UNITED STATES OF AMERICA
BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

Electric Reliability Organization)Docket No.RM13-6-000

Interpretation of Specific Requirements of)

the Disturbance Control Performance)

Standard)

COMMENTS OF THE
ISO/RTO COUNCIL

The ISO/RTO Council (“IRC”) submits these comments in response to the Notice of Proposed Rulemaking (the “NOPR”) issued by the Federal Energy Regulatory Commission (the “Commission”) on May 16, 2013, in this proceeding.1

I.BACKGROUND AND INTRODUCTION

The NOPR seeks comments on the North American Electric Reliability Corporation’s
(“NERC”) February 12, 2013 petition (the “NERC Petition”) for approval of an interpretation to
Reliability Standard BAL-002-1 (Disturbance Control Performance) (the “Interpretation”).

Briefly, Reliability Standard BAL-002-1 is applicable to Balancing Authorities, Reserve
Sharing Groups and Regional Reliability Organizations and maintains interconnection frequency
by setting the Balancing Authority’s (or Reserve Sharing Group’s or Regional Reliability

Organization’s) time limit for balancing real power (i.e., megawatt) demand and supply

following the sudden failure of generation. The purpose of the Reliability Standard BAL-002
standard is “to ensure the Balancing Authority is able to utilize its Contingency Reserve to
balance resources and demand, and return Interconnection frequency within defined limits,

1 See Electric Reliability Organization Interpretation of Specific Requirements of the Disturbance Control Performance Standard, 143 FERC ¶ 61,138 (2013).

following a Reportable Disturbance.”2 A Reportable Disturbance is “[a]ny event that causes an
[Area Control Error (“ACE”)] change greater than or equal to 80% of a Balancing Authority’s or
reserve sharing group’s most severe contingency.”3 The “Disturbance Recovery Period” is 15
minutes.4

The Interpretation of Reliability Standard BAL-002-1 at issue in the NERC Petition is in response to an interpretation request submitted on September 2, 2009, by the Northwest Power Pool Reserve Sharing Group (“NWPP”).5 In response to NWPP’s questions,6 the proposed Interpretation clarifies:

(1) a Disturbance that exceeds the most severe single Contingency, regardless if it
is a simultaneous Contingency or non-simultaneous multiple Contingency, would
be a reportable event, but would be excluded from compliance evaluation; (2) a
pre-acknowledged Reserve Sharing Group would be treated in the same manner
as an individual Balancing Authority; however, in a dynamically allocated
Reserve Sharing Group, exclusions are only provided on a Balancing Authority
member by member basis; and (3) an excludable Disturbance was an event with a
magnitude greater than the magnitude of the most severe single Contingency.7

As the NERC Petition explains, the proposed interpretation is necessary “to prevent Registered
Entities from shedding load to avoid possible violations of BAL-002, a result that is inconsistent
with reliability principles.”8 The Interpretation “neither expands on any Requirement nor

explains how to comply with any Requirement, and provides guidance on the meaning of

2 NERC Petition at 9.

3 NERC Petition at 2-3 (citing Glossary of Terms Used in NERC Reliability Standards (“NERC Glossary”),
available here: http://www.nerc.com/files/Glossary_of_Terms.pdf.).

4 See BAL-002-1 at R4.2.

5 See NOPR at P 8.

6 See NOPR at P 8.

7 NERC Petition at 3.

8 NERC Petition at 3.

Requirements R4 and R5 and their sub-parts.”9 The Interpretation was approved by industry
ballot,10 and subsequently by the NERC Board of Trustees on November 7, 2012.
The NOPR proposes to remand the Interpretation on the basis that it exceeds the permissible scope of interpretations by changing the requirements of the Reliability Standard.11 The NOPR suggests that the Interpretation modifies Requirement R4 of BAL-002-1, and in doing so redefines the term “Reportable Disturbance” as defined in the NERC Glossary, a change that must be effected through the standards development procedure.12 In light of this perceived impermissible change, the NOPR proposes to remand the Interpretation, and seeks comment on this proposal.13

The IRC supports the Interpretation and urges the Commission to accept it. As further
discussed in Section III below, the Interpretation is permissible because it clarifies the meaning
of the requirements in Reliability Standard BAL-002-1 rather than changing its requirements, as
the NOPR suggests. Further, the Interpretation is consistent with the reliable operation of the
Bulk Power System in that it will help Registered Entities, such as Balancing Authorities, protect
reliability by avoiding load shedding that could otherwise occur to meet the Disturbance
Recovery Criterion in the circumstances described in the Petition,14 which would be inconsistent
with the established Contingency Reserve obligation and reliable operation of the power system.

9 NERC Petition at 3.

10 The majority of the members of the Standards Review Committee of the IRC voted “affirmative” on the third and final ballot.

11 See NOPR at P 18.

12 NOPR at P 18.

13 See NOPR at P 23.

14 See NERC Petition at 3, 12, 17.

II.IDENTIFICATION OF FILING PARTIES

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

Independent System Operator (“CAISO”), Electric Reliability Council of Texas (“ERCOT”), the

Independent Electricity System Operator(“IESO”), ISO New England Inc.(“ISO-NE”),

Midcontinent Independent System Operator, Inc. (“MISO”), New York Independent System

Operator, Inc. (“NYISO”), PJM Interconnection, L.L.C. (“PJM”), and Southwest Power Pool,

Inc. (“SPP”).15

III.COMMENTS

A.The Interpretation is Within the Permissible Scope Because it Clarifies the

Requirements in Reliability Standard BAL-002-1 Rather Than Changing the Requirements and Therefore Should be Accepted

The IRC disagrees with the proposition put forward in the NOPR that the Interpretation changes BAL-002-1, Requirement R4.16 To the contrary, as discussed in these comments, the Interpretation comports with the requirements for interpretations because it clarifies BAL-002-1, Requirement R4 and its subparts.

The Interpretation is appropriate because it provides meaning to Requirement R4 in the
context of the Standard as a whole. As NERC states in the Petition, the Standard must be read as
an “integrated whole”.17 If the understanding of a Requirement were limited to the language in
the Requirement alone, it would preclude any interpretation, as that would, by definition, change
the requirement. While “the Requirements are the most critical element of a Reliability

15 The IESO and AESO are not subject to the Commission’s jurisdiction and these comments do not constitute agreement or acknowledgement that they can be subjected to the Commission’s jurisdiction.

16 See NOPR at PP 18-22.

17 NERC Petition at 3

Standard,” as the Commission has acknowledged, “other information in the Reliability Standard,
including in the Compliance section, can and should be used to clarify ambiguities.”18
In interpreting Requirement R4, NERC relied in part on information contained in the Compliance section of Reliability Standard BAL-002-1. Specifically, NERC relied on the following language contained in Part D, Section 1.5 (Additional Compliance Information) of BAL-002-1:

Simultaneous Contingencies—Multiple Contingencies occurring within one
minute or less of each other shall be treated as a single Contingency. If the
combined magnitude of the multiple Contingencies exceeds the most severe single
Contingency, the loss shall be reported, but excluded from compliance evaluation.

As briefly described in Section I above, Requirement R4 relates to Reportable Disturbances. The
above-quoted language is contained in the same Compliance section addressing Contingencies in
the context of Reportable Disturbances to clarify that Contingencies exceeding the most severe
single Contingency are exempt from compliance evaluation. Given this construction, it follows
that the exclusion language relied upon by NERC speaks directly to compliance with the
Requirements and should be read as clarifying the language of the Requirements. That is,
because the Additional Compliance Information states that Contingencies exceeding the most
severe single Contingency are exempt from compliance evaluation, it logically follows that the
obligation to restore ACE within 15 minutes is not applicable to these events.

The NOPR suggests that the exclusion language contained in the Additional Compliance
Information modifies the Levels of Non-Compliance section contained in BAL-002-1, Part D,

18 NERC Petition at 11. See also Mandatory Reliability Standards for the Bulk Power System, Order No. 693, FERC Stats. & Regs. ¶ 31,242 at P 280, order on reh’g, 693-A, 120 FERC ¶ 61,053 (2007) (stating, “Requirements in each Reliability are core obligations and that the Masures and Levels of Non-Compliance provide useful guidance to the industry and can be supporting information, an explanatory statement or an administrative process.”).

Section 2.19 This interpretation is contrary to the plain reading of the Standard and improperly
parses the disputed language. The Levels of Non-Compliance section addresses the severity of
the penalty. Given this, the exclusion language in the Additional Compliance Information
section, Part D, Section 1.5, should be understood as clarifying the Requirements and their
subparts.

Moreover, to interpret the exclusion language as modifying the Levels of Non-
Compliance section, as the NOPR suggests, would mean that a Balancing Authority is required
to keep an unreasonable amount of Contingency Reserve on hand. Not only would this be
inconsistent with the plain language of the Standard and the explicit Contingency Reserve
obligation, which only requires an amount equal to an entity’s single largest Contingency, but
also an unreasonable outcome. As the NERC Petition explains, an excludable disturbance
should be interpreted as an event with a magnitude greater than the magnitude of the most severe
single Contingency because,

[a]ny other interpretation would result in treating BAL-002-0 as if it required
Balancing Authorities and Reserve Sharing Groups to recover ACE[] within the
15-minute Disturbance Recovery Period without regard to Disturbance
magnitude.20

Further, this interpretation of an “excludable disturbance” is consistent with:

(a) the reserve requirement specified in R3.1 of BAL-002-0, (b) the text of
Section 1.4 of Part D of BAL-002-0, and (c) the documented history of the
development of BAL-002-0 (see, e.g., Performance Standards Document, Version

3 (as accepted by NERC Resources Subcommittee on October 23, 2007), which provides in Section D, Disturbance Control Standard, DCS, that “An excludable disturbance is a disturbance whose magnitude was greater than the magnitude of the most severe single contingency.”).21

19 See NOPR at P 22.

20 NERC Petition at 16.

21 NERC Petition at 16.

The exclusion language contained in the Additional Compliance Information section and
the additional details upon which NERC relied speak to the intent of the Requirements, should be
relied on in interpreting the Standard and NERC’s use thereof do not change the Standard. The
Interpretation appropriately provides guidance regarding the application of BAL-002-1
consistent with the plain language of the Standard. It does not exceed the scope of an
interpretation of the Standard’s existing language nor does it modify the stated Requirements of
the Standard. The Interpretation is thus reasonable and appropriate, and should be accepted by
the Commission.

B. The Commission Should Accept the Interpretation Because It Results in

Sound Reliable Operation of the Bulk Power System

The Commission should also accept the Interpretation because it provides clarity and promotes greater system reliability.

As the NERC Petition states, Reliability Standard BAL-002-1 should be examined in its totality.22 To that end, and as discussed above, NERC relied on the exclusion language in the Additional Compliance Information section to clarify that “a Disturbance that exceeds the most severe single Contingency . . . would be a reportable event, but would be excluded from compliance evaluation.”23 NERC appropriately relied on the exclusion language in the Additional Compliance Information section to provide context that supports a reasonable and logical end point to Requirement R4 given the entirety of a Registered Entities’ obligations under BAL-002-1, and to avoid unintended consequences.24

22 See NERC Petition at 3, 10-11.

23 NERC Petition at 3, 15-16.

24 NERC Petition at 16.

If the language in Requirement R4 is to be read in isolation, as the NOPR suggests,
Registered Entities, such as a Balancing Authority, could be placed in the untenable position of
having to choose between compliance and reliability. If the exclusion language in the Additional
Compliance Information section cannot be used to provide meaning to Requirement R4, then the
Standard must be interpreted as requiring a Balancing Authority to return ACE to zero even for a
Disturbance that exceeds the most severe single Contingency. That Interpretation, in turn, would
require a Balancing Authority to take drastic operational actions even when the measures of
system reliability indicate otherwise. To avoid possible violations of BAL-002, a Balancing
Authority would have: (1) to acquire Contingency Reserves sufficient to cover all contingencies,

(2) shed load, or (3) not protect the transmission system in the name of compliance. Such an interpretation of the Standard would be inconsistent with the language and intent of the Standard read as a whole.

As noted above, the purpose of Reliability Standard BAL-002-1 is “to ensure the
Balancing Authority is able to utilize its Contingency Reserve to balance resources and demand
and return Interconnection frequency within defined limits following a Reportable
Disturbance.”25 It is industry practice to plan to the loss of a Balancing Authority’s largest
source (typically considered a worst-case scenario), and acquire sufficient Contingency Reserves
equal to such loss. Due to the interconnected nature of the power system, following the loss of a
large source (such as 1,000 to 2,000 MW), all online generators that are not fully loaded will
respond to address the imbalance of generation and load. As long as the inadvertent flow over
ties does not exceed a transmission limit, this is a secure state in which to operate until such time
as Contingency Reserves can be fully deployed by the Balancing Authority to recover from the

25 NERC Petition at 9.

loss. Without a clear boundary to the Standard, however, a Balancing Authority would be
required to acquire an amount of Contingency Reserves equal to several large contingencies in
order to restore ACE following events exceeding the most severe single Contingency. Because
Contingency Reserves must be a quantifiable amount (and because a limited number of resources
is available to Balancing Authorities for dispatch purposes), it would be unreasonable to require
the acquisition of Contingency Reserves for an unlimited number of source losses. Such a
requirement also would be inconsistent with the language of Requirement R3.1, which requires a
Balancing Authority to carry “at least enough Contingency Reserve to cover the most severe
single contingency.”

On par with the issue of requiring an unreasonable amount of Contingency Reserve, if the
exclusion language in the Additional Compliance Information section cannot be relied on to
provide meaning to Requirement R4, a Balancing Authority could find itself in the position of
having no other option but to shed load to meet the Disturbance Recovery Criterion in the
unusual instance where a Disturbance results in its total source losses exceeding the largest
single source loss. Although load-shedding can be an acceptable and necessary tool in
maintaining system reliability, it is appropriately used to correct for issues which, if unaddressed,
may cause instability, cascading, or uncontrolled separation. Indicators of such issues are low
voltage, transmission limit violations, or continued frequency decay. The Office of Enforcement
recently affirmed that “[s]hedding load is typically an option of last resort and generally is
reserved for emergencies when electricity flows exceed the reliable limits needed to maintain
normal voltage.”26 With regard to the BAL-002-1 Interpretation at issue, losses on the order of
the largest single contingency do not normally present such issues, and even losses exceeding the

26 See FERC, Office of Enforcement, Division of Audits, Reliability Audit of Bonneville Power Authority, Docket No. PA12-17-000 at 21 (Apr. 24, 2013).

value of the largest single source do not necessarily present such issues. As the NERC Petition states, “[t]he proposed interpretation is necessary in order to prevent Registered Entities from shedding load to avoid possible violations of BAL-002, a result that is inconsistent with reliability principles.”27 A remand of the Interpretation, as the NOPR proposes, would contradict this purpose by leading to unwarranted load shedding.

Further, events exceeding the most severe single Contingency are often triggered by
multiple transmission contingencies. Arbitrary ACE correction without regard to the impact on
transmission will lead to problems greater than that caused by the load-generation
mismatch. The proposed Interpretation provides assurance that Balancing Authorities do not
need to sacrifice reliability by taking steps that may not be consistent with the reliable, secure
operation of the Bulk Power System in order to comply with an obligation that is currently not
part of the Standard. A remand of the Interpretation could undermine reliable operations going
forward, and would, ironically, change the scope of the Standard by directing compliance with a
requirement not contained in the Standard and that is contrary to reliable operation of the power
system.

For these reasons, the Interpretation is reasonable and appropriate, and should be accepted by the Commission.

27 NERC Petition at 3.

IV.CONCLUSION

The IRC respectfully requests that the Commission approve the Interpretation in the Final

Rule in this proceeding consistent with the comments submitted herein.

Respectfully submitted,

/s/ Craig Glazer/s/ Matthew Morais

Craig GlazerMatthew Morais

Vice President - Federal Government PolicyAssistant General Counsel

Robert EckenrodElectric Reliability Council of Texas, Inc.

Senior Counsel7620 Metro Center Drive

PJM Interconnection, L.L.C.Austin, Texas 78744

1200 G Street, N.W. Suite 600

Washington, D.C. 20005

/s/Stephen G. Kozey/s/ Theodore J. Paradise

Stephen G. KozeyRaymond W. Hepper

Vice President, General Counsel, and SecretaryVice President, General Counsel, and Secretary

Midcontinent Independent SystemTheodore J. Paradise

Operator, Inc.Assistant General Counsel, Operations &

P.O. Box 4202Planning

Carmel, Indiana 46082-4202Monica Gonzalez

Senior Regulatory Counsel

ISO New England Inc.

One Sullivan Road

Holyoke, Massachusetts 01040

/s/ Anna McKenna/s/ Carl F. Patka

Nancy SaracinoCarl F. Patka

General CounselAssistant General Counsel

Roger CollantonRaymond Stalter

Deputy General CounselDirector, Regulatory Affairs

Anna A. McKennaNew York Independent System Operator,

Assistant General CounselInc.

California Independent System Operator10 Krey Blvd

CorporationRensselaer, New York 12144

250 Outcropping Way

Folsom, California 95630

/s/ Paul Suskie/s/ Jessica Savage

Paul SuskieJessica Savage

Sr. VP Regulatory Policy & General CounselSupervisor, Regulatory Affairs

Southwest Power PoolIndependent Electricity System Operator

201 Worthen DriveStation A, Box 4474

Little Rock, AR 72223-4936Toronto, Ontario

M5W 4E5

/s/ Diana Pommen

Diana Pommen

Director Interjurisdictional Affairs and Compliance

Alberta Electric System Operator

2500, 330 - 5 Avenue SW

Calgary, Alberta

T2Y 2H4

Dated: July 8, 2013