[Federal Register Volume 78, Number 247 (Tuesday, December 24, 2013)]
[Rules and Regulations]
[Pages 77574-77585]
[FR Doc No: 2013-30628]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket No. RM13-7-000; Order No. 793]

Protection System Maintenance Reliability Standard

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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

SUMMARY: Under section 215 of the Federal Power Act (FPA), the Federal
Energy Regulatory Commission (Commission) approves a revised
Reliability Standard, PRC-005-2--Protection System Maintenance, to
supersede four existing Reliability Standards, PRC-005-1.1b
(Transmission and Generation Protection System Maintenance and
Testing), PRC-008-0 (Underfrequency Load Shedding Equipment
Maintenance), PRC-011-0 (Undervoltage Load Shedding Equipment
Maintenance) and PRC-017-0 (Special Protection System Maintenance and
Testing).

DATES: Effective Date: This rule will become effective February 24,
2014.

FOR FURTHER INFORMATION CONTACT:

Tom Bradish (Technical Information), Office of Electric Reliability,
Federal Energy Regulatory Commission, 888 First Street NE., Washington,
DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>Julie Greenisen (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street NE., Washington,
DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Final Rule

(Issued December 19, 2013)

    1. Pursuant to section 215 of the Federal Power Act (FPA),\1\ the
Commission approves a revised Reliability Standard, PRC-005-2--
Protection System Maintenance, to supersede four existing Reliability
Standards, PRC-005-1.1b (Transmission and Generation Protection System
Maintenance and Testing), PRC-008-0 (Underfrequency Load Shedding
Equipment Maintenance), PRC-011-0 (Undervoltage Load Shedding Equipment
Maintenance) and PRC-017-0 (Special Protection System Maintenance and
Testing), and six associated definitions. The modifications, in part,
respond to certain Commission directives issued in Order No. 693,\2\ in
which the Commission approved initial versions of these four
Reliability Standards governing maintenance and testing of protection
systems, and maintenance of underfrequency and undervoltage load
shedding equipment.
---------------------------------------------------------------------------

    \1\ 16 U.S.C. 824o (2012).
    \2\ Mandatory Reliability Standards for the Bulk Power System,
Order No. 693, 72 FR 16,416 (April 4, 2007), FERC Stats. & Regs. ]
31,242 (2007), order on reh'g, Order No. 693-A, 120 FERC ] 61,053
(2007).
---------------------------------------------------------------------------

    2. Reliability Standard PRC-005-2 represents an improvement over
the four existing standards covering protection system maintenance and
testing, by incorporating specific, required minimum maintenance
activities and maximum time intervals for maintenance of individual
components of protection systems and load shedding equipment affecting
the bulk electric system. While the proposed Reliability Standard also
gives responsible entities the option of developing their own,
performance-based maintenance intervals for most components, the
intervals must be designed to achieve a minimum performance level, and
must be adjusted if that target performance level is not actually
achieved. In addition, the proposed Reliability Standard combines the
maintenance and testing requirements for protection systems into one
comprehensive Reliability Standard, as was suggested by the Commission
in Order No. 693.\3\
---------------------------------------------------------------------------

    \3\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 1475.
---------------------------------------------------------------------------

    3. While the revised Reliability Standard contains overall
improvements over the four existing Reliability Standards, as discussed
below, we are directing NERC to submit an informational filing on the
development of a guidance report concerning the commissioning of power
system protection systems.
    4. The Commission approves the violation risk factors and all but
one violation severity level for the revised Reliability Standard. The
Commission directs NERC to modify the violation severity level assigned
to certain failures to comply with Requirement R1. We also approve the
six new definitions associated with proposed Reliability Standard PRC-
005-2, i.e., Component, Component Type, Countable Event, Protection
System Maintenance Program, Segment, and Unresolved Maintenance Issue.
Of these newly defined terms, only the term Protection System
Maintenance Program will be incorporated into NERC's Glossary of Terms,
with the remainder applying only to Reliability Standard PRC-005-2.
    5. Finally, we approve NERC's proposed implementation plan for
Reliability Standard PRC-005-2 (as corrected in NERC's October 30, 2013
Errata filing), which requires entities to develop a compliant
protection system maintenance program within twelve months, but allows
for the transition over time of maintenance activities and
documentation to conform to the new minimum maintenance activities and
maximum maintenance intervals.

I. Background

A. Regulatory Background

    6. Section 215 of the FPA requires a Commission-certified Electric
Reliability Organization (ERO) to develop mandatory and enforceable
Reliability Standards, subject to Commission review and approval.\4\
Once approved, the Reliability Standards may be enforced by the ERO
subject to Commission oversight, or by the Commission independently.\5\
---------------------------------------------------------------------------

    \4\ 16 U.S.C. 824o(c) and (d).
    \5\ See id. at 824o(e).
---------------------------------------------------------------------------

    7. In 2006, the Commission certified NERC as the ERO pursuant to
FPA section 215.\6\ In 2007, in Order No. 693, the Commission approved
an initial set of Reliability Standards submitted by NERC, including
initial versions of four protection system and load-shedding-related
maintenance standards, i.e., PRC-005-1, PRC-008-0, PRC-011-0, and PRC-
017-0.\7\
---------------------------------------------------------------------------

    \6\ North American Electric Reliability Corp., 116 FERC ]
61,062, order on reh'g & compliance, 117 FERC ] 61,126 (2006), aff'd
sub nom., Alcoa, Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009).
    \7\ Order No. 693, FERC Stats. & Regs. ] 31,242 at PP 1474,
1492, 1497, and 1514.
---------------------------------------------------------------------------

    8. In approving these protection system-related Reliability
Standards, the Commission directed NERC to develop or to consider a
number of modifications. Specifically, the Commission directed NERC (1)
to develop a revision to PRC-005-1 incorporating a maximum time
interval during which to conduct maintenance and testing of protection
systems, and (2) to consider combining into one standard the various
maintenance and testing requirements for all of the maintenance and
testing-related Reliability Standards for protection systems, Special
Protection Systems (SPS), underfrequency load shedding (UFLS)
equipment, and undervoltage load shedding (UVLS) equipment.\8\
---------------------------------------------------------------------------

    \8\ In Order No 763, the Commission approved Reliability
Standard PRC-006-1 pertaining to ``underfrequency load shedding,''
which also encompasses ``undervoltage load shedding.'' Automatic
Underfrequency Load Shedding and Load Shedding Plans Reliability
Standards, Order No. 763, 139 FERC ] 61,098 (2012).
---------------------------------------------------------------------------

    9. Subsequently, in Order No. 758, issued in response to NERC's
request for approval of its interpretation of PRC-005-1, the Commission
issued three additional directives addressing deficiencies in the
existing version of Reliability Standard PRC-005.\9\ The Commission
directed NERC to modify

Reliability Standard PRC-005-1 through its standards development
process to (1) identify and include the auxiliary relays and non-
electrical sensing devices designed to sense or take action against any
abnormal system condition that will affect reliable operation (such as
sudden pressure relays); (2) include specific requirements for
maintenance and testing of reclosing relays that affect the reliable
operation of the bulk-power system; and (3) include specific
requirements for maintenance and testing of DC control circuitry.
---------------------------------------------------------------------------

    \9\ Interpretation of Protection System Reliability Standard,
Order No. 758, 138 FERC ] 61,094, order denying clarification, 139
FERC ] 61,227 (2012).
---------------------------------------------------------------------------

B. Existing Protection System-Related Maintenance Standards

    10. Under currently-effective Reliability Standard PRC-005-1b,
transmission owners, generator owners, and applicable distribution
providers are required to have ``a Protection System maintenance and
testing program for Protection Systems that affect the reliability of
the BES,'' and must document their compliance with that program.\10\
The program must include maintenance and testing intervals and their
basis, and a summary of maintenance and testing procedures. However,
Reliability Standard PRC-005-1b does not impose any specific
requirements regarding maintenance activities, standards or intervals.
Similarly, Reliability Standards PRC-008-0, PRC-011-0, and PRC-017-0
require applicable transmission owners, distribution providers, and
generator owners to have a maintenance and testing program in place for
UFLS equipment, UVLS equipment, and special protection systems,
respectively, and to document their compliance with their program.
These Reliability Standards, like PRC-005-1b, do not impose any
specific requirements regarding maintenance activities, standards or
intervals.
---------------------------------------------------------------------------

    \10\ NERC Reliability Standard PRC-005-1b, Requirements R1 and
R2.
---------------------------------------------------------------------------

C. NERC Petition and Reliability Standard PRC-005-2

    11. On February 26, 2013, NERC submitted a petition seeking
approval of Reliability Standard PRC-005-2, six new definitions
associated with that standard, and an implementation plan that includes
retirement of the four currently-effective Reliability Standards that
address maintenance and testing of transmission and generation
protection systems, UFLS and UVLS equipment, and special protection
systems.\11\ NERC maintained that the Reliability Standard not only
consolidates the four currently-effective standards into a single
standard, but also addresses the directives in Order No. 693 related to
those standards.\12\
---------------------------------------------------------------------------

    \11\ PRC-005-2 is not attached to this Final Rule. The complete
text of the Reliability Standard is available on the Commission's
eLibrary document retrieval system in Docket No. RM13-7 and is
posted on NERC's Web site, available at: http://www.nerc.com.
    \12\ NERC Petition at 2. NERC states that while the Commission
issued additional directives related to the PRC-005 Reliability
Standard in Order No. 758, NERC will address these remaining
directives in future versions of PRC-005, and is currently
addressing the maintenance and testing of reclosing relays in a new
phase of Project 2007-17. See NERC Petition at 7-8.
---------------------------------------------------------------------------

    12. The Reliability Standard includes five requirements. Under
Requirement R1, each responsible entity must establish a protection
system maintenance program that: (1) identifies which method (time-
based or performance-based) will be used for each protection system
component type, except that the maintenance program for all batteries
associated with the station DC supply of a protection system must be
time-based, and (2) identifies monitored component attributes for each
component type where monitoring is used as a basis for extending
maintenance intervals.
    13. Under Requirement R2, any responsible entity that uses
performance-based maintenance intervals must follow the procedures set
out in Attachment A of the Reliability Standard to set and to adjust,
as necessary, appropriate maintenance intervals. The Attachment A
procedures allow a responsible entity to establish maintenance
intervals for a given population of similar components based on
historical performance, as long as there is a statistically significant
population of components for which performance can be examined and
monitored. For example, under the Attachment A procedures, a
responsible entity can only use a performance-based interval for
``segments'' with a component population of at least 60 components.\13\
The maximum allowable maintenance interval for a given segment is
required to be set such that the segment will experience ``countable
events'' of no more than four percent of the components within that
segment, for the greater of either the last 30 components maintained or
all components maintained in the previous year.\14\
---------------------------------------------------------------------------

    \13\ NERC defines ``segment'' for purposes of PRC-005-2 as
``Protection Systems or components of a consistent design standard,
or a particular model or type from a single manufacturer that
typically share other common elements. Consistent performance is
expected across the entire population of a Segment.'' NERC Petition,
Ex. B (PRC-005-2) at 26.
    \14\ NERC defines ``countable event'' as ``a failure of a
component requiring repair or replacement, any condition discovered
during the maintenance activities in Tables 1-1 through 1-5 and
Table 3 which requires corrective action, or a Misoperation
attributed to hardware failure or calibration failure.'' NERC
Petition, Ex. B (PRC-005-2) at 26.
---------------------------------------------------------------------------

    14. In addition, to continue to utilize a performance-based
interval, the responsible entity must update its list of components and
segments annually (or whenever a change occurs within a segment), must
maintain a minimum number or percentage of components a year, and must
analyze a given segment's maintenance record to determine the
percentage of countable events. If the percentage of countable events
for the last 30 components maintained or the number of components
maintained over the last year (whichever is larger) exceeds four
percent, the responsible entity must implement an action plan to reduce
the expected countable events to less than four percent for that
segment within the next three years.
    15. Requirements R3 and R4 require a responsible entity to adhere
to the requirements of its protection system maintenance program,
including performance of minimum maintenance activities. Under
Requirement R3, which governs time-based maintenance, the activities
must be performed in accordance with the intervals prescribed in the
tables attached to PRC-005-2. Under Requirement R4, the activities must
be carried out in accordance with the performance-based intervals
established under Requirement R2 and Attachment A.
    16. Under Requirement R5, responsible entities must ``demonstrate
efforts to correct identified Unresolved Maintenance Issues,'' which
are defined as ``deficienc[ies] identified during a maintenance
activity that cause[] the component to not meet the intended
performance, cannot be corrected during the maintenance interval, and
require[] follow-up corrective action.'' NERC explained that the intent
of Requirement R5 is ``to assure that Protection System components are
returned to working order following the discovery of failures or
malfunctions during scheduled maintenance.'' \15\
---------------------------------------------------------------------------

    \15\ NERC Petition at 18.
---------------------------------------------------------------------------

    17. With respect to implementation, NERC proposed to require
entities to fully comply with Requirements R1, R2, and R5 within 12
months of regulatory approval (or 24 months from the date of NERC Board
approval where no regulatory approval is required).\16\ Accordingly,
applicable entities in the United States must develop their revised
protection system maintenance

program within one year after regulatory approval.\17\ NERC's proposed
implementation plan would allow a longer implementation period with
respect to achieving full compliance with the newly-prescribed
maintenance activities and documentation, permitting a transition of
maintenance activities and documentation over time, with the compliance
period scaled to the length of the applicable maximum maintenance
interval.\18\ Thus, for component types with the shortest allowable
maintenance interval (i.e., less than one year, or between one and two
years), entities would be required to fully comply with the new
requirements within 18 months of regulatory approval, and 36 months of
regulatory approval, respectively.\19\ For components types with longer
maintenance intervals (3, 6, and 12 years), NERC proposed to require
compliance over the applicable maintenance interval in equally
distributed steps. For component types with the longest maximum
allowable maintenance interval (i.e., 12 years), entities must be 30
percent compliant within 5 years, 60 percent compliant within 9 years,
and fully compliant within 13 years after regulatory approval.\20\
---------------------------------------------------------------------------

    \16\ NERC Petition, Ex. C (Implementation Plan) at 2, 4.
    \17\ See id.
    \18\ Id. at 1-2.
    \19\ Id. at 4.
    \20\ Id. at 5. NERC notes, however, that ``[o]nce an entity has
designated PRC-005-2 as its maintenance program for specific
Protection System components, they cannot revert to the original
program for those components.'' Id. at 2.
---------------------------------------------------------------------------

    18. NERC explained that this implementation program takes into
consideration that certain entities may not currently be performing all
required maintenance activities specified in proposed PRC-005-2, and
may not have all the documentation necessary to demonstrate
compliance.\21\ NERC further stated that ``it is unrealistic for those
entities to be immediately compliant with the new activities or
intervals,'' and that ``entities should be allowed to become compliant
in such a way as to facilitate a continuing maintenance program.'' \22\
Finally, NERC explained that it developed this step-wise implementation
plan ``in order that entities may implement this standard in a
systematic method that facilitates an effective ongoing Protection
System Maintenance Program.'' \23\
---------------------------------------------------------------------------

    \21\ Id. at 1.
    \22\ Id.
    \23\ Id. at 2.
---------------------------------------------------------------------------

D. Notice of Proposed Rulemaking and Subsequent Filings

    19. On July 18, 2013, the Commission issued a Notice of Proposed
Rulemaking (NOPR) proposing to approve Reliability Standard PRC-005-
2.\24\ The Commission explained that the revised standard represents an
improvement over the four existing standards covering protection system
maintenance and testing, because it incorporates specific, required
minimum maintenance activities and maximum time intervals for
maintenance of individual components of protection systems and load
shedding equipment affecting the bulk electric system.\25\ The
Commission further noted that although the proposed Reliability
Standard would give entities the option of developing performance-based
maintenance intervals for eligible components, those intervals have to
be designed to achieve a minimum performance level and must be adjusted
if the target performance level is not achieved.\26\
---------------------------------------------------------------------------

    \24\ Notice of Proposed Rulemaking, Protection System
Maintenance Reliability Standard, 144 FERC ] 61,055 (2013) (NOPR).
    \25\ Id. P 2.
    \26\ Id.
---------------------------------------------------------------------------

    20. The Commission requested additional information and comment on
three topics pertaining to PRC-005-2: (1) Verification of operability
and settings upon placement in-service of new or modified protection
systems; (2) use of a four percent target for countable events in
performance-based programs; and (3) violation severity levels for
certain Requirement R1 violations.
    21. Comments were due on the NOPR on September 23, 2013. Seven sets
of comments were received, as identified in Appendix A to this Final
Rule.
    22. On October 30, 2013, NERC submitted an errata to its February
26, 2013 petition, stating that certain procedural language regarding
the process for approval of the standard was inadvertently omitted.
NERC submitted a revised Implementation Plan as part of that errata,
asking the Commission to consider the revised plan for purposes of
proposed PRC-005-2 and this proceeding.

II. Discussion

    23. Pursuant to section 215(d)(2) of the FPA, we approve
Reliability Standard PRC-005-2, the six associated definitions
referenced in the proposed standard, and NERC's proposed implementation
plan, as just, reasonable, not unduly discriminatory or preferential,
and in the public interest. As discussed in section A below, we believe
Reliability Standard PRC-005-2 will enhance reliability through
reducing the risk of protection system misoperations by establishing
minimum maintenance activities and maximum maintenance time intervals.
The Reliability Standard will also reduce the risk of protection system
misoperations by establishing requirements for condition-based and
performance-based maintenance programs where hands-on maintenance
intervals are adjusted to reflect the known and reported condition or
the historical performance of the relevant devices.
    24. Below, we discuss the matters raised by the Commission in the
NOPR or raised by commenters in response to the NOPR, as follows: (A)
Approval of PRC-005-2; (B) application of PRC-005-2 to newly-
commissioned or modified components; (C) four percent target for
countable events; (D) correcting unresolved maintenance issues; (E) the
Violation Severity Level assignment for Requirement R1; and (F)
definitions.

A. Approval of PRC-005-2

NERC Petition
    25. In its petition seeking approval of PRC-005-2, NERC maintained
that the proposed standard will improve reliability by:

(i) Defining and establishing criteria for a Protection System
Maintenance Program; (ii) reducing the risk of Protection System
Misoperations; (iii) clearly stating the applicability of the
Requirements in proposed PRC-005-2 to certain Functional Entities
and Facilities; (iv) establishing Requirements for time-based
maintenance programs that include maximum allowable maintenance
intervals for all relevant devices; and (v) establishing
Requirements for condition-based and performance-based maintenance
programs where hands-on maintenance intervals are adjusted to
reflect the known and reported condition or the historical
performance, respectively, of the relevant devices.\27\
---------------------------------------------------------------------------

    \27\ NERC Petition at 3.

    26. NERC asserted that the Reliability Standard not only represents
a comprehensive approach to documenting and implementing programs for
maintenance of all protection systems affecting the reliability of the
bulk electric system, but also reduces the risk of misoperations ``by
applying consistent, best practice maintenance and inspection
activities of Protection System Components in accordance with the
maximum intervals established in the proposed Reliability Standard.''
\28\

NERC maintained that the proposed Reliability Standard represents an
improvement over the four standards that would be superseded, because
none of the existing standards contain technical requirements for any
of the maintenance programs, but merely specify that a program be in
place and that each responsible entity comply with the requirements of
its own program.\29\
---------------------------------------------------------------------------

    \28\ Id. at 11.
    \29\ Id.
---------------------------------------------------------------------------

    27. NERC also maintained that PRC-005-2 satisfies three outstanding
directives from Order No. 693 related to the PRC maintenance standards.
First, NERC explained that the Reliability Standard includes maximum
allowable intervals for maintenance of protection system components (as
set out in Tables 1-1 through 1-5, Table 2, and Table 3 of Reliability
Standard PRC-005-2).\30\ Second, Reliability Standard PRC-005-2
combines the requirements for PRC-005, PRC-008, PRC-011 and PRC-017
into one new, revised standard, addressing maintenance for transmission
and generation protection systems, for special protection systems, and
for UFLS and UVLS equipment.\31\ Finally, in Order No. 693, the
Commission directed NERC to consider whether load serving entities and
transmission operators should be included in the applicability of PRC-
004.\32\ NERC maintained that it considered whether load-serving
entities and transmission operators should be subject to any of the PRC
maintenance and testing requirements, but determined that the
applicable maintenance requirements need only apply to equipment owners
such as generation owners, transmission owners, and certain
distribution providers.\33\ NERC explained that ``[w]hile an equipment
owner may need to coordinate with the operating entities in order to
schedule the actual maintenance, the responsibility resides with the
equipment owners to complete the required maintenance.'' \34\
---------------------------------------------------------------------------

    \30\ Id. at 12.
    \31\ Id. at 12-13.
    \32\ Order No. 693, FERC Stats & Regs. ] 31,242 at P 1469.
    \33\ NERC Petition at 13.
    \34\ Id.
---------------------------------------------------------------------------

NOPR Proposal
    28. In the NOPR, the Commission proposed to approve Reliability
Standard PRC-005-2, finding that it would enhance reliability by
incorporating specific, required minimum activities and maximum time
intervals for maintenance of individual components of protection
systems and load shedding equipment affecting the bulk electric
system.\35\ The Commission further noted that the proposed Reliability
Standard would give entities the option of developing performance-based
maintenance intervals for eligible components, but that those intervals
had to be designed to achieve a minimum performance level and must be
adjusted if the target performance level is not achieved.\36\ Finally,
in the NOPR the Commission stated that Reliability Standard PRC-005-2
``appears to adequately address the Commission directives from Order
No. 693 with respect to: (1) Including maximum allowable intervals in
PRC-005; (2) combining PRC-005, PRC-008, PRC-011, and PRC-017; and (3)
considering whether load serving entities and transmission operators
should be included in the applicability of the PRC-005 Reliability
Standard.''\37\
---------------------------------------------------------------------------

    \35\ NOPR, 144 FERC ] 61,055 at P 2.
    \36\ Id.
    \37\ Id. P 22.
---------------------------------------------------------------------------

Comments
    29. Most commenters generally support the Commission's proposed
approval of PRC-005-2. ITC ``supports NERC's proposal as improving Bulk
Electric System reliability and promoting efficiency through
consolidation [of protection system-related standards] into a single
Standard.'' \38\ The Bureau of Reclamation states that the revised
standard ``is a significant improvement over the current PRC-005-1
standard because the current standard is more likely to penalize an
entity that develops an ambitious maintenance program than an entity
that has a less robust maintenance program. . . .'' \39\
---------------------------------------------------------------------------

    \38\ ITC Comments at 4.
    \39\ Bureau of Reclamation Comments at 1.
---------------------------------------------------------------------------

    30. Duke Energy, however, asks that the Commission reject the
revised standard. Duke Energy argues that PRC-005-2 improperly expands
the applicability of the protection system maintenance standard
because, ``as written, it could also apply to Protection Systems which
detect faults on the Bulk Electric System (BES), but which don't affect
the reliable operation of the BES.'' \40\ Duke Energy argues that the
Reliability Standard, as written, would apply to one of Duke Energy's
typical protection schemes for dispersed, non-BES generation at
distribution stations, because the relays involved are designed to
detect faults on the BES although these particular protection schemes
do not operate BES elements or interrupt network current flow from the
BES.\41\ Duke Energy maintains that these protection schemes initiate
shutdown of non-BES generation only, and should not properly be covered
under a protection system maintenance Reliability Standard. Duke Energy
accordingly requests that the Commission remand the standard to NERC
with a directive to limit applicability of the standard to protection
systems and elements thereof ``which affect the reliable operation of
those BES Elements'' on which they detect faults.\42\
---------------------------------------------------------------------------

    \40\ Duke Energy Comments at 2. In particular, Duke Energy cites
to applicability section 4.2.1, which pertains to ``protection
systems that are installed for the purpose of detecting Faults on
BES Elements (lines, buses, transformers, etc.).''
    \41\ Id. at 3-4.
    \42\ Id. at 5.
---------------------------------------------------------------------------

Commission Determination
    31. We find that Reliability Standard PRC-005-2 will enhance
reliability as compared to the currently existing standards, and agree
with ITC that PRC-005-2 promotes efficiency by consolidating protection
system maintenance requirements into a single standard. Consistent with
the NOPR, we believe that Reliability Standard PRC-005-2 should reduce
the risk of protection system misoperations by setting out minimum
maintenance activities and maximum maintenance time intervals for
individual components of protection systems.\43\ In addition, we
believe that PRC-005-2 will improve reliability by establishing
requirements for condition-based and performance-based maintenance
programs where maintenance intervals are adjusted to reflect the known
and reported condition or the historical performance of the relevant
devices. Finally, we agree with the Bureau of Reclamation that the
revised standard removes the potential disincentive, inherent in the
existing protection system maintenance standards, to adopt more
aggressive maintenance programs because compliance is currently
measured against each individual company's adopted program rather than
against industry standards or minimums.
---------------------------------------------------------------------------

    \43\ See NOPR, 144 FERC ] 61,055 at P 2.
---------------------------------------------------------------------------

    32. We are not persuaded by Duke Energy that remand of the
Reliability Standard is required. Duke Energy argues that PRC-005-2
will bring a new set of protection system schemes under NERC's
protection system maintenance standard requirements. We decline to make
any specific determination about the applicability of this standard to
specific elements or types of elements. Rather, Duke Energy may seek to
raise concerns regarding applicability of the Reliability Standard to
specific system

elements with NERC or the relevant Regional Entity.

B. Verification of Operability and Settings Upon Placement In-Service
NERC Petition

    33. Reliability Standard PRC-005-2 does not include separate
requirements for protection system commissioning testing for new or
modified equipment (i.e., testing activities necessary to ensure that
new or modified equipment has been built and will function in
accordance with its design). NERC maintained in its petition that such
testing is often performed by a different organization (such as a
start-up or commissioning group of the organization, or a contractor
hired to construct and start-up or commission the facility) than the
organization responsible for the on-going maintenance of the protection
system, and that the activities required for such testing will not
necessarily correlate to the maintenance activities required by the
proposed standard.\44\ At the same time, NERC acknowledged that ``a
thorough commission testing program would include, either directly or
indirectly, the verification of all those Protection System attributes
addressed by the maintenance activities specified in the Tables of PRC-
005-2,'' and that ``an entity would be wise to retain commissioning
records to show a maintenance start date.'' \45\

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

    \44\ NERC Petition, Ex. E (Supplementary Reference and FAQ) at
35.
    \45\ Id. NERC also noted that an entity ``that requires that
their commissioning tests have, at a minimum, the requirements of
PRC-005-2 would help that entity prove time interval maximums by
setting the initial time clock.'' Id.
---------------------------------------------------------------------------

NOPR Proposal
    34. In the NOPR, the Commission noted its concern that PRC-005-2
does not include a requirement to verify that protection system
equipment and components operate at least as accurately as required
under the PRC-005-2 maintenance standards when those components are
first placed in service or are modified, even though NERC has stated
that such placement into service can be used as the starting point for
the maintenance interval and even though a failure to verify the
accurate functioning of protection system components when placed in
service or when subsequently modified has contributed to misoperations
in the past.\46\ The Commission accordingly asked for an explanation of
``whether and if so, how [NERC] intends to interpret and enforce
Reliability Standard PRC-005-2 to require that newly installed or
modified protection system equipment or components perform at the same
level as is required for subsequent compliance, including verification
of applicable settings as specified whenever a relay is repaired,
replaced, or upgraded with a new firmware version.'' \47\
---------------------------------------------------------------------------

    \46\ See NOPR, 144 FERC ] 61,055 at PP 25-27.
    \47\ Id. P 27.
---------------------------------------------------------------------------

    35. In addition, if NERC did not believe it could interpret PRC-
005-2 to require verification of operability and settings of protection
system components at commissioning to the same performance level as is
required for subsequent compliance with PRC-005-2, the Commission
requested comment on whether such a modification to the standard should
be made.\48\
---------------------------------------------------------------------------

    \48\ Id. P 28.
---------------------------------------------------------------------------

Comments
    36. NERC, the Cooperatives, ITC and Oncor all object to the
application of PRC-005-2 to newly-commissioned or newly-modified
protection systems or components. NERC maintains that the proposed
standard was not ``designed to establish requirements for commission
testing and such testing would go beyond the maintenance activities
identified in proposed PRC-005-2.'' \49\ NERC accordingly asserts that
it ``cannot interpret and enforce proposed PRC-005-2 to require that
newly installed or modified protection system equipment or components
perform at the same level as is required for subsequent compliance.''
\50\
---------------------------------------------------------------------------

    \49\ NERC Comments at 3.
    \50\ Id. However, NERC states in its comments, as it did in its
petition, that ``the date of completion of the commission testing of
the Protection System component and its placement into service can
be used by an entity as the starting point in determining first
maintenance due dates.'' Id. at 3-4 (citing to NERC Petition at 35-
36).
---------------------------------------------------------------------------

    37. NERC also provides information about its efforts to reduce
protection system misoperations through improved commissioning testing
practices, and asks that the Commission refrain from issuing a
directive to modify PRC-005-2 to address commissioning testing until
NERC completes that work and can determine whether it is sufficient to
address commissioning testing.\51\ NERC states that these efforts
include development of a report by the System Protection and Control
Subcommittee (SPCS), recently approved by the NERC Planning Committee,
in which the SPCS ``suggested improving commissioning practices through
(1) analysis of protection system Misoperations; (2) sharing of lessons
learned; and (3) development of an industry reference document on
protection system commissioning practices.'' \52\ With respect to the
first recommendation, NERC suggests it is being addressed as part of
entities' ongoing obligations under PRC-004-2a (Analysis and Mitigation
of Transmission and Generation Protection System Misoperations).\53\ As
for the second recommendation, NERC notes that the SPCS is working on a
lessons learned document.\54\ As for the third recommendation, NERC
indicates that it is participating in ongoing efforts of an IEEE task
force, working on the development of a report to provide guidance on
the commissioning of power system protection systems.\55\ NERC commits
in its Comments to keep the Commission informed on the progress of
these ongoing efforts to reduce protection system misoperations related
to commissioning testing practices.\56\
---------------------------------------------------------------------------

    \51\ NERC Comments at 4.
    \52\ Id. at 6.
    \53\ Id.
    \54\ Id.
    \55\ Id. at 7-8. Oncor agrees that the Commission should
consider allowing NERC to continue its participation in efforts to
create a document providing commissioning guidelines and best
practices, instead of adding requirements to PRC-005-2. Oncor
Comments at 1.
    \56\ NERC Comments at 4.
---------------------------------------------------------------------------

    38. The Cooperatives agree with NERC that PRC-005-2 cannot be read
to include a requirement to verify operability and settings of new or
modified protection system equipment, because there is no explicit
language in the requirement that would allow such an interpretation and
because it would disregard the standards development process.\57\ The
Cooperatives argue that imposing a commissioning testing requirement as
part of PRC-005-2 would constitute a material change to the standard,
which must be addressed through the standards development process if
needed.\58\ Similarly, ITC ``strongly opposes'' application of PRC-005-
2 to commissioning of new components, and stresses that the proposed
standard was developed solely for the purpose of covering ``ongoing
maintenance during the life of the component, and not an initial
testing when the component is first commissioned.'' \59\ Oncor supports
NERC's efforts to develop guidelines on commissioning testing practices
instead of imposing additional requirements as part of PRC-005-2, and
notes that there are many differences between commissioning testing and
periodic

maintenance testing. In addition, Oncor notes that PRC-004-2a is
designed to identify deficiencies in performance and provide for
correction, while PRC-005-2 is not a deficiency in performance
standard.\60\
---------------------------------------------------------------------------

    \57\ Cooperatives Comments at 3-4.
    \58\ Id. at 4.
    \59\ ITC Comments at 6-7.
    \60\ Oncor Comments at 1.
---------------------------------------------------------------------------

    39. The Cooperatives also argue that the Commission should not
require the development of a commissioning testing requirement that
would require verification of protection system operability and
settings, because such a requirement ``would be redundant, difficult to
formulate and enforce, and might affect some (but not all) Registered
Entities' willingness to deploy new or upgraded protection systems.''
\61\
---------------------------------------------------------------------------

    \61\ Cooperatives Comments at 5-8.
---------------------------------------------------------------------------

    40. Idaho Power, on the other hand, believes that the Commission
has identified a gap in the Reliability Standards that should be
addressed by expanding PRC-005-2 to include newly-commissioned or
modified equipment.
Commission Determination
    41. While we remain concerned about the continued possibility of
misoperations resulting from a failure to properly verify the
operability or settings of protection system equipment upon being
placed in service or modified, we will not direct NERC to modify PRC-
005-2 to include such a requirement or to otherwise develop a separate
commissioning testing standard at this time. Instead, we rely on NERC's
discussion of its on-going efforts to reactively and proactively reduce
protection system misoperations through improved commissioning testing
practices, which includes the analysis of misoperations, sharing of
lessons learned, and the development of a report intended to provide
guidance concerning the commissioning of power system protection
systems.\62\ As explained in the NOPR, our concern is with a protection
system that has not been verified as capable of functioning according
to its design when placed in service or modified. In its Comments, NERC
describes an event studied by NERC's Event Analysis and Investigation
Group, in which an entity did not perform in-service testing as part of
commissioning a new protection system, ``resulting in line relays being
placed in service with the incorrect transformer ratio.'' \63\
According to NERC, this situation remained undetected until the
protection system was required to operate for a system disturbance.
That protection system failed to operate correctly due to the defect,
consequently increasing the magnitude and scope of the system
disturbance.\64\ We believe that this example, provided by NERC,
highlights our concern and the importance of commissioning testing.
---------------------------------------------------------------------------

    \62\ See NERC Comments at 5-8.
    \63\ Id. at 4.
    \64\ Id.
---------------------------------------------------------------------------

    42. We agree with a proactive approach to reducing misoperations,
i.e., ensuring that a new or modified protection system, when placed in
service, is capable of functioning according to its design so that an
undetected defect resulting in a misoperation of that protection system
does not negatively affect bulk electric system reliability. We
encourage and accept NERC's commitment to keep the Commission informed
of its efforts concerning this issue.\65\ Accordingly, we direct NERC
to submit, within one year of issuance of this Final Rule, an
informational filing on the status of these efforts, including the
development of the guidance report as described in the NERC Comments.
---------------------------------------------------------------------------

    \65\ See id.
---------------------------------------------------------------------------

C. Four Percent Target for Countable Events in Performance-Based
Program

NERC Petition
    43. Pursuant to Requirement R2 of Reliability Standard PRC-005-2,
responsible entities may choose to establish performance-based
maintenance intervals for individual component types, according to the
procedures set out in Attachment A of the standard. Under these
procedures, the responsible entity must first develop a list of
components to be included in the designated segment (with a minimum
population of 60 components).\66\ Using that analysis and looking at
the greater of either the last 30 components maintained or all
components maintained within the segment over the last year, the
responsible entity must set a maximum allowable interval for each
segment so that countable events will occur on no more than four
percent of the components within that segment. In addition, the
maintenance history of the segment is to be reviewed at least annually
to determine the overall performance of the segment, and, if the four
percent target is not met, the entity is required to develop and
implement an action plan to reduce countable events to less than four
percent within three years.\67\
---------------------------------------------------------------------------

    \66\ Until such time as the entity has performed and analyzed
the required maintenance activities applicable to the segment for at
least 30 individual components, it must maintain the segment using
PRC-005-2's time-based intervals, as specified in Tables 1-1 to 1-5,
2 and 3, i.e., it cannot adopt a performance-based interval until it
has performed and analyzed the maintenance history for a minimum
pool of components.
    \67\ As NERC explains in the Supplementary Reference and FAQ
(Ex. E) attached to its petition, entities using a performance-based
program must not only ``demonstrate how they analyze findings of
performance failures and aberrations'' but must also ``implement
continuous improvement actions'' to meet the failure rate targets.
See NERC Petition, Ex. E at 40.
---------------------------------------------------------------------------

    44. Under PRC-005-2, an entity would not violate Requirement R2
upon failing to achieve a four percent or less failure rate for a given
segment in the first year the failure occurs, but would violate
Requirement R2 if: (1) The entity could not show that the interval
selected was initially set to expect a failure rate of no more than
four percent; (2) the entity fails to make immediate changes to its
performance-based maintenance program to achieve a four percent target
within 3 years; or (3) the entity does not actually achieve a four
percent failure rate for that segment within 3 years after adjusting
its program.\68\
---------------------------------------------------------------------------

    \68\ See generally id. at 40-53.
---------------------------------------------------------------------------

    45. In the Technical Justification NERC submitted as part of its
petition, NERC explained the basis for selecting a four percent target
for countable events as follows:
    The 4% number was developed using the following:

    General experience of the drafting team based on open
discussions of past performance.
    Test results provided by Consumers Energy for the years 1998-
2008 showing a yearly average of 7.5% out-of-tolerance relay test
results and a yearly average of 1.5% defective rate.
    Two failure analysis reports from Tennessee Valley Authority
(TVA) where TVA identified problematic equipment based on a
noticeably higher failure of a certain relay type (failure rate of
2.5%) and voltage transformer type (failure rate of 3.6%).\69\
---------------------------------------------------------------------------

    \69\ NERC Petition, Ex. D (Technical Justification) at 5.
---------------------------------------------------------------------------

NOPR
    46. In the NOPR, the Commission questioned whether NERC had
provided sufficient support for the choice of a four percent target
figure for countable events, particularly with respect to individual
components known to have historically higher levels of reliability.\70\
The Commission requested support for NERC's proposed approach in PRC-
005-2, which adopts a single failure rate target for all component
types, as opposed to establishing a target failure rate for each
individual component.\71\ In addition, the Commission sought

comment on the selection of four percent as the appropriate target
failure rate, assuming a blanket failure rate is used. Finally, the
Commission proposed to direct NERC to study and submit a report and
recommendations based on the study results concerning the expected
failure rates for individual component types if the technical
information to respond to the Commission's questions is not currently
available.
---------------------------------------------------------------------------

    \70\ See NOPR, 144 FERC ] 61,055 at PP 32-33.
    \71\ Id. P 34.
---------------------------------------------------------------------------

Comments
    47. NERC comments that it continues to support the four percent
failure rate target, arguing that an ``acceptable failure rate needs to
balance between a goal of ultimate reliability and what could be
reasonably expected of a well-performing component population.''\72\
NERC maintains that the four percent performance target was selected
``based on the drafting team's experience and past studies performed by
several utilities,'' and references back to Section 9 of the
Supplementary Reference and FAQ appended to its Petition.\73\ In those
supplementary materials, the choice of a four percent failure rate is
explained as follows:
---------------------------------------------------------------------------

    \72\ NERC Comments at 10.
    \73\ Id. at 11.

    It is notable that 4% is specifically chosen because an entity
with a small population (30 units) would have to adjust its time
intervals between maintenance if more than one Countable Event was
found to have occurred during the last analysis period. A smaller
percentage would require that entity to adjust the time interval
between maintenance activities if even one unit is found out of
tolerance or causes a Misoperation.\74\
---------------------------------------------------------------------------

    \74\ NERC Petition, Ex. E (Supplementary Reference and FAQ) at
42.

    48. NERC further maintains that ``it is appropriate to use a
specified target percentage in a performance based maintenance program
when applied to the results of time based maintenance of various
component types'' because the ``variable performance expectations for
different types of components are already reflected in the Table 1 time
intervals.'' \75\ Thus, NERC explains, components with high failure
rates would not generate significant extensions in allowed maintenance
intervals ``unless dramatic advances in component reliability validate
the use of significantly lower intervals.'' \76\ NERC further explains
that extension of the maintenance interval will reduce the number of
Countable Events for a given year, such that highly reliable components
will have a low number of permitted ``failures'' per year.
---------------------------------------------------------------------------

    \75\ NERC Comments at 11-12.
    \76\ Id. at 12.
---------------------------------------------------------------------------

    49. NERC accordingly asks that the Commission approve the four
percent target failure rate as proposed. In the alternative, if the
Commission determines it needs additional information to support the
four percent figure, NERC asks that it be given the opportunity to
provide that additional support rather than have the Commission direct
modification of the proposed standard. NERC also indicates that it will
have the ``ability to track trends in Misoperations as industry gains
practical experience with the performance based maintenance approach
reflected in proposed PRC-005-2.'' \77\
---------------------------------------------------------------------------

    \77\ Id. at 13.
---------------------------------------------------------------------------

    50. Idaho Power, the only commenter other than NERC to address the
four percent target failure rate, agrees with NERC that the four
percent figure should be retained for all component types.\78\ Idaho
Power believes that the cost of developing specific failure rates for
component types would outweigh the benefit of doing so. Idaho Power
points out the practical limitations of developing specific failure
rates, which ``would need to account for different manufacturers,
models, operating environments, production plants, and handling,'' and
would need to be updated periodically.\79\
---------------------------------------------------------------------------

    \78\ Idaho Power Comments at 2.
    \79\ Id.
---------------------------------------------------------------------------

Commission Determination
    51. We are persuaded by the comments of NERC and Idaho Power to
adopt the four percent target failure rate in performance-based
maintenance programs, as described in Attachment A of PRC-005-2. In
addition to the rationale provided by NERC, we recognize the practical
need to adopt a target failure rate that is available to smaller
organizations, and the cost and resources required to develop variable
rates for different component types, and thus approve the approach set
forth in Attachment A of PRC-005-2. While we do not direct the
submission of further data or support for the target failure rate at
this time, we note NERC's commitment to continue collecting data on
misoperations,\80\ and expect that NERC will maintain sufficient data
bases to allow future evaluation of performance-based maintenance
programs as compared to time-based maintenance programs, including the
frequency of misoperations (including clearly tracking the underlying
cause of the misoperations).
---------------------------------------------------------------------------

    \80\ NERC Comments at 13.
---------------------------------------------------------------------------

D. Correcting Unresolved Maintenance Issues (Requirement R5)

NERC Petition
    52. Requirement R5 of PRC-005-2 obligates responsible entities to
``demonstrate efforts to correct identified Unresolved Maintenance
Issues.'' NERC defines an ``unresolved maintenance issue'' as a
``deficiency identified during a maintenance activity that causes the
component to not meet the intended performance, cannot be corrected
during the maintenance interval, and requires follow-up corrective
action.'' \81\ In its Petition, NERC explained the rationale behind
providing some latitude to complete correction or restoration of a
discovered problem outside of the normal maintenance interval as
follows:
---------------------------------------------------------------------------

    \81\ NERC Petition at 14.

    The drafting team does not believe entities should be found in
violation of a maintenance program requirement because of the
inability to complete a remediation program within the original
maintenance interval. The drafting team does believe corrective
actions should be timely but concludes it would be impossible to
postulate all possible remediation projects and therefore,
impossible to specify bounding time frames for resolution of all
possible Unresolved Maintenance Issues or what documentation might
be sufficient to provide proof that effective corrective action has
been initiated. Therefore Requirement R5 requires only the entity
demonstrate efforts to correct the Unresolved Maintenance
Issues.\82\
---------------------------------------------------------------------------

    \82\ Id. at 17.

NOPR
    53. In the NOPR, the Commission agreed that it may be appropriate
in certain circumstances to allow entities additional time beyond the
maximum maintenance interval period to complete restorative action,
including when the corrective action involves redesign, ordering
additional equipment, or timing corrective work to correspond to
planned outages.\83\ However, the Commission noted its expectation that
such instances would be limited, and that in most circumstances
entities should have the capability to replace components and make
minor repairs within the maximum maintenance interval.\84\
---------------------------------------------------------------------------

    \83\ NOPR, 144 FERC ] 61,055 at P 37.
    \84\ Id.
---------------------------------------------------------------------------

Comments
    54. ITC states that it ``does not oppose the overall structure'' in
Requirement R5 for correcting an Unresolved Maintenance Issue, but has
concerns

about the Commission's ``expectation that `entities should have the
capability to replace components . . . within the maximum maintenance
interval.' '' \85\ ITC maintains that this expectation ``ignores the
challenges of maintaining older, well-functioning protection systems''
that are ``obsolete by current technology standards and/or for which
replacement parts are no longer available.'' \86\ ITC notes that its
own practice is to institute a new capital project to replace obsolete
protection systems with new technologies when obsolete protection
systems unexpectedly fail or are found to be unacceptable when tested,
which could take up to a year or more to complete.
---------------------------------------------------------------------------

    \85\ ITC Comments at 5.
    \86\ Id.
---------------------------------------------------------------------------

    55. By contrast, the Bureau of Reclamation argues that the
Requirement R5 obligation to ``demonstrate efforts to correct
identified Unresolved Maintenance Issues'' is unclear, and asks the
Commission to direct that NERC clarify the requirement ``by including a
requirement for entities to develop plans with timeframes for
corrective actions.'' \87\
---------------------------------------------------------------------------

    \87\ Bureau of Reclamation Comments at 2.
---------------------------------------------------------------------------

Commission Determination
    56. We are not persuaded that any modification to Requirement R5 is
needed at this time, or that it is unreasonable to expect, as stated in
the NOPR, that in most circumstances responsible entities should not
need longer than the maximum maintenance interval to complete
corrective actions. While we agree with the Bureau of Reclamation that
the adoption of a formal plan for correcting an Unresolved Maintenance
Issue may help to demonstrate that an entity has demonstrated
sufficient efforts to meet Requirement R5, we note that the adoption of
such a plan may not be necessary in all cases, e.g., if the issue will
be quickly resolved. Moreover, we can conceive of situations where the
adoption of a formal plan for resolution of the issue should not be
treated as a sufficient demonstration of effort to correct the issue.
    57. With regard to ITC's comment regarding the time involved in
certain replacements, particularly when they involve a new capital
project, we recognize that in this circumstance (and others), it may
appropriately require a significant period of time to address an
Unresolved Maintenance Issue. Nonetheless, we do not believe that such
a project is inconsistent with our expectation, as stated in the NOPR,
that the instances in which restoration or repair is delayed beyond the
normal maximum maintenance interval ``will be limited and, in most
circumstances, entities should have the capability to replace
components and make minor repairs within the maximum maintenance
interval.'' \88\
---------------------------------------------------------------------------

    \88\ NOPR, 144 FERC ] 61,055 at P 37.
---------------------------------------------------------------------------

    58. In addition, we note that an Unresolved Maintenance Issue could
degrade protection system performance to a level that requires
notification and corrective action under Reliability Standard PRC-001-
1. Under PRC-001-1, if a protective relay or equipment failure reduces
system reliability, the transmission operator or generator operator
must notify relevant reliability entities (e.g. the host balancing
authority, reliability coordinator, and affected transmission operators
and balancing authorities) of the relay or equipment failure and must
take corrective action as soon as possible.\89\
---------------------------------------------------------------------------

    \89\ Currently approved PRC-001-1 contains the following:
    R2. Each Generator Operator and Transmission Operator shall
notify reliability entities of relay or equipment failures as
follows:
    R2.1. If a protective relay or equipment failure reduces system
reliability, the Generator Operator shall notify its Transmission
Operator and Host Balancing Authority. The Generator Operator shall
take corrective action as soon as possible.
    R2.2. If a protective relay or equipment failure reduces system
reliability, the Transmission Operator shall notify its Reliability
Coordinator and affected Transmission Operators and Balancing
Authorities. The Transmission Operator shall take corrective action
as soon as possible.
---------------------------------------------------------------------------

E. Violation Severity Level for Requirement R1 Violation--Station
Batteries

NERC Petition
    59. Under the second sentence of Part 1.1 of Requirement R1, all
batteries associated with station DC supply must be included in a time-
based maintenance program, i.e., they are not eligible for a
performance-based program.\90\ In assigning violation severity levels
for Requirement R1, NERC assigned a ``lower'' violation severity level
for the failure to include applicable station batteries in a time-based
maintenance program. NERC also assigned a ``lower'' violation severity
level for the failure to specify whether one Component Type is being
addressed by time-based or performance-based maintenance, or a
combination of both. NERC explained that ``[t]here is an incremental
aspect to the violation [of Requirement R1] and the VSLs follow the
guidelines for incremental violations.'' \91\
---------------------------------------------------------------------------

    \90\ NERC explained this unique treatment of station batteries
as follows:
    Batteries are the only element of a Protection System that is a
perishable item with a shelf life. As a perishable item batteries
require not only a constant float charge to maintain their freshness
(charge), but periodic inspection to determine if there are problems
associated with their aging process and testing to see if they are
maintaining a charge or can still deliver their rated output as
required. NERC Petition, Ex. D (Technical Justification) at 8.
    \91\ NERC Petition, Ex. I (Discussion of Assignments of VRFs and
VSLs) at 10.
---------------------------------------------------------------------------

NOPR
    60. In the NOPR, the Commission proposed to direct NERC to change
the violation severity level for the failure to include station
batteries in a time-based program from a ``lower'' designation to a
``severe'' designation, based on the binary nature of the
requirement.\92\ The Commission noted that entities either satisfy the
obligation to include station batteries in a time-based program or fail
to meet the requirement in its entirety, which is indicative of a
binary requirement.\93\ The Commission also noted that a low violation
severity level designation does not properly reflect the number of
historical violations associated with station battery maintenance.\94\
---------------------------------------------------------------------------

    \92\ NOPR, 144 FERC ] 61,055 at P 39.
    \93\ Id.; see also id. at n.53 (citing North American Electric
Reliability Corporation, 135 FERC ] 61,166, at P 13 (2011).
    \94\ Id. P 39.
---------------------------------------------------------------------------

Comments
    61. NERC, Idaho Power, and the Cooperatives support NERC's initial
``lower'' violation severity level designation for the failure to
include station batteries in a time-based maintenance program. NERC
notes that the purpose of Requirement R1 (as a whole) is ``to obligate
the entity to establish a Protection System Maintenance Program for its
Protection Systems,'' and that the subparts of the requirement are
``not intended as separate subrequirements for compliance purposes.''
\95\ NERC further notes that ``it was not the intent of the standard
drafting team to assign more importance to station batteries than any
other Protection system component type as far as the initial
establishment of the Protection System Maintenance Program.'' \96\ NERC
explains that the violation severity levels for Requirement R1 were
assigned based on the main Requirement, and argues that it is
appropriate to measure compliance with that Requirement using ``a
gradated level of non-compliance based on the number of component types
missed. . . .'' \97\ NERC states that

deletion of the failure to include station batteries in a time-based
maintenance program as a separately listed violation would be
preferable to a directive requiring that failure to be treated as a
``severe'' level violation.\98\
---------------------------------------------------------------------------

    \95\ NERC Comments at 14.
    \96\ Id. at 14-15 (emphasis in original).
    \97\ Id. at 15.
    \98\ Id.
---------------------------------------------------------------------------

    62. NERC also disagrees with the Commission's statement that an
assignment of a ``lower'' violation severity level in this context is
inconsistent with the Commission's approach to binary requirements.
NERC asserts that neither it nor the standard drafting team considered
Requirement R1 to be binary, and NERC points out that the Commission
has adopted the general rule that ``gradated Violation Severity Levels,
where possible, would be preferable to binary Violations Severity
Levels since the application of any penalty for a violation could be
more consistently and fairly applied commensurate with the degree of
the violation.'' \99\
---------------------------------------------------------------------------

    \99\ Id. at 16 (citing North American Electric Reliability
Corporation, 123 FERC ] 61,284, at P 27 (2008)).
---------------------------------------------------------------------------

    63. The Cooperatives and Idaho Power agree that a ``lower''
violation severity level is appropriate in this context.\100\ The
Cooperatives assert that a ``severe'' designation does not reflect the
level of risk associated with the failure to test a given battery, and
that the number of historical violations associated with station
battery maintenance merely reflects NERC's zero-tolerance policy for
missing a defined testing interval by even one day.\101\ The
Cooperatives agree with NERC that Requirement R1.1 is not binary,\102\
and Idaho Power maintains that NERC's proposed assignment properly
takes into account ``the incremental aspect to potential violations.''
\103\
---------------------------------------------------------------------------

    \100\ Cooperatives Comments at 9-10; Idaho Power Comments at 2.
    \101\ Cooperatives Comments at 9.
    \102\ Id.
    \103\ Idaho Power Comments at 2.
---------------------------------------------------------------------------

    64. ITC supports the NOPR proposal to direct NERC to modify the
violation severity level for Part 1.1 of Requirement R1, and agrees
that the requirement is essentially binary with respect to
compliance.\104\
---------------------------------------------------------------------------

    \104\ ITC Comments at 4-5.
---------------------------------------------------------------------------

Commission Determination
    65. We are not persuaded that the failure to include station
batteries in a time-based maintenance program should be assigned a
``lower'' violation severity level, when these components were singled
out for special treatment in Requirement R1 as proposed. Furthermore,
NERC does not propose gradated violation severity levels relating to
whether a responsible entity includes station batteries in a time-based
maintenance program. Nor does NERC explain how it would develop such
gradated violation severity levels. NERC instead proposes a single,
``lower'' violation severity level assignment as to this requirement.
NERC treats the requirement as binary, while proposing gradated
violation severity levels for all other portions of Requirement
R1.\105\ In this situation, the violation severity level must be
``severe,'' as NERC has previously stated.\106\ However, NERC is free
to develop and propose gradated violation severity level assignments
for its time-based maintenance program requirement as to station
batteries.
---------------------------------------------------------------------------

    \105\ NERC refers to a Commission statement that BAL-005-0,
Requirement R12, which requires an applicable entity to include all
tie line flows in a calculation, is not a binary requirement and can
be gradated. NERC Comments at 15-16 (citing North American Electric
Reliability Corporation, 123 FERC ] 61,284, at P 26 (2008)). An
applicable entity's failure to include any tie line flows in the
calculation would represent the most serious excursion from
compliance with this requirement and be appropriate for a ``severe''
violation severity level assignment. As to the requirement that a
responsible entity include all batteries associated with DC station
supply in a time-based maintenance program, the single instance of
violation NERC identifies in its violation severity levels for PRC-
005-2 Requirement R1 is a failure to include any such batteries in a
time-based maintenance program. Even if this requirement can be
gradated for the purpose of assigning violation severity levels, the
violation NERC identifies likewise would be the most serious
excursion from compliance, so that a severe violation severity level
assignment would be appropriate.
    \106\ ``NERC further states that it will determine whether a
requirement has a single violation severity requirement or a set of
violation severity levels by analyzing the performance required to
satisfy a particular requirement. . . . Requirements that are
binary, i.e., pass/fail, will have only one violation severity
level--severe.'' North American Electric Reliability Corporation,
135 FERC ] 61,166, at P 13 (2011).
---------------------------------------------------------------------------

    66. We also note that the level of risk associated with the failure
to test a given battery is not an appropriate consideration in the
context of assigning violation severity levels, but rather, should be
considered when assigning a violation risk factor. In this case,
Requirement R1 has been assigned a medium violation risk factor, which
we accept as properly reflecting NERC's determination that a violation
of Requirement R1 could directly affect the electrical state or the
capability of the bulk-power system, but is unlikely to lead to bulk
power system instability, separation, or cascading failures.\107\ We
accordingly direct NERC to submit a compliance filing changing the
violation severity level for the failure to include station batteries
in a time-based maintenance program to ``severe.'' \108\
---------------------------------------------------------------------------

    \107\ NERC Petition, Ex. I (Discussion of Assignments of VRFs
and VSLs) at 5-6.
    \108\ We disagree with NERC's suggestion to delete this VSL
assignment rather than direct a change in it because ``the
compliance element is covered adequately by the remaining language
in the `lower' VSL'' for Requirement R1. NERC Comments at 15. Under
NERC's suggestion, a responsible entity that specifies that it is
using a performance-based maintenance program for station batteries
would be in compliance with the first sentence of Requirement R1.1,
but in violation of the second sentence, without an applicable
violation severity level.
---------------------------------------------------------------------------

F. Definitions

NERC Petition
    67. NERC sought approval of six new definitions as part of proposed
Reliability Standard PRC-005-2, i.e., Component, Component Type,
Countable Event, Protection System Maintenance Program, Segment, and
Unresolved Maintenance Issue. Of these newly defined terms, NERC
proposed to include only the term Protection System Maintenance Program
in its Glossary of Terms, with the remainder applying only to
Reliability Standard PRC-005-2.
NOPR
    68. In the NOPR, the Commission proposed to approve all six
definitions without modification.
Comments
    69. The Bureau of Reclamation asks the Commission to direct NERC to
clarify section 4.2 (Applicability) to eliminate use of the vague or
confusing terms ``such as,'' ``including,'' and ``etc.,'' including
eliminating their use in the definition of the term ``Element'' (as
referenced in PRC-005-2) and in the standard-specific definition of
``Component.'' \109\ In addition, the Bureau of Reclamation suggests
that the Commission require all definitions included in standards to be
included in the NERC Glossary as a general matter, ``to promote
consistency among standards.'' \110\
---------------------------------------------------------------------------

    \109\ Bureau of Reclamation Comments at 2.
    \110\ Id. at 1-2.
---------------------------------------------------------------------------

Commission Determination
    70. We are not persuaded that the use of the terms and phrases
highlighted by the Bureau of Reclamation, which allow for the use of an
illustrative list of elements or facilities that are included within a
definition, renders that definition or the standard's applicability
impermissibly vague. Nor are we persuaded that the definitions at issue
in this docket that are used in the context of this standard must be
adopted in NERC's Glossary of Terms for potential application to all

standards.\111\ However, we note that NERC should not adopt
inconsistent definitions for the same term. We therefore accept the six
definitions associated with PRC-005-2 as proposed by NERC without
modification.
---------------------------------------------------------------------------

    \111\ This appears to be a unique situation in that the five
defined terms at issue have been developed specifically for use with
PRC-005-2 and do not have broader applicability. However, we note
that our approval of the defined terms as part of PRC-005-2 makes
them binding on the ERO, regional entities, and registered entities
for purposes of PRC-005-2, regardless of whether the terms appear in
NERC's Glossary of Terms or as part of the individual standard. See,
e.g., Notice of Proposed Rulemaking, Monitoring System Conditions--
Transmission Operations Reliability Standard, Transmission
Operations Reliability Standards, Interconnection Reliability
Operations and Coordination Reliability, 145 FERC ] 61,158, at P 66,
n.81 (2013) (``The Commission has held that definitions are
standards.'').
---------------------------------------------------------------------------

III. Information Collection Statement

    71. The following collection of information contained in this Final
Rule is subject to review by the Office of Management and Budget (OMB)
under section 3507(d) of the Paperwork Reduction Act of 1995.\112\
OMB's regulations require approval of certain information collection
requirements imposed by agency rules.\113\ Upon approval of a
collection(s) of information, OMB will assign an OMB control number and
an expiration date. Respondents subject to the filing requirements of a
rule will not be penalized for failing to respond to these collections
of information unless the collections of information display a valid
OMB control number.
---------------------------------------------------------------------------

    \112\ 44 U.S.C. 3507(d) (2012).
    \113\ 5 CFR 1320.11 (2012).
---------------------------------------------------------------------------

    72. The Commission approves Reliability Standard PRC-005-2, which
replaces PRC-005-1.1b (Transmission and Generation Protection System
Maintenance and Testing), PRC-008-0 (Underfrequency Load Shedding
Equipment Maintenance), PRC-011-0 (Undervoltage Load Shedding Equipment
Maintenance) and PRC-017-0 (Special Protection System Maintenance and
Testing). The Reliability Standard combines the requirements for
maintenance and testing of protection systems, special protection
systems, underfrequency load shedding equipment, and undervoltage load
shedding equipment into one, comprehensive standard. In addition, the
Reliability Standard sets out minimum maintenance activities and
maximum maintenance intervals for the various components of these
systems, but also allows applicable entities to adopt performance-based
maintenance intervals in certain circumstances.
    73. Reliability Standard PRC-005-2 includes specific requirements
about the minimum maintenance activities required for each type of
applicable component, as well as a maximum time interval during which
the maintenance must be completed. Because the specific requirements
were designed to reflect common industry practice, entities are
generally not expected to experience a meaningful change in actual
maintenance and documentation practices. However, applicable entities
will have to perform a one-time review of their current protection
system maintenance programs to ensure that they meet the requirements
of the revised standard PRC-005-2. Accordingly, all expected
information collection costs are expected to be limited to the first
year of implementation of the revised standard.
    74. Public Reporting Burden: Our estimate below regarding the
number of respondents is based on the NERC compliance registry as of
June 10, 2013. According to the compliance registry, 544 entities are
registered as distribution providers, 898 entities are registered as
generation owners, and 346 entities are registered as transmission
owners within the United States. However, due to significant overlap,
the total number of these affected entities (i.e., entities registered
as a distribution provider, a generation owner, a transmission owner,
or some combination of these three functional entities) is 867
entities.
    75. Affected entities must perform a one-time review of their
existing protection system maintenance program to ensure that it
contains at a minimum the activities listed in Tables 1 through 3 in
Reliability Standard PRC-005-2 and that the activities are performed
within the applicable maximum interval listed in Tables 1 through 3. If
the existing protection system maintenance program does not meet the
criteria in Reliability Standard PRC-005-2, the entity will have to
make certain adjustments to the program.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Number  of      Number  of PSMP   Average number
                          Requirement                               affected        reviewed  per     of hours per      Total burden       Total cost
                                                                    entities           entity            review             hours
                                                                             (1)               (2)               (3)     (1)*(2)*(3) =     (4)*$70 \114\
                                                                                (4)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One time review and adjustment of existing protection system                 867                 1                 8             6,936          $485,520
 maintenance program..........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\114\ This figure is the average of the salary plus benefits for a manager and an engineer. The figures are taken from the Bureau of Labor and
  Statistics at (http://bls.gov/oes/current/naics3_221000.htm).

    Title: FERC-725P, Mandatory Reliability Standards: Reliability
Standard PRC-005-2
    Action: Proposed Collection of Information
    OMB Control No: To be determined
    Respondents: Business or other for-profit and not-for-profit
institutions.
    Frequency of Responses: One time.
    Necessity of the Information: The Reliability Standard PRC-005-2
implements the Congressional mandate of the Energy Policy Act of 2005
to develop mandatory and enforceable Reliability Standards to better
ensure the reliability of the nation's Bulk-Power System. Specifically,
the new Reliability Standard ensures that transmission and generation
protection systems affecting the reliability of the bulk electric
system are maintained and tested.
    76. Internal review: The Commission has reviewed revised
Reliability Standard PRC-005-2 and made a determination that approval
of this standard is necessary to implement section 215 of the FPA. The
Commission has assured itself, by means of its internal review, that
there is specific, objective support for the burden estimates
associated with the information requirements.
    77. Interested persons may obtain information on the reporting
requirements by contacting the Federal

Energy Regulatory Commission, Office of the Executive Director, 888
First Street, NE., Washington, DC 20426 [Attention: Ellen Brown, email:
<EMAIL_ADDRESS>phone:<PHONE_NUMBER>, fax:<PHONE_NUMBER>].
    78. Comments concerning the information collections in this rule
and the associated burden estimates should be sent to the Commission
and to the Office of Management and Budget, Office of Information and
Regulatory Affairs [Attention: Desk Officer for the Federal Energy
Regulatory Commission]. For security reasons, comments to OMB should be
sent by email to<EMAIL_ADDRESS>Please reference Docket
No. RM13-7-000 (FERC-725P) in your submission.

IV. Regulatory Flexibility Act Analysis

    79. The Regulatory Flexibility Act of 1980 (RFA) \115\ generally
requires a description and analysis of rules that will have significant
economic impact on a substantial number of small entities. As discussed
above, Reliability Standard PRC-005-2 will apply to an estimated 867
individual entities (the number of entities registered as a
distribution provider, a generator owner, a transmission owner, or any
combination of those three functional entities). Comparison of the NERC
Compliance Registry with data submitted to the Energy Information
Administration on Form EIA-861 indicates that, of these entities, 230
may qualify as small entities.\116\ Of the 230 small entities, 90 are
registered as a combination of distribution providers, generator owners
and transmission owners, but it is assumed that each entity would have
only one comprehensive program to review.
---------------------------------------------------------------------------

    \115\ 5 U.S.C. 601-12.
    \116\ The RFA definition of ``small entity'' refers to the
definition provided in the Small Business Act (SBA), which defines a
``small business concern'' as a business that is independently owned
and operated and that is not dominant in its field of operation. See
15 U.S.C. 632 (2006). According to the Small Business
Administration, an electric utility is defined as ``small'' if,
including its affiliates, it is primarily engaged in the generation,
transmission, and/or distribution of electric energy for sale and
its total electric output for the preceding fiscal year did not
exceed 4 million megawatt hours.
---------------------------------------------------------------------------

    80. The Commission estimates that, on average, each of the 230
small entities affected will have a one-time cost of $560, representing
a one-time review of the program for each entity, consisting of 8 man-
hours at $70/hour as explained above in the information collection
statement. We do not consider this cost to be a significant economic
impact for small entities. Accordingly, the Commission certifies that
Reliability Standard PRC-005-2 will not have a significant economic
impact on a substantial number of small entities.

V. Environmental Analysis

    81. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\117\ The
Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment. Included in the exclusion are rules that are clarifying,
corrective, or procedural or that do not substantially change the
effect of the regulations being amended.\118\ The actions taken herein
fall within this categorical exclusion in the Commission's regulations.
---------------------------------------------------------------------------

    \117\ Regulations Implementing the National Environmental Policy
Act of 1969, Order No. 486, FERC Stats. & Regs. ] 30,783 (1987).
    \118\ 18 CFR 380.4(a)(2)(ii).
---------------------------------------------------------------------------

VI. Document Availability

    82. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's Home Page (http://www.ferc.gov) and
in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE., Room 2A,
Washington, DC 20426.
    83. From the Commission's Home Page on the Internet, this
information is available on eLibrary. The full text of this document is
available on eLibrary in PDF and Microsoft Word format for viewing,
printing, and/or downloading. To access this document in eLibrary, type
the docket number excluding the last three digits of this document in
the docket number field.
    84. User assistance is available for eLibrary and the Commission's
Web site during normal business hours from the Commission's Online
Support at<PHONE_NUMBER> (toll free at 1-866-208-3676) or email at
<EMAIL_ADDRESS>or the Public Reference Room at (202) 502-
8371, TTY<PHONE_NUMBER>. Email the Public Reference Room at
<EMAIL_ADDRESS>
VII. Effective Date and Congressional Notification

    85. This Final Rule is effective February 24, 2014.
    86. The Commission has determined, with the concurrence of the
Administrator of the Office of Information and Regulatory Affairs of
OMB, that this rule is not a ``major rule'' as defined in section 351
of the Small Business Regulatory Enforcement Fairness Act of 1996.\119\
The Commission will submit the Final Rule to both houses of Congress
and to the General Accountability Office.
---------------------------------------------------------------------------

    \119\ See 5 U.S.C. 804(2) (2007).

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

    Note:  The Appendix will not appear in the Code of Federal
Regulations.

Appendix A

Commenters

Associated Electric Cooperative, Inc., Basin Electric Power
Cooperative, Inc. and Tri-State Generation and Transmission
Association (Cooperatives)
Duke Energy Corporation (Duke Energy)
Idaho Power Company (Idaho Power)
International Transmission Company d/b/a ITCTransmission, Michigan
Electric Transmission Company, LLC, ITC Midwest LLC and ITC Great
Plains, LLC (ITC)
North American Electric Reliability Corporation (NERC)
Oncor Electric Delivery Company LLC (Oncor)
United States Department of the Interior, Bureau of Reclamation
(Bureau of Reclamation)
[FR Doc. 2013-30628 Filed 12-23-13; 8:45 am]
BILLING CODE 6717-01-P