions as specified in overall
coordinated regional system restoration plans.
ii. Staff Preliminary Assessment
    339. Staff noted in the Staff Preliminary Assessment that this
Reliability Standard requires that the start-up and operation of each
generating blackstart unit be tested and that the results be submitted
to the regional reliability organization. However, it does not require
that blackstart units be periodically tested to ensure that they will
be available when required to restore the system.
iii. Comments
    340. NERC and other commenters point out that Reliability Standard
EOP-007-0 requires the routine testing, i.e., minimum testing of one-
third of blackstart units each year, suggested by staff.
iv. Commission Proposal
    341. The Commission is satisfied with the explanation of NERC and
other commenters that Reliability Standard EOP-007-0 requires periodic
testing of blackstart units.
    342. The Commission believes that the proposal serves an important
purpose in ensuring adequate blackstart generation capability. Further
the proposed Requirements set forth in EOP-009-0 are sufficiently clear
and objective to provide guidance for compliance. Accordingly, the
Commission believes that Reliability Standard EOP-009-0 is just,
reasonable, not unduly discriminatory or preferential, and in the
public interest; and proposes to approve it as mandatory and
enforceable.
5. FAC: Facilities Design, Connections, Maintenance, and Transfer
Capabilities
a. Overview
    343. The nine Facility (FAC) Reliability Standards address topics
such as facility connection requirements, facility ratings, system
operating limits, and transfer capabilities. The standards also
establish requirements for maintaining equipment and rights-of-way,
including vegetation management.
    344. How transmission local control centers are incorporated into
the transmission operator definition will be the same as is described
in the COM Chapter.
b. Facility Connection Requirements (FAC-001-0)
i. NERC Proposal
    345. Proposed Reliability Standard FAC-001-0 is intended to ensure
that

transmission owners establish facility connection and performance
requirements to avoid adverse impacts to the Bulk-Power System.
 ii. Staff Preliminary Assessment
    346. The Staff Preliminary Assessment did not identify any issues
related to this Reliability Standard.
iii. Comments
    347. No specific comments were received.
iv. Commission Proposal
    348. This Reliability Standard is necessary to ensure standard
procedures and performance assessments for new interconnection
facilities. Further, the Requirements in FAC-001-0 are sufficiently
clear and objective to provide guidance for compliance. Thus, the
Commission proposes to approve Reliability Standard FAC-001-0 as just,
reasonable, not unduly discriminatory or preferential, and in the
public interest.
c. Coordination of Plans for New Generation, Transmission, and End-User
Facilities (FAC-002-0)
i. NERC Proposal
    349. Proposed Reliability Standard FAC-002-0 requires that each
generation owner, transmission owner, distribution provider, load-
serving entity, transmission planner, and planning authority assess the
impact of integrating generation, transmission, and end-user facilities
into the interconnected transmission system.
ii. Staff Preliminary Assessment
    350. Requirement R1 of FAC-002-0 requires system performance
assessments in accordance with Standard TPL-001-0,\160\ which relates
only to normal system conditions. Staff pointed out that performance
requirements for new generation interconnection in Order No. 2003 \161\
require assessment for both normal and post-contingency conditions and
is therefore more rigorous than TPL-001-0.
---------------------------------------------------------------------------

    \160\ Standard TPL-001-0 (Requirement 1 states that ``The
Planning Authority and Transmission Planner shall each demonstrate
through a valid assessment that its portion of the interconnected
transmission system is planned such that, with all transmission
facilities in service and with normal (pre-contingency) operating
procedures in effect, the Network can be operated to supply
projected customer demands * * *'').
    \161\ Standardization of Generator Interconnection Agreements
and Procedures, Order No. 2003, 68 FR. 49845 (Aug. 19, 2003), FERC
Stats. & Regs. ] 31,146 (2003), order on reh'g, Order No. 2003-A, 69
FR 15932 at P 89 and 145 (Mar. 26, 2004), FERC Stats. & Regs. ]
31,160 (2004), order on reh'g, Order No. 2003-B, 70 FR 265 (Jan. 4,
2005), FERC Stats. & Regs. ] 31,171 (2004), order on reh'g, Order
No. 2003-C, 70 FR 37661 (June 30, 2005), FERC Stats. & Regs. ]
31,190 (2005); see also Notice Clarifying Compliance Procedures, 106
FERC 1,009 (2004).
---------------------------------------------------------------------------

iii. Comments
    351. NERC comments that, while the staff evaluation of FAC-002-0 is
valid, the Reliability Standard should nonetheless be approved. NERC
offers that it will continue to improve the Reliability Standard.
Likewise, MRO and ISO/RTO Council agree with staff's evaluation of FAC-
002-0. MRO adds that an effort should be made to align or combine the
requirements of Order No. 2003 and the NERC Reliability Standards into
a single set of standards. ISO/RTO Council expresses concern that the
Reliability Standard does not identify parties responsible for
particular tasks, stating that it should be reviewed to ensure that
tasks are correctly assigned.
    352. NERC and others state that Requirement R1 of FAC-002-0 should
require not only the use of TPL-001-0, but also TPL-002-0, and TPL-003-
0. Similarly, ReliabilityFirst believes that FAC-002-0 contains an
error in Requirement R1.4. It alleges that the requirement should have
been translated to refer to standards TPL-001-0 through TPL-004-0
instead of only referencing TPL-001-0. Similarly, ISO/RTO Council
submits that Requirements R1.1 through R1.5 need to include a reference
to standard TPL-002-0.
    353. Alcoa points out that Requirements R1.1 and R1.2 lack metrics.
Alcoa asserts that these Requirements are broadly-worded, open-ended
and suggest that even a small addition of facilities would compel an
entity to comply with all of the Reliability Standards, which might not
otherwise apply.
    354. CenterPoint contends that coordination cannot be audited with
an objective auditable measure and recommends that this standard be
eliminated. CenterPoint notes tradeoffs involved in planning
interconnections for generators can put transmission service providers
at risk for either accusation by the ERO of failing to provide adequate
facilities or accusation by state commissions of ``gold-plating,'' or
not performing proper generation interconnection planning. CenterPoint
adds that although staff has discussed planning for the most onerous
conditions, real-life application of this is more complex because it
needs to be based on the reasoned judgment of experts considering
particular facts as opposed to rigid standards.
    355. MEAG asserts that including distribution providers in FAC-002-
0 is unnecessarily redundant and potentially overbroad because the
Reliability Standard should not apply to distribution providers that do
not own generation or transmission facilities. It explains that, if a
distribution provider owns facilities that are integral to the
transmission system, then the distribution provider is also a
transmission owner, according to the ``NERC glossary of Terms Used in
Reliability Standards.'' Likewise, if a distribution provider owns
generating facilities, then the distribution provider is a generator
owner. However, if each load-serving entity provides the transmission
owner with its load characteristics and the distribution provider does
not own integral generation or transmission facilities, then MEAG
concludes that FAC-002-0 should not apply to such distribution
providers.
iv. Commission Proposal
    356. The Commission agrees with NERC and others that the
Reliability Standard should refer not only to TPL-001, but also to TPL-
002-0 and TPL-003-0, which relate to loss of one or more Bulk-Power
System elements. This would improve the technical soundness of the
Reliability Standard by appropriately broadening the scope of system
performance assessments to include post-contingency conditions. In
addition, such a modification would achieve greater consistency with
Order No. 2003. Thus, we propose to direct that NERC modify FAC-002-0
accordingly.
    357. Requirements R1.1 and R1.2 provide that an applicable entity
seeking to integrate generation, transmission and end-user facilities
must perform an assessment that includes: An evaluation of the
reliability impact of the new facilities and their connections on the
interconnected transmission systems (R1.1) and ``ensurance of
compliance with NERC Reliability Standards'' and other applicable
criteria (R1.2). While we agree with Alcoa that Requirements R1.1 and
R1.2 lack corresponding metrics, we disagree that these Requirements
are overly-broad or open-ended. Nor do we read Requirement R1.2 as
suggesting that even a small addition of facilities would compel an
entity to comply with all of the Reliability Standards, which might not
otherwise apply. Rather, we believe that the Requirements and existing
Measures set forth in FAC-002-0 are sufficiently clear and objective to
provide guidance for compliance.
    358. The Commission disagrees with CenterPoint's comments that
because

coordination is not readily auditable, the Reliability Standard should
be eliminated. The Reliability Standard specifies the assessments that
must be carried out to demonstrate that facility connections meet
reliability performance requirements. Furthermore the Reliability
Standard specifies that the assessment studies must be jointly
evaluated by the entities involved and that evidence of such
coordination shall be provided. Coordination provides assurance of a
fair, equitable and comprehensive Interconnection process, which is the
basis for open access and is required to avoid adverse impacts on
reliability.
    359. The Commission disagrees with MEAG's comment that the
inclusion of distribution providers is redundant and unnecessary. The
NERC definition clearly identifies the role of the distribution
provider as providing the ``wires'' connecting the transmission system
to the end use customer. FAC-002-0 has a reliability goal of avoiding
adverse impacts on Interconnections, including a number of types of
end-user facilities. Because the distribution provider has
responsibility at the interface between the transmission and
distribution system, it is proper that FAC-002-0 include Requirements
to address those responsibilities.
    360. The Commission agrees with the ISO/RTO Council that the
Reliability Standard does not identify functional entities responsible
for specific tasks. The Commission understands that the roles and
responsibilities of the transmission planner and planning authority in
carrying out the tasks are in accordance with the definitions in the
NERC glossary. Since the Commission has previously approved the
division of responsibilities in various tariffs, the exact delegation
of individual tasks is better placed in the procedures manuals than in
the Reliability Standard.
    361. While the Commission has identified concerns with regard to
FAC-002-0, we believe that the proposal serves an important purpose in
ensuring that generator owners, transmission owners and end-users meet
facility connection and performance requirements. We note that the
Reliability Standards contains Measures and Levels of Non-Compliance.
Further, the proposed Requirements set forth in this Reliability
Standard are sufficiently clear and objective to provide guidance for
compliance.
    362. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard FAC-002-0 as
mandatory and enforceable. In addition, pursuant to section 215(d)(5)
of the FPA and Sec.  39.5(f) of our regulations, the Commission
proposes to direct that NERC submit a modification to FAC-002-0 that
amends Requirement R1.4 to require evaluation of system performance
under both normal and contingency conditions by referencing TPL-001
through TPL-003.
d. Transmission Vegetation Management Program (FAC-003-1)
i. NERC Proposal
    363. NERC stated that proposed Reliability Standard FAC-003-1 is
designed to minimize transmission outages from vegetation located on or
near transmission rights-of-way by maintaining safe clearances between
transmission lines and vegetation, and establish a system for uniform
reporting of vegetation-related transmission outages. FAC-003-1 applies
to transmission lines operated at 200 kV or higher voltage (and lower-
voltage transmission lines which have been deemed critical to
reliability by a regional reliability organization). The Reliability
Standard requires each transmission owner to have a documented
vegetation management program in place, including records of its
implementation. Each program must be designed for the geographical area
and specific design configurations of the transmission owner's system.
    364. This Reliability Standard requires a transmission owner to
define a schedule for and the type (aerial or ground) of right-of-way
vegetation inspections. In addition, it requires a transmission owner
to determine and document the minimum allowable clearance between
energized conductors and vegetation before the next trimming, and it
specifically provides that ``Transmission-Owner-specific minimum
clearance distances shall be no less than those set forth in the
Institute of Electrical and Electronics Engineers (IEEE) Standard 516-
2003 (IEEE Guide for Maintenance Methods on Energized Power Lines).''
\162\
---------------------------------------------------------------------------

    \162\ Standard FAC-003-1 (Requirement R1.2.2).
---------------------------------------------------------------------------

    365. Compliance with this standard is measured against four Levels
of Non-Compliance. Levels 1 and 2 relate to documentation. Level 3 non-
compliance occurs if a transmission owner reports one incident of
vegetation-related outage in a calendar year due to vegetation grow-ins
from inside or outside the right of way. If the transmission owner
reports more than one vegetation-related outage, then Level 4 non-
compliance has occurred.
ii. Staff Preliminary Assessment
    366. Staff expressed concern that the Reliability Standard does not
designate maximum allowable inspection intervals but, instead, allows
each transmission owner to define its inspection schedule and maintain
its own program. Thus, a transmission owner cannot be faulted for the
length of its inspection interval, provided that it has defined the
schedule in its formal program.
    367. Staff also expressed concern with the Reliability Standard's
development of a minimum clearance, i.e., the distance between a wire
and the vegetation around it, based on IEEE standard 516-2003 that was
developed with the primary purpose of enabling the performance of safe,
energized line maintenance.\163\ IEEE 516-2003 specifies a 2.45-foot
clearance from a live conductor for the 120 kV voltage class.\164\
Staff noted that this clearance is lower than that specified by
relevant U.S. safety codes such as the ANSI Z-133 standard, which
specifies 12-feet, 4-inches as the approach distance for the 115 kV
voltage class.\165\
---------------------------------------------------------------------------

    \163\ Institute of Electrical and Electronics Engineers, Inc.
Standard 516-2003, IEEE Guide for Maintenance Methods on Energized
Power Lines at 1 (July 29, 2003) (IEEE 516-2003).
    \164\ Id. at 20.
    \165\ ANSI Z133, American National Standards Institute Standard
for Tree Care Operations--Pruning, Trimming, Repairing, Maintaining
and Removing Trees, and Cutting Brush--Safety Requirements.
---------------------------------------------------------------------------

    368. Staff expressed concern that use of the IEEE clearance
provision as a basis for minimum clearance may not be appropriate, and
adopting it for use with regular maintenance practices in vegetation
management may be a ``lowest common denominator'' approach. In
addition, use of IEEE Standard 516-2003 could create the unintended
consequence that some transmission owners that currently maintain more
stringent vegetation management programs based on standards such as the
ANSI Z-133 may relax their practices to meet the less-stringent minimum
requirement set forth in the NERC vegetation management standard FAC-
003-1. Staff questioned whether the Reliability Standard sufficiently
addresses Recommendation No. 16 of the Blackout Report to establish
``enforceable standards for maintenance of electrical clearances in
right-of-way areas.'' \166\
---------------------------------------------------------------------------

    \166\ Blackout Report at 154.

---------------------------------------------------------------------------

iii. Comments
    369. NERC contends that FAC-003-1 is an excellent standard that
sets appropriate requirements for managing vegetation in transmission
rights-of-way. NERC and other commenters address four key issues: (1)
Adequacy of minimum clearances; (2) the need to specify maximum
inspection intervals; (3) no vegetation-related outage can occur
without also violating the proposed Reliability Standard; and (4) cost
impact of expanding the minimum clearances.
    370. Adequacy of minimum clearances: NERC explains the adoption of
minimum clearance distances based on the standard IEEE 516-2003 is
appropriate because, even though the standard was originally developed
for live line workers, ``its engineering basis applies electric
flashover physics that apply to flashover conditions between an
energized conductor and a grounded object, such as a tree.'' \167\ NERC
adds that the minimum clearances identified in the standard are the
``second'' clearance requirement.\168\ In the first instance, a
transmission owner must develop wider clearances when accounting for
vegetation growth, line dynamics and other conditions between the times
of tree pruning.
---------------------------------------------------------------------------

    \167\ NERC Comments at 31.
    \168\ ``Clearance 1'' is the clearance distance between
vegetation and a transmission line to be achieved at the time of
vegetation management work, and ``clearance 2'' is the minimum
clearance distance between vegetation and a transmission line to be
achieved at all times. FAC-003-1 defines ``clearance 2'' in
Requirement R1.2.2 as ``The Transmission Owner shall determine and
document specific radial clearances to be maintained between
vegetation and conductors under all rated electrical operating
conditions. These minimum clearance distances are necessary to
prevent flashover between vegetation and conductors and will vary
due to such factors as altitude and operating voltages. These
Transmission Owner-specific minimum clearance distances shall be no
less than those set forth in the [IEEE] Standard 516-2003 * * * and
as specified in its Section <IP_ADDRESS>, Minimum Air Insulation
Distances without Tolls in the Air Gap.''
---------------------------------------------------------------------------

    371. Similar to NERC's view on the adequacy of minimum clearances,
several commenters argue that the IEEE 516-2003 standard is an
appropriate standard for use in FAC-003-1.\169\ Southern indicates that
full compliance with this standard would help to ensure line
reliability consistent with the purposes of this standard and therefore
believes the use of the IEEE standard is appropriate for use as a
minimum acceptable clearance in this context. CenterPoint states that
``clearance 2,'' i.e., the minimum distance in FAC-003-1, must be
maintained under all rated electrical operating conditions and must
consider additional clearance for the dynamic movement of the
transmission conductors to avoid vegetation related outages. According
to CenterPoint, the derived values from the IEEE table serve only as a
theoretical minimum for static situations.
---------------------------------------------------------------------------

    \169\ E.g., EEI, Mid-American, National Grid, NRECA, PG&E, and
Southern.
---------------------------------------------------------------------------

    372. Conversely, ReliabilityFirst submits that it agrees with
staff's evaluation of standard FAC-003-1 regarding the appropriateness
of using the IEEE standard. SCE believes that the adoption of IEEE 516-
2003 in FAC-003-1 to establish ``specific radial clearances to be
maintained between vegetation and conductors under all rated electrical
operating conditions'' is wholly inappropriate when determining minimum
tree-to-line clearances. SCE states that no scientific evidence was
ever presented or cited during the NERC standard development process
that demonstrated vegetation represented a greater or equal flash-over
hazard in comparison to the human body (i.e., a qualified electrical
worker) when placed in proximity to transmission lines. SCE recommends
that NERC establish a new minimum clearance for transmission lines
operated at 200 kV and above and that studies be conducted so that
these new minimum clearances be based on real-world knowledge and line
clearing expertise, as opposed to simply appropriating standards that
were designed for other situations.
    373. Inspection Cycle: With regard to a maximum allowable
inspection cycle, NERC believes FAC-003-1 appropriately provides
discretion to transmission owners to develop vegetation inspection
cycles appropriate for their respective systems. Several commenters
argue that staff's concern that FAC-003-1 does not designate maximum
allowable inspection intervals fails to recognize varying types of
vegetation, growth rates and climates throughout North America.\170\
Some commenters consider staff's comment on maximum allowable
inspection intervals as a ``one size fits all'' approach to vegetation
management and advise that such an approach to inspection intervals
could result in the lowest common denominator among all regions
throughout the country or unfairly punish or financially burden certain
regions. Allegheny proposes as an alternative that maximum inspection
intervals could vary between Regional Entities and notes that there
might need to be variations of the maximum interval within a Regional
Entity that is geographically diverse.
---------------------------------------------------------------------------

    \170\ E.g., Allegheny, CenterPoint, EEI, MRO, National Grid,
NRECA, NYSPUC, SCE, and Southern.
---------------------------------------------------------------------------

    374. Performance measure: NERC states that no vegetation-related
transmission line outage can occur without also being a violation of
the standard. NERC expresses the view that, if such outages do occur,
the transmission owner has violated the standard, and the solution is
to engage in compliance enforcement actions rather than developing a
wider margin of clearance. Several commenters concur with NERC on this
point and assert that staff's concerns with regard to maximum
inspection intervals and minimum clearances would not be an issue if a
vegetation management standard measured and used performance as a
metric.\171\ Southern points out that FAC-003-1 utilizes outage
reporting to measure the effectiveness of an entity's vegetation
management program and suggests that the performance metric will expose
the standard's shortcomings which can then be addressed through a
revision of the standard.
---------------------------------------------------------------------------

    \171\ E.g., CenterPoint, National Grid, ISO/RTO Council and
Southern.
---------------------------------------------------------------------------

    375. Cost of compliance: Finally, NERC and others express concern
that expanding the minimum clearances could increase workload and costs
yet not provide any added reliability benefit. Regarding the issue on
increased costs to maintain greater minimum clearances versus
reliability benefits, EEI points out that ``flexibility written into
the standard recognizes that fixed clearance distances will not provide
stronger protection of the grid, and are certain to cause significant
additional costs,'' yet recognizes the need to prevent cost-based
incentives which might drive the Reliability Standard toward a lowest
common denominator.\172\
---------------------------------------------------------------------------

    \172\ EEI Comments at 8.
---------------------------------------------------------------------------

    376. USDA Forest Service expresses concern with regard to the
manner in which the requirements of EPAct 2005 are being applied. In
particular, utilities are submitting vegetation management standards to
the Commission for use on National Forest System lands that were not
first approved by the USDA Forest Service. It adds that it objects to
any process that allows a utility to set its own new vegetation
management standards independently and to any interpretation of EPAct
2005 that would diminish the USDA Forest Service's authority to approve
new vegetation management standards on Forest Service lands.

iv. Commission Proposal
    377. Giving due weight to the technical expertise of the ERO and
with the expectation that the Reliability Standard will accomplish the
purpose represented to the Commission by the ERO and that it will
improve the reliability of the nation's Bulk-Power System, the
Commission proposes to approve Reliability Standard FAC-003-1. In
addition, pursuant to section 215(d)(5) of the FPA and Sec.  39.5(f) of
our regulations, the Commission proposes to modify the Reliability
Standard, as discussed below.
(a) Adequacy of Minimum Clearances
    378. NERC and others support the proposed minimum ``clearance 2''
distances based on IEEE 516-2003 as appropriate for use in vegetation
management. The Commission believes that clearance distances need to
exceed IEEE 516-2003's requirements in many circumstances, but should
never be less than these requirements. The Commission is concerned that
the application of the IEEE requirement without consideration of
specific circumstances may result in flashovers, and this possibility
appears to be addressed in IEEE 516-2003 and the vegetation management
standard. Specifically, FAC-003-1 provides that a transmission owner
must ``identify and document clearances between vegetation and
[conductors] taking into consideration transmission line voltage, the
effects of ambient temperature on conductor sag under maximum design
loading, and the effects of wind velocities on conductor sway.'' \173\
In addition, the Reliability Standard provides:
---------------------------------------------------------------------------

    \173\ FAC-003-1, Requirement R1.2.

    The Transmission Owner shall determine and document specific
radial clearances to be maintained between vegetation and conductors
under all rated electrical operating conditions. These minimum
clearance distances are necessary to prevent flashover between
vegetation and conductors and will vary due to such factors as
altitude and operating voltages.'' \174\
---------------------------------------------------------------------------

    \174\ FAC-003-1, Requirement R1.2.2 (emphasis added).

    379. Consistent with the notion that the minimum clearance may vary
due to various factors, NERC states that the transmission owners must
develop wider clearances when accounting for vegetation growth, line
dynamics and other conditions between the times of tree pruning.\175\
In addition, IEEE 516-2003 makes clear that the stated minimum
clearances are based on ``standard'' atmospheric conditions and ``if
standard atmospheric conditions do not exist, extra care must be
taken.'' \176\
---------------------------------------------------------------------------

    \175\ NERC Comments at 32.
    \176\ IEEE 516-2003 at 20. Further, IEEE 516-2003 defines
``standard atmospheric conditions'' as temperatures above freezing,
wind less than 24 kilometer per hour, unsaturated air, normal
barometer, uncontaminated air, and clean and dry insulators.''
---------------------------------------------------------------------------

    380. NERC's comments, IEEE 516-2003, and the vegetation management
standard itself all make clear that the minimum ``clearance 2''
distances based on IEEE 516-2003 are adequate in some, but not all,
circumstances. The minimum clearances that a transmission owner must
identify and document depend on a variety of conditions including, but
not limited to, transmission line voltage, temperature, wind
velocities, altitude. Accordingly, we interpret the FAC-003-1 to
require trimming that is sufficient to prevent outages due to
vegetation management practices under all applicable conditions.\177\
---------------------------------------------------------------------------

    \177\ Nothing in this Reliability Standard should be interpreted
as preempting the authority and responsibility of the states to set
and enforce minimum clearances, such as those delineated in the
National Electric Safety Code, to protect the safety of the public.
---------------------------------------------------------------------------

    381. In response to the USDA Forest Service's comments, we believe
that any potential issues regarding minimum clearances on National
Forest Service lands should be dealt with on a case-by-case basis. The
Commission seeks comments whether another approach would be more
appropriate.
(b) Inspection Intervals
    382. NERC and other commenters believe FAC-003-1 appropriately
provides discretion to transmission owners to develop vegetation
inspection cycles appropriate for their respective systems. While the
Commission recognizes that some variation in inspection cycles would be
appropriate based on climate and other factors, we are concerned that
the complete discretion left to the transmission owners in determining
inspection cycles limits the effectiveness of the Reliability Standard.
    383. While the Commission will not dictate a specific minimum
vegetation inspection cycle, based on data provided by transmission
owners to the Commission in 2004 as part of the Commission's vegetation
management survey, it appears that a one-year vegetation inspection
cycle is reasonable.\178\ According to the Vegetation Management
Report, 76 of 161 entities surveyed conduct ground inspections once a
year.\179\ This indicates that a one-year vegetation inspection cycle
is the ``norm'' for the industry, but not a lowest common denominator
that sets a standard less stringent than the industry practice. While
the Commission will not dictate a minimum vegetation inspection cycle,
we do believe that it is important that the ERO develop a minimum
requirement as a ``backstop'' to assure that transmission owners
conduct inspections at a reasonable interval. Accordingly, we propose
to direct that the ERO modify the Reliability Standard to establish a
minimum vegetation inspection cycle.
---------------------------------------------------------------------------

    \178\ The data provided in the survey was used to prepare a
report to Congress, Federal Energy Regulatory Commission, Utility
Vegetation Management and Bulk Electric Reliability Report,
(September 7, 2004) (Vegetation Management Report).
    \179\ Id. at 11. The Vegetation Management Report indicates that
29 entities conduct ground inspections semi-annually or more
frequently, 37 entities inspect less frequently than annually, 12
inspect on an ``as needed'' basis, and seven entities did not report
on their inspection cycle.
---------------------------------------------------------------------------

    384. Further, as mentioned above, the Commission believes that some
variation to a continent-wide, one year minimum cycle should be allowed
due to physical differences such as climate and species of vegetation.
Appropriate variations may be determined on a regional basis, with FAC-
003-1 providing a continent-wide ``backstop.'' Alternatively, the
continent-wide standard could specify a one-year minimum inspection
cycle, and provide that exemptions would be granted by the ERO for
legitimate physical differences. The most appropriate approach could be
determined in the ERO Reliability Standard development process.
    385. The applicability of FAC-003-1 currently states that it
applies to all transmission lines operated at 200 kV and above and to
any lower voltage lines designated by the regional reliability
organization as critical to reliability. The Commission is concerned
that the bright-line applicability threshold of 200 kV will exclude a
significant number of transmission lines that could impact Bulk-Power
System reliability. Although the regional reliability organizations are
given discretion to designate lower voltage lines under the proposed
Reliability Standard, we are concerned that this approach will not
result in the inclusion of all transmission lines that could impact
Bulk Power System reliability. Accordingly, the Commission proposes to
direct NERC to change the applicability of FAC-003-1 so that it applies
to Bulk-Power System transmission lines that have an impact of
reliability as determined by the ERO.
    386. While we have expressed some concerns regarding FAC-003-1, we

believe that it serves an important goal of improving the reliability
of the Bulk-Power System by preventing outages from vegetation.
Further, with our interpretation above regarding minimum clearances,
the Commission believes that the proposed Requirements set forth in
FAC-003-1 are sufficiently clear and objective to provide guidance for
compliance.
    387. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard FAC-003-1.
Further, pursuant to section 215(d)(5) of the FPA and Sec.  39.5(f) of
our regulations, we propose to direct that NERC submit a modification
to FAC-003-1 that: (1) The ERO develop a minimum vegetation inspection
cycle that allows variation for physical differences, as discussed
above; and (2) removes the applicability to transmission lines operated
at 200 kV and above so that the Reliability Standard applies to Bulk-
Power System transmission lines that have an impact of reliability as
determined by the ERO.
e. Methodologies for Determining Electrical Facilities (FAC-004-0) and
Electrical Facility Ratings for System Modeling (FAC-005-0)
    388. NERC's August 28, 2006 Supplemental Filing states that
Reliability Standards FAC-004-0 and FAC-005-0 were filed for approval
on April 4, 2006, but have been superseded by FAC-008-1 and FAC-009-1,
respectively. NERC has withdrawn its request for approval of FAC-004-0
and FAC-005-0. Thus, the Commission will not address them in this
notice of proposed rulemaking.
f. Facility Ratings Methodology (FAC-008-1)
i. NERC Proposal
    389. The stated purpose of FAC-008-1 is to ensure that facility
ratings used in the reliable planning and operation of the bulk
electric system are determined based on an established methodology. It
requires that each transmission owner and generation owner develop a
facility rating methodology for their facilities, which should consider
manufacturing data; design criteria (such as IEEE, ANSI and other
industry standards); ambient conditions; operating limitations; and
other assumptions. This methodology is to be made available to
reliability coordinators, transmission operators, transmission
planners, and planning authorities who have responsibility in the same
areas where the facilities are located for inspection and technical
reviews.
ii. Staff Preliminary Assessment
    390. Staff noted that this Reliability Standard does not establish
or require a uniform or consistent set of methodologies, which has
resulted in different ratings for the same equipment under the same
conditions in the same region. Rather, it only requires an equipment
owner to document the methodology it chooses to use. Thus, staff was
concerned that FAC-008-1 does not appear to address Recommendation No.
27 of the Blackout Report that NERC develop ``clear, unambiguous
requirements for the calculation of transmission line ratings.'' \180\
---------------------------------------------------------------------------

    \180\ Blackout Report at 162.
---------------------------------------------------------------------------

iii. Comments
    391. NERC comments that strengthening the consistency of the
underlying assumptions and methods used to determine the ratings of
facilities could improve the standard; however, NERC cautions that a
single, uniform method for ratings calculations will not be practical
or effective. This concern is echoed by ReliabilityFirst. NERC explains
that the rating of facilities is very complex, beginning with the fact
that each physical device has its own unique design criteria and
limitations, which are incorporated into the device's warranty. The
facility owner risks voiding the warranty or damaging the physical
device if it is operated outside of the manufacturer ratings. The
second consideration is the configuration of the equipment within the
power system. A facility owner examines the equipments' limitations and
uses engineering judgment to apply a variety of assumptions and
practices in creating the design criteria for operational facilities.
NERC agrees that it is at this step where practices could be more
consistent. However, it adds that differences in assumptions and
practices arise from site-specific characteristics such as climate
conditions, local equipment safety codes, or life expectancy of the
equipment, and that when the standards were developed, participants
strongly agreed that uniform methods were not appropriate or feasible.
    392. NERC points out that there are trade-offs to uniform ratings
methods. Currently, a facility owner assumes a business risk associated
with the assumptions used in the rating of facilities because the
facility owner has invested in the equipment and is responsible for
maintaining the warranty, the equipment's performance, and ultimately
replacement costs. If ratings are uniform and outside a facility
owner's control, NERC questions who would be responsible for equipment
failures. Uniform rating methods might also lead to a reduction in
limits on facilities and, consequently, reduced capacity of the
transmission network. Several commenters, including NERC, agree with
staff that regardless of how ratings are developed, jointly-owned
facilities must use the same ratings.
    393. Allegheny disagrees with staff's evaluation of standard FAC-
008. It comments that the industry does not consider the absence of a
standard methodology for determining facility ratings a threat to the
reliability of the transmission grid and that the establishment of a
uniform standard will be a massive and costly undertaking. Allegheny
explains that, historically, generator owners and transmission owners
rely on manufacturer-provided equipment ratings, in conjunction with
their respective business practices, to ensure consistent documentation
and application of ratings to ensure reliability. Further, monitoring
by regional organizations has also ensured that generator and
transmission owners' practices address reliability concerns. In light
of this, Allegheny advocates that staff's recommendations not be
adopted without further demonstration that the benefits justify the
cost.
    394. PG&E asserts that FAC-008-1 appropriately balances the need
for consistent facility ratings with the realities of the transmission
system and that a single line rating methodology for all of North
America is neither practical nor advisable. It explains that the
Reliability Standard properly places the responsibility of determining
facility ratings with the facility owners. PG&E believes the
Reliability Standard's disclosure requirement safeguards against
manipulation of facility ratings.
    395. Mid-American and MRO agree that a consistent methodology
should be established for equipment rating. Mid-American believes that
the standard should encourage a consistent methodology for calculating
equipment ratings, ensure transmission customers of nondiscriminatory
treatment without being overly burdensome to the facility owner, and
must address all factors that affect equipment ratings. However, Mid-
American does not support an overly-prescriptive standard. It suggests
that staff's concerns should be directed at

ensuring consistent methodologies for rating development, however,
points out that a consistent methodology may still result in differing
numerical ratings due to differing ambient temperatures, sag
conditions, etc., that may exist in differing regions. While supporting
staff's recommendation for a consistent methodology, MRO disagrees with
staff's approach. Transmission owners should be able to set facility
ratings as they see fit, provided the rating is communicated to others
and the transmission owners operate with the same rating.
    396. National Grid comments that it supports some measure of
standardization of equipment rating methodologies. It explains that,
``if left entirely to the asset owners, the lack of uniform equipment
rating methodologies leaves open the possibility in some circumstances
that the determination of facility ratings can be used by an asset
owner to gain a market edge over other market participants that do not
own assets.'' \181\ National Grid encourages the standardization of
facility ratings only at a conceptual level, though not necessarily the
standardization of specific parameters, recognizing regional climatic
and topological conditions.
---------------------------------------------------------------------------

    \181\ National Grid Comments at 19.
---------------------------------------------------------------------------

    397. CenterPoint contends that Reliability Standards FAC-004-0,
FAC-005-0, FAC-008-1 and FAC-009-1 are not necessary and should be
rejected. It explains that Blackout Report Recommendation No. 27 does
not require a uniform set of methodologies for rating facilities, but
instead only recommends that there be clear, unambiguous requirements
to rate transmission lines. According to CenterPoint, most if not all
utilities follow a standard IEEE method for rating transmission lines.
    398. The Valley Group proposes that the fastest and most efficient
way to fulfill Blackout Report Recommendation No. 27 would be the
adoption of the principles of the International Council on Large
Electric Systems (CIGRE)/IEEE Guide and the necessary procedures for
enforcement. The Valley Group cites survey data indicating that a large
percentage of utilities have increased their facility ratings by
changing certain ratings assumptions, most commonly by increasing the
assumed wind speed. It views this as a dangerous trend because system
loads have generally increased during the same period. It also sees the
regional adoption of assumptions being based on utilities with the
least conservative practices, leading to a ``lowest common
denominator'' result. To correct this problem, the Valley Group
encourages adoption of IEEE/CIGRE guidelines for selection of weather
parameters.\182\
---------------------------------------------------------------------------

    \182\ The Valley Group cites a CIGRE Technical Brochure entitled
Guide for Selection of Weather Parameters for Overhead Bare
Conductor Ratings published in August 2006 and a CIGRE/IEEE
Tutorial, which was presented in June 2006.
---------------------------------------------------------------------------

    399. Alcoa agrees with staff's evaluation of the facility
Reliability Standards. It adds that, without a clear set of
straightforward methodologies for facility ratings, the proposed
documentation requirements are unduly burdensome. Alcoa suggests that
the ERO propose methodologies that consider the relative importance to
the reliability of the Bulk-Power System, as well as the ability of the
owner of the facilities to pass on the costs incurred to enhance
reliability to those receiving the benefit.
iv. Commission Proposal
    400. The Commission proposes to approve FAC-008-1 as mandatory and
enforceable. In addition, we propose directing that NERC develop
modifications to the Reliability Standard, as discussed below.
    401. The Commission agrees with NERC and others that the
assumptions used in the methodologies can not be standardized. The
assumptions are essentially input variables into rating methodologies
used to convert the input into the normal and emergency ratings of the
facilities. Owners will use the actual topology and substation
arrangement of the facilities in configuring equipment for facility
ratings. There should be different input variables such as the ambient
temperatures in Texas as compared to Maine. Thus, we are not proposing
to require a ``uniform method of ratings calculation,'' which would
standardize the input assumptions in the formula for calculating
ratings.
    402. On the other hand, the Commission disagrees with MRO that
transmission owners ``should set the rating as they see fit, provided
that everyone knows what the rating is and that rating is used for all
purposes including the Transmission Owner's use of the facilities.''
\183\ As explained by National Grid, allowing facility owners to set
ratings ``as they see fit'' could result in the use of a facility
rating determination to gain a competitive advantage over other market
participants that do not own assets. This could harm the reliability of
the transmission grid and can also impact competition as described by
National Grid. Likewise, the Valley Group raises legitimate concerns
about manipulation of the assumptions, in particular wind speed,
demonstrating the need not only for uniformity, but for oversight as
well.
---------------------------------------------------------------------------

    \183\ MRO Comments at 8.
---------------------------------------------------------------------------

    403. The Commission believes that, to address the concerns of
National Grid, Valley Group and others, the Reliability Standard could
be improved in two ways. First, we propose that the different
assumptions that are the basis for the input variables should be
documented and made available for review by other users, owners and
operators of the Bulk-Power System. Currently, only a subset of
functional entities responsible for the facilities in a specific area
are able to view this information. The added transparency that we
propose would allow customers, regulators and other affected users,
owners and operators of the Bulk-Power System to understand how a
facility owner sets its facility ratings.
    404. Second, asset owners use various methods for calculating
ratings that are widely accepted throughout the industry, such as IEEE
and CIGRE, to calculate transmission line conductor ratings. While not
proposing to mandate a particular methodology, we do propose that the
methodology chosen by a facility owner be consistent with industry
standards developed through an open process such as IEEE or CIGRE.
    405. Further, consistent with NERC's comments,\184\ the Commission
proposes that the limiting component(s) be identified and that the
increase in rating based on the next limiting component(s) be defined
for all critical facilities, including facilities that limit TTC, limit
delivery of generation to load, or bottle generation. This would
provide additional transparency and sufficient information so that the
most cost effective solutions to increase facility ratings can be
identified. For example, if a specific transmission line is limited by
the relay settings or protective relay system, ordinarily the line
could be ``up rated'' for a relatively modest cost. As a second
example, if a line is limited by the sag of one particular span,
modifying the tension in that span, even if it requires reinforcing a
few towers, may result in significant increases in capability at
relatively low cost. Such information would be useful to users of the
Bulk-Power System and to the Commission.
---------------------------------------------------------------------------

    \184\ See NERC Comments at 61.
---------------------------------------------------------------------------

    406. CenterPoint has not provided a compelling reason for us to
reject this Reliability Standard. Assuming CenterPoint is correct that
most, if not all, utilities follow a standard method for rating
transmission lines, that fact

does not obviate the need for mandatory and enforceable Reliability
Standards that require clear, ambiguous requirements to rate
transmission lines. Moreover, industry use of a standard line rating
method may be a result of the Reliability Standard, which requires
facility owners to consider industry rating practices such as IEEE.
Moreover, the Reliability Standards include ratings for all facilities,
not just transmission lines.
    407. FAC-008-1 makes considerable progress in addressing Blackout
Report Recommendation No. 27, which as noted above recommends that NERC
develop clear and unambiguous requirements for the calculation of
transmission line ratings. While the Commission has identified ways to
improve and strengthen this Reliability Standard, we believe that the
proposal serves an important purpose in ensuring that facility ratings
are determined based on an established methodology. Further, the
Commission believes that the proposed Requirements set forth in FAC-
008-1 are sufficiently clear and objective to provide guidance for
compliance.
    408. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard FAC-008-1 as
mandatory and enforceable. In addition, pursuant to section 215(d)(5)
of the FPA and Sec.  39.5(f) of our regulations, the Commission
proposes to direct that NERC submit a modification to FAC-008-1 that
requires transmission and generation facility owners to: (1) Document
underlying assumptions and methods used to determine normal and
emergency facility ratings; and (2) develop facility ratings consistent
with industry standards developed through an open process such as IEEE
or CIGRE; and (3) identify the limiting component(s) and define for all
critical facilities the increase in rating based on the next limiting
component(s).
g. Establish and Communicate Facility Ratings (FAC-009-1)
i. NERC Proposal
    409. The stated Purpose of FAC-009-1 is to ensure that facility
ratings are determined based on an established methodology. It requires
each transmission owner and generation owner to establish facility
ratings consistent with their associated facility ratings methodology
and provide those ratings to their reliability coordinator,
transmission operator, transmission planner, and planning authority.
ii. Staff Preliminary Assessment
    410. The Staff Preliminary Assessment did not identify any issues
related to this Reliability Standard.
iii. Comments
    411. ReliabilityFirst agrees with staff's evaluation that FAC-009-1
does not contain any substantive issues.
iv. Commission Proposal
    412. FAC-009-1 serves an important reliability purpose of ensuring
that facility ratings are determined based on an established
methodology. Further, the proposed Requirements set forth in FAC-009-1
are sufficiently clear and objective to provide guidance for
compliance. Accordingly, the Commission proposes to approve Reliability
Standard FAC-009-1 (Establish and Communicate Facility Ratings) as
just, reasonable, not unduly discriminatory or preferential, and in the
public interest.
h. Transfer Capability Methodology (FAC-012-1)
i. NERC Proposal
    413. Proposed Reliability Standard FAC-012-1 requires each
reliability coordinator and planning authority to document their
methodology used to develop inter-regional and intra-regional transfer
capabilities. This methodology must describe how it addresses
transmission topology, system demand, generation dispatch, and use of
projected and existing commitment of transmission.
ii. Staff Preliminary Assessment
    414. Staff noted that a move toward standardization of the inter-
regional and intra-regional transfer capability may be desirable to
ensure an adequate level of reliability and minimize undue negative
impact on competition.
iii. Comments
    415. Responding to staff's suggested move toward standardization,
MRO comments that the Reliability Standards should recognize the
differences in geographical diversity, as well as relative population
size, to maintain reliability. A single approach is desirable, but it
should provide the flexibility to adjust for technical realities within
a given part of the Eastern Interconnection. It explains that the
assumptions underlying methodologies for determining inter-regional and
intra-regional transfer capabilities may vary for different regions of
the Eastern Interconnection due to geography, system design, weather,
or state-specific requirements. Transparency in the approach and
assumptions is essential.
    416. PG&E comments that the inherent differences in the development
of the transmission infrastructure between the Eastern Interconnection
and the Western Interconnection weigh against the imposition of a
single methodology. Because transmission lines tend to be located in
common corridors in the Western Interconnection, efficiency and
reliability are maximized by transfer capabilities calculated with
consideration of selected multiple contingencies to account for the
multiplicity of potential credible events.
    417. CenterPoint proposes that FAC-012-1 be consolidated with FAC-
013-1. Further, it advocates that, because the ERCOT region operates as
a single control area and thus does not have transfers between control
areas, the NERC transfer capability methodology is not used, nor should
it be.
iv. Commission Proposal
    418. As the methodology to calculate transfer capability used by a
reliability coordinator or planning authority has not been submitted to
the Commission, it is not possible to determine at this time whether
FAC-012-1 satisfies the statutory requirement that a proposed
Reliability Standard be ``just, reasonable, not unduly discriminatory
or preferential, and in the public interest.'' Accordingly, the
Commission will not propose to accept or remand this Reliability
Standard, until the regional procedures are submitted. In the interim,
compliance with FAC-012-1 should continue on its current basis, and the
Commission considers compliance with the Reliability Standard to be a
matter of good utility practice.
    419. Although we do not propose any action with regard to FAC-012-1
at this time, we address comments and our additional concerns regarding
this Reliability Standard below.
    420. We agree with MRO and PG&E that different regions or
Interconnections may have different geography, population size, or
transmission structure that necessitate different approaches to
transfer capability, and we have noted that the Requirement R1.3
addresses issues such as transmission system topology and current and
projected use of transmission system for reliability margin but not for
transfer capability calculation. FAC-012-1 only requires

that the regional reliability organization provide documentation on
transfer capability methodology and provide this documentation to
entities such as transmission planner, planning authority, reliability
coordinator, and transmission operator. The Reliability Standard does
not contain clear requirements on how transfer capability should be
calculated, which has resulted in diverse interpretations of transfer
capability and the development of various calculation
methodologies.\185\ We believe that this Reliability Standard should,
as a minimum, provide a framework for the transfer capability
calculation methodology including data inputs, and modeling
assumptions. We seek comments on the most efficient way to make the
above information transparent for all participants.
---------------------------------------------------------------------------

    \185\ Path rating process in WECC and various regional transfer
capability methodologies in the Eastern interconnection.
---------------------------------------------------------------------------

    421. With regard to CenterPoint's comment, while FAC-012, which
pertains to the documentation of transfer capability methodologies, and
FAC-013, which pertains to the establishment of transfer capabilities
consistent with the methodology, are related, we leave it to NERC's
discretion whether they should be consolidated. As we have mentioned
elsewhere, CenterPoint's suggestion that the Reliability Standard not
apply to the ERCOT region must be submitted by NERC as a regional
difference.
i. Establish and Communicate Transfer Capability (FAC-013-1)
i. NERC Proposal
    422. Proposed Reliability Standard FAC-013-1 requires each
reliability coordinator and planning authority to calculate transfer
capabilities consistent with its transfer capability methodology and
provide those capabilities to its transmission operators, transmission
service providers, and planning authorities.
ii. Staff Preliminary Assessment
    423. The Staff Preliminary Assessment did not identify any issues
related to this Reliability Standard.
iii. Comments
    424. ReliabilityFirst agrees with staff's evaluation that FAC-013-1
does not contain any substantive issues.
iv. Commission Proposal
    425. The Commission's concern about this Reliability Standard is
related to the applicability. The Reliability Standard currently states
that it is applicable to a reliability coordinator (as required by its
regional reliability organization), and a planning authority (as
required by its regional reliability organization). The Commission
believes that the Reliability Standard should be applicable to all
Reliability Coordinators. A planning authority may also have a role in
determining transfer capabilities, however, the regional reliability
organization should not be the entity that makes this determination.
    426. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard FAC-013-1 as
mandatory and enforceable. In addition, pursuant to section 215(d)(5)
of the FPA and Sec.  39.5(f) of our regulations, the Commission
proposes to direct that NERC submit a modification to FAC-013-1 that:
(1) Makes it applicable to all reliability coordinators; and (2)
removes the regional reliability organization as the entity that
determines whether a planning authority has a role in determining
transfer capabilities.
6. INT: Interchange Scheduling and Coordination
a. Overview
    427. The Interchange Scheduling and Coordination (INT) group of
Reliability Standards addresses the process of Interchange
Transactions, which occur when electricity is purchased and transmitted
from a seller to a buyer across the power grid.\186\ Specific
information regarding each transaction must be identified in an
electronic label, known as a ``Tag,'' which is used by an affected
reliability coordinator, transmission service provider or balancing
authority to assess the transaction for reliability impacts. In
addition, communication, submission, assessment and approval of a Tag
must be completed for reliability consideration before implementation
of the transaction.
---------------------------------------------------------------------------

    \186\ NERC glossary at 8 defines ``Transaction'' as ``[a]n
agreement to transfer energy from a seller to a buyer that crosses
one or more Balancing Authority Area boundaries.''
---------------------------------------------------------------------------

    428. In its April 4, 2006 Petition, NERC submitted four Version 0
interchange Reliability Standards, INT-001-0 through INT-004-0. In its
August 28, 2006 Supplemental Filing, NERC submitted nine Version 1
proposed Reliability Standards in the INT group.\187\ Reliability
Standards INT-001-1, INT-003-1 and INT-004-1 replace the corresponding
Version 0 standards although, as discussed later on, the language of
some Requirements have been modified and other Requirements have been
transferred elsewhere. NERC states that Reliability Standard INT-002-0
is being retired, effective January 1, 2007 and asked that it be
withdrawn for Commission review. Reliability Standards INT-005-1
through INT-010-1 are new to the Version 1 Reliability Standards.
---------------------------------------------------------------------------

    \187\ INT-001-1, INT-003-1, INT-004-1, INT-005-1, INT-006-1,
INT-007-1, INT-008-1, INT-009-1, INT-010-1.
---------------------------------------------------------------------------

i. General Comments
    429. CenterPoint comments that the INT group of proposed
Reliability Standards should be rejected because Reliability Standards
that attempt to create auditable requirements to measure
``coordination'' cannot realistically be implemented and are
unnecessary appendages to Reliability Standards addressing the actual
goal of ensuring reliable operation. CenterPoint also contends that, if
the Commission approves the INT group of Reliability Standards, ERCOT
should be explicitly exempted from them because interchange tagging is
not used in ERCOT.
    430. ReliabilityFirst comments generally on the INT group of
Reliability Standards. It states that the development of missing
compliance elements by NERC's drafting team must be expedited and that
it may be necessary to supplement the team with additional experts if
it is necessary to expand and/or detail requirements in these
Reliability Standards.
ii. Commission Proposal
    431. Order No. 672 explains that a Reliability Standard must be
designed to achieve a specified reliability goal.\188\ The goal of the
INT group of Reliability Standards is not simply to measure
coordination as CenterPoint contends. Rather, these Reliability
Standards are intended to ensure that uses of the Bulk-Power System are
known to operating entities and reliability coordinators sufficiently
in advance to permit them to evaluate reliability impacts and curtail
transactions in the event system parameters approach their operating
limits.\189\ In our view, the INT group of Reliability Standards is
designed to achieve a specified goal that is important to maintaining
Bulk-Power System reliability. Accordingly, the Commission disagrees
with CenterPoint

that the INT group of Reliability Standards should be rejected.
---------------------------------------------------------------------------

    \188\ Order No. 672 at P 324.
    \189\ NERC Petition at 40-41.
---------------------------------------------------------------------------

    432. With regard to CenterPoint's suggestion that ERCOT be
explicitly exempted from the INT group of Reliability Standards, we
note that NERC has not proposed such an exemption as a regional
difference. Order No. 672 makes clear that a proposed Reliability
Standard, including a modification or regional difference to a
Reliability Standard, must be submitted by the ERO to the Commission
for our consideration.\190\ Accordingly, we will not consider such an
exemption unless submitted by NERC for our review.
---------------------------------------------------------------------------

    \190\ Order No. 672 at P 249.
---------------------------------------------------------------------------

    433. With regard to ReliabilityFirst's comment, we agree that the
development of missing compliance elements is an important priority and
note that NERC has stated that it plans to submit a filing in November
2006 that will include many such missing compliance elements. NERC
staffing of the team assigned to develop missing compliance elements is
a matter beyond the scope of this proceeding.
b. Interchange Information (INT-001-1)
i. NERC Proposal
    434. NERC states that the purpose of INT-001-1 is to ensure that
interchange information is submitted to the reliability analysis
service identified by NERC.\191\ Proposed Reliability Standard INT-001-
1 applies to purchasing-selling entities and balancing authorities. It
specifies two Requirements that focus primarily on establishing who has
responsibility in various situations for submitting the Interchange
information, previously known as transaction tag data, to the
reliability analysis service identified by NERC.\192\ The Requirements
apply to all dynamic schedules, delivery from a jointly owned generator
and bilateral inadvertent interchange payback.
---------------------------------------------------------------------------

    \191\ Currently, the reliability analysis service used by NERC
is the Interchange Distribution Calculator.
    \192\ NERC's Glossary of Terms adopted by NERC's Board of
Trustees on August 2, 2006 defines Interchange as ``Energy transfers
that cross Balancing Authority boundaries.''
---------------------------------------------------------------------------

ii. Staff Preliminary Assessment
    435. Staff noted that INT-001-0 has only one Measure and no Levels
of Non-Compliance. The Version 1 standard, INT-001-1, would delete the
one Measure and, thus, would contain no Measures or Levels of Non-
Compliance.
iii. Comments
    436. ISO/RTO Council generally agrees with staff that INT-001-0
lacks sufficient compliance measures. Allegheny, in contrast, comments
that tagging deadlines within the Reliability Standard provide an
adequate measure of compliance.
iv. Commission Proposal
    437. The Commission proposes to approve INT-001-1 as mandatory and
enforceable. In addition, we propose to direct that NERC develop
modifications to the Reliability Standard, as discussed below.
    438. Requirement R1.2 in INT-001-0 (the Version 0 standard)
requires data submission on all point-to-point transfers entirely
within a balancing authority area, including ``all grandfathered and
'non-Order 888' Point-to-Point Transmission Service.'' This Requirement
to submit data for grandfathered and non-Order 888 point-to-point
transmission service is not included in INT-001-1 or any other Version
1 Reliability Standard in the INT group. These transactions, if not
reported, will create a gap in reliability assessment and transaction
curtailment provisions and may result in adverse impact on reliable
operation of the Interconnection. Therefore, the Commission proposes to
direct that NERC retain this important Requirement.
    439. Requirements R1.1, R3, R4 and R5 of INT-001-0, which relate to
the timing and content of e-tags, have been deleted in the Version 1
Reliability Standard. NERC indicates that these Requirements are
actually business practices and that they will be included in the next
version of NAESB Business Practices.\193\ Without prejudging any future
proceeding regarding NAESB business practices, we find acceptable
NERC's explanation that the deleted Requirements are business
practices, and we propose to approve INT-001-1 with the deletion of
Requirements R1.1, R3, R4 and R5. However, the Commission notes that
NAESB has not at this time filed these e-tagging requirements as part
of its business practices. If, at the time of the final rule, no such
business practice has been submitted, the Commission may reinstate
these Requirements as part of the final rule. In the future, to ensure
that there is not a gap in Reliability Standards or business practices,
the Commission expects filings from NERC and NAESB be coordinated to
allow for the seamless transfer of Requirements from Reliability
Standards to Business Practices.
---------------------------------------------------------------------------

    \193\ See NERC Implementation Plan for Coordinate Interchange
Standards INT-005 through INT-010 (December 15, 2005) at 2-3.
---------------------------------------------------------------------------

    440. With regard to Allegheny's comments, we believe that all
Reliability Standards will benefit from Measures and Levels of Non-
Compliance. Further, as mentioned above, the tagging deadlines which
Allegheny believes provides an adequate measure of compliance have been
deleted and will be incorporated by NAESB as business practices.
    441. While the Commission has identified concerns with regard to
INT-001-1, it serves an important purpose in ensuring that responsible
entities have the information they need to assess the reliability
impact of an interchange transaction. While NERC should provide
Measures and Levels of Non-Compliance, the Requirements set forth in
INT-001-1 are sufficiently clear and objective as to provide guidance
for compliance.
    442. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard INT-001-1 as
mandatory and enforceable. In addition, pursuant to section 215(d)(5)
of the FPA and Sec.  39.5(f) of our regulations, we propose directing
that NERC submit a modification to INT-001-1 that: (1) Includes
Measures and Levels of Non-Compliance; and (2) includes a Requirement
that interchange information must be submitted for all point-to-point
transfers entirely within a balancing authority area, including all
grandfathered and ``non-Order No. 888'' transfers.
c. Regional Difference to INT-001-1 and INT-004-1: WECC Tagging Dynamic
Schedules and Inadvertent Payback
i. NERC Proposal
    443. NERC states that WECC has a regional variance that exempts
tagging dynamic schedules and inadvertent payback. The waiver request
included with the proposed Reliability Standards explains that tagging
requirements simply do not apply to operations in the Western
Interconnection. Also, a tagging requirement for dynamic schedules
would create a burden for scheduling entities and not provide a
substantial benefit. NERC explains that control areas and transmission
providers have real-time scheduling information on dynamic schedules
and that unilateral

inadvertent payback is not allowed in the WECC.\194\
---------------------------------------------------------------------------

    \194\ Waiver Request--Tagging Dynamic Schedules and Inadvertent
Payback, Approved November 21, 2002. NERC Petition, Exhibit A.
---------------------------------------------------------------------------

ii. Commission Proposal
    444. As discussed earlier, in Order No. 672, the Commission
stressed that uniformity of Reliability Standards should be the goal
and practice, ``the rule rather than the exception.'' \195\ The absence
of a tagging requirement for dynamic schedules in WECC is, therefore, a
matter of concern to us. However, the Commission understands that WECC
currently is developing a tagging requirement for dynamic
schedules.\196\ The Commission seeks information from NERC on the
status of the proposed tagging requirement, the time frame for its
development, its consistency with INT-001-1 and INT-004-1, and whether
the need for the current waiver will be obviated when the tagging
requirements become effective. The Commission will not approve or
remand the waiver until NERC submits this information. The Commission
will consider any regional differences contained in proposed WECC
tagging requirement for dynamic schedules when it is submitted by NERC
for Commission review.
---------------------------------------------------------------------------

    \195\ Order No. 672 at P 290.
    \196\ Information on this development can be found at: http://www.wecc.
[fxsp0]biz/

index.php?[fxsp0]module=pn[fxsp0]Forum&func=view[fxsp0]topic&topic=39
4.
---------------------------------------------------------------------------

d. Regional Difference to INT-001-1 and INT-003-1: MISO Energy Flow
Information
i. NERC Proposal
    445. NERC states that a regional difference is necessary to allow
MISO to provide market flow information in lieu of tagging intra-market
flows among its member balancing authorities. The waiver request
included with the proposed Reliability Standards seeks specific
provisions to accommodate a multi-control area energy market. According
to the waiver request, the MISO energy flow information waiver is
needed to realize the benefits of locational marginal pricing within
MISO while increasing the level of granularity of information provided
to the NERC TLR Process. The waiver request text states that it is
understood that the level of granularity of information provided to
reliability coordinators must not be reduced or reliability will be
negatively impacted.\197\ The waiver text includes a condition
specifying that the ``Midwest ISO must provide equivalent information
to Reliability Authorities as would be extracted from a transaction
tag.''
---------------------------------------------------------------------------

    \197\ Waiver Request--Energy Flow Information, Approved July 16,
2003. (Attached to NERC's proposed Reliability Standards).
---------------------------------------------------------------------------

ii. Commission Proposal
    446. Order No. 672 explains that ``uniformity of Reliability
Standards should be the goal and the practice, the rule rather than the
exception.'' \198\However, the Commission has stated that, as a general
matter, regional differences are permissible if they are either more
stringent than the continent-wide Reliability Standard, or if they are
necessitated by a physical difference in the Bulk-Power System.\199\
Regional differences must still be just, reasonable, not unduly
discriminatory or preferential and in the public interest.\200\
---------------------------------------------------------------------------

    \198\ Order No. 672 at P 290.
    \199\ Id. at 291.
    \200\ Id.
---------------------------------------------------------------------------

    447. Based on the information provided by NERC, the proposed
regional difference for the INT Reliability Standards is necessary to
accommodate MISO's Commission-approved, multi-control area energy
market.\201\ Thus, we believe that the regional difference is
appropriate as it is more stringent than the continent-wide Reliability
Standard and otherwise satisfies the statutory standard for approval of
a Reliability Standard.
---------------------------------------------------------------------------

    \201\ See Midwest Independent Transmission System Operator,
Inc., 102 FERC ] 61,196 at P 38 (2003).
---------------------------------------------------------------------------

    448. Accordingly, the Commission proposes to approve the regional
difference.
e. Interchange Transaction Implementation (INT-003-1)
i. NERC Proposal
    449. NERC states that the purpose of the INT-003-1 is to ensure
that balancing authorities confirm interchange schedules with adjacent
balancing authorities prior to implementing the schedules in their area
control error equations. The proposed Reliability Standard applies to
balancing authorities. INT-003-1 contains one Requirement that focuses
on ensuring that a sending balancing authority confirms interchange
schedules with the receiving balancing authority prior to implementing
the schedules in its control area. The proposed Reliability Standard
also requires that, for the instances where a high voltage direct
current (HVDC) tie is on the scheduling path, both sending and
receiving balancing authorities have to coordinate with the operator of
the HVDC tie.
    450. NERC indicates that it will modify this proposed Reliability
Standard to address the lack of Measures and Levels of Non-Compliance
and resubmit the proposal for Commission approval in November 2006.
ii. Staff Preliminary Assessment
    451. Staff noted in its Staff Preliminary Assessment that INT-003-0
contains no Measures or Levels of Non-Compliance. This comment applies
equally to INT-003-1.
iii. Commission Proposal
    452. The Commission notes that Requirement R1.1.3 addressing ramp
starting time and duration in INT-003-0 is removed from INT-003-1, and
will be included as a NAESB business practice, whereas Requirement R1.3
addressing interchange schedules crossing an interconnection boundary
is now included in the new INT-009-1. In addition, Requirements R2, R3
and R4 in INT-003-0 addressing implementation requirements and
responsibilities on the balancing authorities are transferred to INT-
009-1. Requirement R5 stipulating that balancing authorities in
implementing interchange schedule do not knowingly cause other system
to violate operating criteria is now retired. Requirement R6 on the
maximum limit on the net interchange schedule is replaced with R1.2 in
the new INT-006-1.
    453. As noted above, INT-003-1 lacks Measures and Levels of Non-
Compliance. While it is important to develop Measures and Levels of
Non-Compliance, the Commission believes that INT-003-1 serves an
important purpose in requiring receiving and sending balancing
authorities to confirm and agree on the interchange schedules. Further,
we believe that the Requirements set forth in INT-003-1 are
sufficiently clear and objective to provide appropriate guidance for
compliance.
    454. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard INT-003-1 as
mandatory and enforceable. In addition, pursuant to section 215(d)(5)
of the FPA and Sec.  39.5(f) of our regulations, we propose directing
NERC to submit a modified Reliability

Standard that includes Measures and Levels of Non-Compliance.
f. Regional Differences to INT-003-1: MISO/SPP Scheduling Agent and
MISO Enhanced Scheduling Agent
i. NERC Proposal
    455. The MISO/SPP Scheduling Agent Waiver dated November 21, 2002
creates variances from this proposed Reliability Standard for MISO/SPP
that permits a market participant to utilize a scheduling agent to
prepare a transaction Tag on its behalf.\202\ The scheduling agent is a
single point of contact for all external, non-participating control
areas or other scheduling agents with respect to scheduling interchange
into, out of, or through the RTO to which the variance applies. The
variance document explains that the variance is needed to implement a
proposed RTO scheduling process to meet the RTO obligations under Order
No. 2000, simplify transaction information requirements for market
participants, reduce the number of parties with which control area
operators must communicate, and provide a common means to tag
transactions within and between RTOs. It also specifies that the
specific scheduling processes implemented between participating control
areas are internalized and transparent to the market, but that it has
no reliability implications and will not violate any reliability
criteria.\203\ The Commission has issued orders authorizing use of
these practices by MISO.\204\
---------------------------------------------------------------------------

    \202\ NERC has proposed three regional differences for INT-003-1
that would apply to MISO. One regional difference was addressed
above as it also related to Reliability Standard INT-001-1. The
remaining two are discussed here.
    \203\ Waiver Request--Scheduling Agent, Approved November 21,
2002. NERC Petition, Exhibit A.
    \204\ Midwest Independent Transmission System Operator, Inc., et
al., 108 FERC ] 61,163 at P 100 (2004).
---------------------------------------------------------------------------

    456. The MISO Enhanced Scheduling Agent Waiver dated July 16, 2003
creates a variance from INT-003-1 for MISO that permits an enhanced
single point of contact scheduling agent. Again, the variance document
explains that the variance is needed to implement a proposed RTO
scheduling process to meet the RTO obligations under Order No. 2000,
simplify transaction information requirements for market participants,
reduce the number of parties with which control area operators must
communicate, and provide a common means to tag transactions within and
between RTOs.\205\
---------------------------------------------------------------------------

    \205\ Waiver Request--Enhanced Scheduling Agent, Approved
November 16, 2003. ERC Petition, Exhibit A.
---------------------------------------------------------------------------

ii. Commission Proposal
    457. The Commission ruled in Order No. 672 that, as a general
matter, the following types of regional differences in Reliability
Standards would be acceptable: (1) a regional difference that is more
stringent than the continent-wide Reliability Standard, including a
regional difference that addresses matters that the continent-wide
Reliability Standard does not; and (2) a regional Reliability Standard
that is necessitated by a physical difference in the Bulk-Power
System.\206\
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    \206\ Order No. 672 at P 291.
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    458. Based on the information provided by NERC, the proposed
regional differences for the INT Reliability Standard will provide
administrative efficiency, and equal or greater amounts of information
to the appropriate entities as required in MISO's Commission-approved
multi-control area energy market.\207\ Thus, we believe that the
proposed regional differences meet the legal standard for approval as
well as the first criteria discussed above for a regional difference.
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    \207\ See Midwest Independent Transmission System Operator,
Inc., 102 FERC ] 61,196 at P 38 (2003).
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    459. Accordingly, for the reasons set forth above, the Commission
proposes to approve these two additional regional differences.
g. Dynamic Interchange Transaction Modifications (INT-004-1)
i. NERC Proposal
    460. NERC states that the purpose of INT-004-1 is to ensure that
dynamic transfers are adequately tagged to be able to determine their
reliability impact. It requires the sink balancing authority, i.e., the
balancing authority responsible for the area where the load or end-user
is located, to communicate any change in the transaction. It also
requires the updating of a Tag for dynamic schedules, i.e.,
transactions that vary from within an hour. INT-004-1 does not identify
Levels of Non-Compliance.
ii. Staff Preliminary Assessment
    461. No concerns were raised in the Staff Preliminary Assessment.
iii. Comments
    462. INT-004-1 was included in NERC's August 28, 2006 Supplemental
Filing, and no comments were submitted regarding it.
iv. Commission Proposal
    463. The Commission notes that Requirement R1 in INT-004-1
providing procedures to modify interchange schedules to address
reliability events are replaced with Requirements R1, R2 and R3 in the
new INT-010-1. Requirement R2 which applies to generator operators or
load serving entities for requesting to modify an interchange
transaction due to loss of generation or load is replaced with
Requirements in INT-005-1 through INT-010-1.
    464. The Commission believes that Levels of Non-Compliance should
be included.
    465. INT-004-1 contains a regional variance from WECC that exempts
tagging dynamic schedules and inadvertent payback. This is discussed
above in more detail. The Commission proposes to leave pending the WECC
regional difference until NERC files a new regional difference.
    466. While the Commission has identified concerns with regard to
INT-004-1, this proposed Reliability Standard serves an important
purpose by setting thresholds on changes in dynamic schedules for which
modified interchange data must be submitted for reliability assessment.
Further, the Requirements set forth in INT-004-1 are sufficiently clear
and objective to provide guidance for compliance.
    467. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard INT-004-1 as
mandatory and enforceable. In addition, pursuant to section 215(d)(5)
of the FPA and Sec.  39.5(f) of our regulations, we propose directing
NERC to submit a modification to INT-004-1 that includes Levels of Non-
Compliance.
h. Interchange Authority Distributes Arranged Interchange (INT-005-1)
i. NERC Proposal
    468. INT-005-1, submitted with NERC's August 28, 2006 Supplemental
Filing, ensures the implementation of interchange between source and
sink balancing authorities and the interchange information is
distributed by an interchange authority to the relevant entities for
reliability

assessments. INT-005-1 is applicable to the ``interchange authority.''
\208\
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    \208\ NERC's glossary defines ``interchange authority'' as
``[t]he responsible entity that authorizes implementation of valid
and balanced Interchange Schedules between Balancing Authority
Areas, and ensures communication of Interchange information for
reliability assessment purposes.''
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ii. Commission Proposal
    469. The Commission is satisfied that the Requirements of the
Reliability Standard are appropriate to ensure that interchange
information is distributed and available for reliability assessment
prior to its implementation. However, we are concerned regarding the
applicability of INT-005-1 to the interchange authority. It is not
clear from NERC's definition whether an interchange authority is a
user, owner or operator of the Bulk-Power System, or what types of
entities would be eligible to perform such a function. Therefore, the
Commission requests that NERC provide additional information regarding
the role of the interchange authority so that the Commission can
determine whether it is a user, owner or operator of the Bulk-Power
System that is required to comply with mandatory Reliability Standards.
    470. Reliability Standard INT-005-1 does not include Levels of Non-
Compliance.
    471. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard INT-005-1 as
mandatory and enforceable. In addition, pursuant to section 215(d)(5)
of the FPA and Sec.  39.5(f) of our regulations, we propose to direct
that NERC submit a modification to INT-005-1 that includes Levels of
Non-Compliance. Further, the Commission requests that NERC provide
additional information regarding the role of the interchange authority
so that the Commission can determine whether it is a user, owner or
operator of the Bulk-Power System that is required to comply with
mandatory Reliability Standards.
i. Response to Interchange Authority (INT-006-1)
i. NERC Proposal
    472. INT-006-1, submitted with NERC's August 28, 2006 Supplemental
Filing to replace INT-002-0, ensures that each arranged interchange is
checked for reliability before it is implemented. It is applicable to
balancing authorities and transmission service providers and requires
these entities to evaluate the energy profile and the ramp rate of the
generation to support the transactions in response to the request from
the interchange authority to change the status of an interchange from
an arranged interchange to a confirmed interchange.
ii. Staff Preliminary Assessment
    473. INT-006-1 is a new Reliability Standard that mostly contains
Requirements from retired INT-002-0. Staff noted in its Staff
Preliminary Assessment that INT-002-0 does not explicitly apply to
reliability coordinators and transmission operators for reliability
assessments of transactions before they are implemented. Staff
indicated that it is important that the Reliability Standard apply to
these entities explicitly because power flows for interchange
transactions cross multiple balancing authority areas and affect
multiple transmission paths in an Interconnection.
iii. Comments
    474. As discussed below, INT-006-1 raises a number of issues that
are similarly raised by the Reliability Standard it replaces, INT-002-
0. Therefore, relevant comments regarding INT-002-0 are discussed here.
    475. NERC maintains that staff's concerns regarding the
applicability of INT-002-0 to reliability coordinators and transmission
operators are addressed by proposed Reliability Standard INT-004-0,
which addresses reliability events such as potential or actual SOL or
IROL violations.
    476. Similarly, Southern submits that the Reliability Standard
currently applies to reliability coordinators and transmission
operators in their role in the reliability assessment of individual
interchange transactions. Southern explains that an individual Tag is
first assessed by the balancing authority based on information on
system limits provided by the reliability coordinator and/or the
transmission operator. The composite set of Tags and associated
schedules are then forwarded to the reliability analysis services that
reliability coordinators and transmission operators use for their wide-
area review. Southern contends that it would not be appropriate for
reliability coordinators and transmission owners to approve or deny
individual schedules during tagging, and states that they should be
involved in reviewing tags in a composite manner.
iv. Commission Proposal
    477. The Commission proposes to approve INT-006-1 as mandatory and
enforceable. In addition, we propose to direct that NERC develop
modifications to the Reliability Standard, as discussed below.
    478. We agree with NERC and Southern that it would be duplicative
for a reliability coordinator or transmission owner to approve or deny
an individual schedule during tagging. However, consistent with
Southern's comment, we believe that reliability coordinators and
transmission operators should review composite energy interchange
transaction information (composite Tags) for wide-area reliability
impact. When the review indicated a potential detrimental reliability
impact, the reliability coordinator or transmission operator should
communicate to the sink balancing authority the necessary transaction
modifications prior to implementation. Accordingly, we propose to
require the ERO to modify the proposed Reliability Standard to ensure
that reliability coordinators and transmission operators validate
composite Tags (now called composite arranged interchanges) for
reliability.
    479. The Commission notes that INT-006-1 has included Measures and
Levels of Non-Compliance with Requirements on balancing authorities and
transmission service providers to check each arranged interchange for
reliability. We believe that INT-006-1 serves an important purpose in
assessing each interchange transaction from a reliability perspective.
    480. Accordingly, giving due weight to the technical expertise of
the ERO and with the expectation that the Reliability Standard will
accomplish the purpose represented to the Commission by the ERO and
that it will improve the reliability of the nation's Bulk-Power System,
the Commission proposes to approve Reliability Standard INT-006-1 as
mandatory and enforceable. In addition, pursuant to section 215(d)(5)
of the FPA and Sec.  39.5(f) of our regulations, we propose to direct
that NERC submit a modification to INT-006-1 that: (1) Makes it
applicable to reliability coordinators and transmission operators; and
(2) requires reliability coordinators and transmission operators to
review composite transactions from the wide-area reliability viewpoint
and, where their review indicates a potential detrimental reliability
impact, communicate to the sink balancing authorities necessary
transaction modifications prior to implementation.

j. Interchange Confirmation (INT-007-1)
i. NERC Proposal
    481. INT-007-1, submitted with NERC's August 28, 2006 Supplemental
Filing, ensures that each arranged interchange is checked for
reliability before it is implemented. INT-007-1 requires the
interchange authority to verify that the submitted arranged
interchanges are valid and complete with relevant information and
approvals from the balancing authorities and transmission service
providers before changing their status to confirmed interchanges.
ii. Commission Proposal
    482. We are concerned regarding the applicability of INT-007-1 to
the interchange authority. As discussed previously, it is not clear
from NERC's definition whether an interchange authority is a user,
owner or operator of the Bulk-Power System, or what types of entities
would be eligible to perform such a function, and in our discussion of
INT-005-1 we request that NERC provide additional information regarding
the role of the interchange authority.
    483. However, the Commission is satisfied that the Requirements of
the Reliability Standard are appropriate to ensure that interchange
information is verified prior to its implementation. Accordingly, the
Commission therefore proposes to approve INT-007-1 as mandatory and
enforceable. We believe that the proposed Reliability Standard is just,
reasonable, not unduly discriminatory or preferential, and in the
public interest.
k. Interchange Authority Distributes Status (INT-008-1)
i. NERC Proposal
    484. INT-008-1, submitted with NERC's August 28, 2006 Supplemental
Filing, ensures that the implementation of interchanges between source
and sink balancing authorities is coordinated by an interchange
authority. The Reliability Standard applies to the interchange
authority. INT-008-1 requires the interchange authority to distribute
information to all balancing authorities, transmission service
providers and purchasing-selling entities involved in the arranged
interchange when the status of the transaction has changed from
arranged interchange to confirmed interchange.
ii. Commission Proposal
    485. Again, we are concerned regarding the applicability of INT-
008-1 to the interchange authority. As explained above, the Commission
requests additional information because it is not clear from NERC's
definition whether an interchange authority is a user, owner or
operator of the Bulk-Power System, or what types of entities would be
eligible to perform such a function.
    486. However, the Commission is satisfied that the Requirements of
the Reliability Standard are appropriate to ensure that interchange
information is coordinated between the source and sink balancing
authorities prior to its implementation. Accordingly, the Commission
therefore proposes to approve INT-008-1 as mandatory and enforceable.
We believe that the proposed Reliability Standard is just, reasonable,
not unduly discriminatory or preferential, and in the public interest.
l. Implementation of Interchange (INT-009-1)
i. NERC Proposal
    487. INT-009-1, submitted with NERC's August 28, 2006 Supplemental
Filing, ensures that the implementation of an interchange between
source and sink balancing authorities is coordinated by an interchange
authority.
ii. Commission Proposal
    488. The Commission is satisfied that the proposed Reliability
Standard performs a necessary reliability function by coordination of
interchanges and incorporating them into the ACE calculation of the
respective balancing authorities. Further, INT-009-1 includes clear and
appropriate Requirements, Measurements and Levels of Non-Compliance to
ensure proper implementation of interchange transactions that have
received reliability assessments. The Commission therefore proposes to
approve INT-009-1 as mandatory and enforceable. We believe that the
proposed Reliability Standard is just, reasonable, not unduly
discriminatory or preferential, and in the public interest.
m. Interchange Coordination Exemptions (INT-010-1)
i. NERC Proposal
    489. INT-010-1, submitted with NERC's August 28, 2006 Supplemental
Filing, allows certain types of interchange schedules to be initiated
or modified by reliability entities under abnormal operating
conditions, and to be exempt from compliance with other Reliability
Standards in the INT group. The Reliability Standard is applicable to
the balancing authority and reliability coordinator.
    490. The proposed Reliability Standard, INT-010-1 has three
Requirements, which allows modifications to interchange schedules under
abnormal system conditions: (1) The balancing authority that
experiences a loss of resources covered by an energy sharing agreement
shall ensure that a request for an arranged interchange is submitted
within required time; (2) for a modification to an existing interchange
schedule that is directed by a reliability coordinator for a current or
imminent reliability-related reasons, the reliability coordinator
directs a balancing authority to submit the modified arranged
interchange reflecting that modification within a specified time; and
(3) for a new interchange schedule that is directed by a reliability
coordinator for current or imminent reliability-related reasons, the
reliability coordinator directs a balancing authority to submit an
arranged interchange reflecting that interchange schedule within
required time.
ii. Staff Preliminary Assessment
    491. INT-010-1 includes three Requirements that replace Requirement
R1 from INT-004-0. Staff raised concerns in the Staff Preliminary
Assessment on INT-004-0 with respect to the use of transaction
modifications to address reliability events such as actual IROL
violations.
    492. Specifically, staff noted that INT-004-0 (now INT-010-1)
allows modification of an interchange transaction to address an actual