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FERC Issues Order Revising Notice of Penalty Review Process

On October 30, 2009, FERC issued Order No. 728 revising its regulations for processing Notices of Penalty (“NOPs”) for violations of NERC Reliability Standards. The process changes are intended to allow for more efficient and timely processing of “routine, non-controversial Notices that propose zero dollar penalties.”

In the Order, the Commission states that because NOPs addressing penalties of zero dollars will, in most cases become effective by operation of law, the Commission is revising its current process so that these types of penalties can be processed without the need for a formal Commission vote.  To do this, the Commission is delegating the necessary authority to the Director of the Office of Enforcement to allow the Director to require NERC or other entities to submit additional information regarding the NOPs and to extend the time period for reviewing a filed NOP.  In addition, the Commission is delegating the necessary authority to the Secretary of the Commission to issue notices for zero dollar penalties indicating that the Commission will not undertake further review of an NOP.

The Order does specify a number of circumstances where a formal vote of the Commission will be needed for a notice to be issued that the Commission will not conduct further review of an NOP. The Commission noted the following circumstances that would warrant such a vote: (1) a penalty or settlement that is greater than zero; (2) a penalty that appears low based on the facts; (3) a penalty that involves an event posing a high risk to the BPS; (4) an event resulting in loss of load to customers; (5) a specific or unique legal question; (6) an NOP resulting from a live hearing process; (7) an NOP resulting from NERC’s enforcement process; (8) an NOP involving the intentional violation of a standard; (9) an NOP with a record that fails to justify the violation/penalty; and (10) any other matter worthy of Commission attention.

To view FERC Order No. 728, click here.