Problem Areas Updates Penalties FRCC Compliance Workshop September / October

Problem Areas 1.NERC Top Violations since 6/18/ FRCC Top Violations since 6/18/ NERC Examples - PER-003, PRC-005, CIP-001, EOP-005, FAC-008, FAC-009 2

Problem Areas -NERC Top Violations 3

Problem Areas –FRCC Possible Violations Reported Since June 18, 2007 Operating Personnel CredentialsPER-003 – Operating Personnel Credentials Transmission & Generation Protection System Maintenance & TestingPRC-005 – Transmission & Generation Protection System Maintenance & Testing Sabotage ReportingCIP-001 – Sabotage Reporting System Restoration PlansEOP-005 – System Restoration Plans Facility Ratings MethodologyFAC-008 – Facility Ratings Methodology Establish & Communicate Facility RatingsFAC-009 – Establish & Communicate Facility Ratings 4

Problem Areas The following are examples of non- compliance problems found throughout NERC for specific Standards. 5

Problem Areas – PER-003 Having NERC Certified Operators on duty at all times. Operating Personnel Credentials 6

Problem Areas – PRC-005 The Protection System Maintenance and Testing Program does NOT exist The documentation of the maintenance and testing plan/program has not been maintained according to standard requirements (i.e. within specified intervals and their basis) Testing records of all Protection System devices have not been maintained Transmission & Generation Protection System Maintenance and Testing 7

8 Problem Areas – CIP-001 Incomplete documentation The document doesn’t exist The document does not define or provide examples of what sabotage is Reporting Plan is not included in the document including specific contact information for local, state, federal enforcement agencies and the region Sabotage Reporting

9 Problem Areas – EOP-005 Incomplete Documentation The System Restoration Plan document does not exist The System Restoration Plan is out of date Evidence that the restoration plan is reviewed annually Evidence that the System Restoration Plan is being coordinated with the entity’s neighbors Evidence that training on the System Restoration Plan has taken place Evidence that the System Restoration Plan is being tested through actual testing or simulation System Restoration Plans

10 Problem Areas – FAC-008 Facility Rating Methodology is not documented or incomplete The Facility Ratings Methodology did not contain a statement that a Facility Rating shall equal the most limiting element Not all of the component equipment ratings were included when the overall Facility Rating is determined Facility Ratings Methodology

11 Problem Areas – FAC-009 (FAC-008)Ratings were inconsistent with the associated Facility Ratings Methodology document. (FAC-008) Lack of Evidence that ratings have been communicated to the RC, PA, TP, TOP Establish and Communicate Facility Ratings

12 Problem Areas – Lessons Learned Read the standards - including the RSAWs What are the standards asking for? Talk with others, what did they do? Ask questions, the FRCC Compliance staff will help as much as we can Good documentation is critical Make sure you have what is needed If not, create what is needed Maintain it once its in place Update it as required Management approval, with effective date Educate and Train your employees and management Have good quality up-to-date procedures

UPDATES 13

Updates FRCC Compliance Activities 2.FAQ – Frequently Asked Questions 14

Updates – 2009 Activities 19 On-Site Audits CIP-002 through CIP-009 Self Certification CIP-002 through CIP-009 Spot Checks will be done On-Site (starting in July) –BAs & TOPs under UA-1200 Annual Compliance Workshop (1 or 2) 15

Updates – 2009 Activities Annual Self Certification CTS – Adding Features –User Group Annual Spot Check 16

Updates – FAQ FAQ Expand the Frequently Asked Compliance Related Questions section on the FRCC Website –Important information related to specific Standards and Requirements 17

AVOIDING OR REDUCING PENALTIES 18

PENALTIES 1.Penalty Calculation 2.Reducing Penalties 3.Avoiding Penalties 19

PENALTIES - Calculation 20

PENALTIES - Calculation FERC expects penalty to be calculated on a per day per violation basis –This could be from $1,000 up to a $1,000,000 per day, per violation Final Penalty Assessment can ratchet up or down pending on the entities actions 21

PENALTIES – Reducing (or Increasing) Adjustment Factors per Violation / Violator –Repetitive Violations –Violator’s Compliance History –Failure to Comply with Compliance Directives –Degree and Quality of Cooperation –Compliance Program Quality –Attempt to Conceal the Violation –Intentional Violation –Extenuating Circumstances 22

PENALTIES - Reducing Settlements preferred –Can occur anytime up to the filing of the Notice of Penalty to FERC! 23

PENALTIES - Reducing Mitigation Plan submittals and timeliness Every violation of a standard requires mitigation Mitigation should begin when a possible violation is identified –FRCC accepts the Mitigation Plan – NERC approves the Mitigation Plan 24

PENALTIES - Reducing Mitigation Plan submittals and timeliness (continued) –Follow the Standard –Accurate and Complete –Measureable milestone dates –Reasonable completion date 25

PENALTIES - Reducing Mitigation Plan submittals and timeliness (continued) Must submit evidence with completion form for FRCC Compliance staff to verify MP completed and in compliance A Request for an extension (at least 5 days prior) 26

AVOIDING PENALTIES 27

PENALTIES - Avoiding 1.Reliability Standards – Linda –Understand the Standards –Identify the Standards that are applicable to you –Participate in the Standards process both with NERC and FRCC 28

PENALTIES - Avoiding 2.Audit Preparation – Barry –Determine what you are responsible for –Establish / Assign Ownership –Organize your Evidence 29

PENALTIES - Avoiding 3.Quality of Evidence – Jim –Appropriate and Sufficient to meet the requirement and standard –All evidence needs to be based on facts –Quality not necessarily Quantity 30

Q & A’s Final Questions and Answer Session Topics for 2009 Compliance Workshop 31

32 Thank You for Your Attendance!