UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

North American Electric Reliability)Docket No. RR12-8-000

Corporation)

ANSWER OF THE ISO/RTO COUNCIL

In accordance with Rule 213 of the Commission’s Rules of Practice and Procedure, the ISO/RTO Council (“IRC”)1 respectfully submits this answer to the Motion to Intervene and Comments of Occidental Energy Ventures Corp. (“Occidental Comments”).2

The IRC previously filed comments in this proceeding urging the Commission to accept
the North American Electric Reliability Corporation’s (“NERC”) proposed new section 5.11 of
Appendix 4.C of its Rules of Procedure (“ROP”).  Section 5.11 would establish “Special
Procedures for an Enforcement Action Against an ISO/RTO Where the Monetary Penalty May
Be Allocated by the ISO/RTO to Other Entities.”  Occidental claims that section 5.11 is unlawful
and discriminatory because it supposedly grants unduly preferential treatment to Independent

1 The IRC is comprised of the Alberta Electric System Operator (“AESO”), the California

Independent System Operator Corporation (“California ISO”), Electric Reliability Council of Texas

(“ERCOT”), the Independent Electricity System Operator of Ontario, Inc., (“IESO”), ISO New England, Inc. (“ISO-NE”), Midwest Independent Transmission System Operator, Inc., (“MISO”), New York
Independent System Operator, Inc. (“NYISO”), PJM Interconnection, L.L.C. (“PJM”), Southwest Power Pool, Inc. (“SPP”), and New Brunswick System Operator (“NBSO”).  Because they are not subject to the Commission’s jurisdiction, NBSO and, AESO do not join in this pleading.  Further, these comments do not constitute agreement or acknowledgement by IESO or NBSO that they can be subject to the
Commission’s jurisdiction.  The IRC’s mission is to work collaboratively to develop effective processes, tools, and standard methods for improving the competitive electricity markets across North America.  In fulfilling this mission, it is the IRC’s goal to provide a perspective that balances Reliability Standards
with market practices so that each complements the other, thereby resulting in efficient, robust markets
that provide competitive and reliable service to customers.

2 Because the Occidental Comments are styled as “comments” the IRC may answer them as of
right under Rule 213(a)(1).  If the Commission were to conclude that the Occidental Comments were
tantamount to a protest, the IRC respectfully requests that the Commission exercise its discretion to allow
this answer.

System Operators (“ISOs”) and Regional Transmission Organizations (“RTOs”).  Occidental also asserts that NERC has failed to provide “any legal basis” for the supposedly “special
treatment” that Section 5.11 would provide to ISOs/RTOs.  It suggests that the provision would be unduly preferential because various non-ISO/RTO entities have contracts that authorize them to allocate part or all of a reliability penalty to others and would benefit if they were permitted to use procedures similar to those established by section 5.11.3

The Occidental Comments ignore a series of Commission precedents addressing the

allocation of reliability penalty costs that are initially assessed against ISOs/RTOs to entities that
actually caused a reliability standard violation.  The Commission has expressly recognized that
ISOs/RTOs are differently situated than other Registered Entities because they “may have
insufficient reserves to pay penalties assessed pursuant to section 215 of the [Federal Power
Act].”  It has therefore established rules, uniquely applicable to ISOs/RTOs, which allow
ISOs/RTOs to seek FERC permission to directly allocate reliability penalties if certain conditions
are met.4  One of the conditions is a due process requirement that entities potentially subject to a
penalty allocation receive “notice and an opportunity to fully participate in the Compliance
Monitoring and Enforcement Program conducted by NERC or NERC’s Regional Entities.”5
Accordingly, there is no merit to Occidental’s challenge to section 5.11.  The provision is not unduly discriminatory or preferential to ISOs/RTOs.  It merely conforms NERC’s procedures to Commission precedents that authorized the creation of unique ISO/RTO penalty allocation rules.  The premise of these precedents was the Commission’s recognition that ISOs/RTOs are not similarly situated to other entities when it comes to the recovery of penalty costs, ISO/RTOs

3 Occidental Comments at 5-6.

4 Reliability Standard Compliance and Enforcement in Regions with Regional Transmission Organizations or Independent System Operators, 122 FERC ¶ 61,247 (2008).

5 PJM Interconnection, L.L.C. 124 FERC ¶ 61,260 at P 12 (2008).

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may be attributed violations that are due to the actions of other entities that are not registered or registered improperly and, as non-profit entities, they have no shareholder revenues from which to pay penalties.  There is nothing unduly discriminatory about treating entities differently when they are not similarly situated.6

Occidental’s claim that non-ISO/RTO entities might benefit if section 5.11 were

applicable to them is irrelevant.  Non-ISOs/RTOs do not have the characteristics that led the Commission to permit ISOs/RTOs to make direct allocations of penalty costs to other entities. Thus, there is no justification for non-ISOs/RTOs to be eligible to use the procedures under proposed section 5.11.

To the extent that Occidental is objecting to the Commission’s ISO/RTO cost recovery
precedents themselves, it is engaged in an untimely collateral attack on multiple Commission
orders.  Commission precedent clearly establishes that such collateral attacks are impermissible.7
Occidental is wrong to suggest that NERC failed to establish a “legal basis” for
section 5.11.  NERC’s filing clearly stated that section 5.11 “implements a framework that was
initiated by a 2008 Commission Guidance Order on recovery of Penalty costs by ISO/RTOs from
third parties and furthered by subsequent Commission orders approving proposed tariff
provisions of ISO/RTOs providing for the allocation to third parties of Penalties imposed on the

6 See, e.g., California Independent System Operator Corp., 119 FERC 61,061 at P 70 (2007).

7 See, e.g., San Diego Gas & Electric Co. v. Sellers of Energy and Ancillary Services, et al.,

134 FERC ¶ 61,229 at P 15 (2011) (“[c]ollateral attacks on final orders and relitigation of applicable

precedent by parties that were active in the earlier cases thwart the finality and repose that are essential to administrative efficiency and are strongly discouraged.”), citing Entergy Nuclear Operations, Inc. v.
Consolidated Edison Co., 112 FERC ¶ 61,117, at P 12 (2005), EPIC Merchant Energy NJ/PA, LP v. PJM Interconnection, LLC, 131 FERC ¶ 61,130 at P 20 (2010) (dismissing as an impermissible collateral
attack a complaint that merely sought to re-litigate the same issues as raised in the prior case citing no new evidence or changed circumstances).

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RTO/ISO.”8  The history of, and the rationale for, the development of section 5.11 was also described in detail by the IRC’s comments in this proceeding.

Accordingly, the IRC respectfully requests that the Commission reject Occidental’s request that proposed new Section 5.11 be deleted9 and instead accept that provision as submitted by NERC, without any change or condition.

Respectfully submitted,

/s/ Nancy Saracino/s/ Matthew Morais

Nancy SaracinoMatthew Morais

General CounselAssistant General Counsel

Roger CollantonElectric Reliability Council of Texas,

Assistant General Counsel-Litigation andInc.

Mandatory Standards2705 West Lake Drive

Anna McKennaTaylor, Texas 76574

Senior Counselmmorais@ercot.com

California Independent System Operator Corporation

151 Blue Ravine Road

Folsom, California 95630
amckenna@caiso.com

/s/ Raymond W. Hepper/s/ Stephen G. Kozey

Raymond W. HepperStephen G. Kozey

Vice President, General Counsel, andVice President, General Counsel, and

SecretarySecretary

Theodore J. ParadiseMidwest Independent Transmission

Assistant General Counsel, Operations andSystem Operator, Inc.

PlanningP.O. Box 4202

ISO New England Inc.Carmel, Indiana 46082-4202

One Sullivan Roadskozey@midwestiso.org

Holyoke, Massachusetts 01040 tparadise@iso-ne.com

8 See Petition of the North American Electric Reliability Corporation for Approval of Revisions to its Rules of Procedure at 58.

9 The Occidental Comments also ask that the Commission not accept NERC’s proposed changes to section 1.1.24 of Appendix 4C but do not explain how this request is related to Occidental’s request to delete section 5.11.  See Occidental Comments at 6.  To the extent that Occidental is directing the same invalid arguments that it made against section 5.11 against the proposed change to section 1.1.24 its
challenge to the latter provision should be rejected by the Commission.

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/s/ Carl F. Patka/s/ Brian Rivard

Carl F. PatkaBrian Rivard

Assistant General CounselManager - Regulatory Affairs & Sector

Raymond A. StalterPolicy Analysis

Director of Regulatory AffairsOntario’s Independent Electricity

New York Independent System Operator, Inc.System Operator

10 Krey Blvd655 Bay Street, Suite 410

Rensselaer, New York 12144Toronto, Ontario M5G 2K4

cpatka@nyiso.combrian.rivard@ieso.ca

/s/ Craig Glazer/s/ Paul Suskie

Craig GlazerPaul Suskie

Vice President - Federal Government PolicySenior Vice President, Regulatory Policy

Steven Pincusand General Counsel

Associate General CounselSouthwest Power Pool, Inc.

PJM Interconnection, L.L.C.415 North McKinley, Suite 140

1200 G Street, N.W. Suite 600Little Rock, Arkansas 72205

Washington, DC  20005psuskie@spp.org

glazec@pjm.com

Dated:  June 14, 2012

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CERTIFICATE OF SERVICE

I hereby certify that I have this day caused the foregoing document to be served upon

each person designated on the official service list compiled by the Secretary in this proceeding in accordance with the requirements of Rule 2010 of the Rules of Practice and Procedure, 18 C.F.R. § 385.2010 (2011).

Dated at Washington, DC this 14th day of June, 2012.

By:/s/Catherine A. Karimi

Catherine A. Karimi

Hunton & Williams LLP

2200 Pennsylvania Avenue, NW Washington, D.C.  20037