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The North American Electric Reliability Corporation (NERC) develops and enforces mandatory reliability standards, subject to FERC approval. Owners and operators of electric generation or transmission facilities, as well as electricity suppliers, are subject to NERC’s reliability standards if placed on its registry of “responsible entities.” NERC and eight Regional Entities monitor and enforce compliance with the reliability standards, utilizing spot checks, self-certifications, and routine audits, among other tools. Any registered entity that violates any requirement in any NERC reliability standard could incur a penalty of up to $1 million per day per violation.

It is critical, therefore, that NERC-registered entities be fully prepared to demonstrate compliance with the NERC reliability standards.

Dickstein Shapiro’s Energy Practice provides advice to a wide array of energy industry clients on all aspects of NERC’s reliability standards, as well as its monitoring and enforcement processes. We know the rules and what must be done in order to comply and are often able to avoid penalties by staying ahead-of-the-curve. Our energy attorneys assist clients in preparing for periodic NERC compliance audits as well as in developing company-specific compliance programs. We have the capability to build a program from start to finish or to evaluate and enhance a program already in place to ensure it is structured and documented to meet NERC’s and FERC’s evolving standards. Even if an entity is found to have violated a reliability requirement, the fact that it has a robust compliance program in place will be taken into account by NERC and FERC when determining if and how large a penalty is appropriate.

Representative Experience

• Represented New Harquahala Generating Company (“Harquahala”) in its appeal of registration as a Transmission Owner and Transmission Operator with respect to its generator interconnection facility. This was a groundbreaking case in the evolution of NERC’s new powers created by the Energy Policy Act of 2005. Although FERC upheld the registration, it did so in a manner that prevented NERC from adopting a general practice of registering generation companies as Transmission Owners and Operators and led, ultimately, to NERC’s current proposal to adopt policies that will avoid such registrations in the future. The firm also assisted Harquahala in successfully negotiating with NERC and the Regional Entity limitations on the applicability of transmission owner and operator standards to Harquahala;
• Challenged the registration of Constellation Energy Commodities Group as a Generator Operator based on its purchase of electricity from a generator; negotiated settlement with the Texas Regional Entity, which resolved the registration dispute; 
• Negotiated with counterparties on joint registration organization (JRO) arrangements and coordinated with Regional Entities to obtain acceptance of JRO arrangements; 
• Advised clients with respect to audits (onsite and desktop), spot checks, and other compliance monitoring processes, including reviewing evidence used to demonstrate compliance to determine whether it would be deemed legally sufficient; also advised on the content of reliability standard audit worksheets to ensure that they are comprehensive in describing compliance with applicable reliability standards; 
• Assessed internal compliance programs to develop responses to Regional Entity inquiries; 
• Advised clients with respect to Self-Certifications, including whether the company has sufficient evidence to certify to compliance with applicable reliability standards; 
• Advised clients on steps to take if possible violation is identified, including their consideration of whether and when to self-report and the content of mitigation plans; 
• Developed legal arguments as to why registered entities are in compliance where a Regional Entity has found a possible violation; 
• Responded to requests for information from Regional Entities; 
• Negotiated settlements of violations with Regional Entities and NERC reflecting a substantial reduction in penalties that the Regional Entities had intended to impose; 
• Monitored changes to reliability standards, including preparing comments on proposed standards; 
• Educated and trained senior management on the scope of NERC compliance, including risk exposure and steps that should be taken to mitigate any noncompliance; 
• Developed strategies for monitoring and obtaining data from third parties involved in a registered entity’s NERC compliance activities; and 
• Reviewed transaction documents, power sale agreements, and operating agreements to identify NERC compliance issues and address related issues, including allocation of responsibility and liability among counterparts.