As of June 18, 2007, U.S. utilities and other bulk power industry participants that violate any requirements of 83 reliability standards will face enforcement actions by the North American Electric Reliability Corporation (NERC) under federal law, NERC president and CEO Rick Sergel said last week. The electricity industry has spent years preparing for this new era in which compliance with reliability standards is mandatory, corrective measures can be ordered, and fines of up to $1 million a day can be imposed.

The August 2003 blackout that affected 50 million people in the northeastern and midwestern U.S. and Canada prompted U.S. legislators to make standards mandatory and enforceable via the Energy Policy Act of 2005, which also authorized the creation of a self-regulatory "electric reliability organization" to develop and enforce the standards. The U.S. Federal Energy Regulatory Commission (FERC) approved NERC as this organization on July 20, 2006.

"The North American electricity industry has operated one of the world's most reliable electricity networks under voluntary guidelines for decades," said Sergel. "Voluntary guidelines worked very well to a point, but they were not enough. The electricity industry is no stronger than its weakest link, and a mistake by one entity can affect customers hundreds of miles away, as we saw with the August 2003 blackout that affected 50 million people in the United States and Canada. To avoid future blackouts, everyone must follow all the rules, all the time. Mandatory standards are the next logical step toward achieving that," Sergel said.

Standards relate to the planning and operation of the bulk power system, and cover areas such as balancing customer demand with generation supplies, emergency operations, cyber security, vegetation management, and disturbance reporting. More than 1,400 entities that carry out functions necessary to ensure a reliable bulk power system must comply with the NERC Reliability Standards.

NERC, working with eight "regional entities" under delegation agreements approved by FERC, will monitor compliance with the standards and impose enforcement actions when violations are identified. The regional entities were formed by the eight North American regional reliability organizations, to carry out compliance monitoring and enforcement activities.

Examples of enforcement actions include sanctions that impose limitations or restrictions on activities; remedial action directives designed to correct conditions, practices or other actions posing a threat to reliability; and fines of $1,000 to $1 million per day.

NERC has been preparing for June 18 by putting systems and people in place, training compliance auditors at NERC and the regional entities, and establishing a compliance hotline. NERC, the regional entities, and industry associations have conducted workshops around the country to educate the industry on mandatory standards, and compliance monitoring and reporting responsibilities. Users, owners and operators of the bulk power system have been working to bring themselves into compliance.

In Canada, NERC Reliability Standards are already mandatory and enforceable in the provinces of Ontario and New Brunswick. NERC is working with the remaining provinces to achieve the same result.

The bulk power system consists of the power plants, transmission lines and substations, and related equipment and controls, that generate and move electricity in bulk to points from which local electric companies then distribute the electricity to customers.