1. Board of Directors Meeting September 2010 Enforcement Process Update Robert K. Wargo Manager of Enforcement

2. 2 Step 1 Receipt Of Violation Step 1 Receipt Of Violation Step 2 Initial Reliability Assessment Step 2 Initial Reliability Assessment Step 3 Initial Information Developed Step 3 Initial Information Developed Step 4 Detailed Information Developed Step 4 Detailed Information Developed Step 5 Settlement Or NAVAP/NOCV Step 5 Settlement Or NAVAP/NOCV Mitigation Plan Submittal, Review, Acceptance, Tracking & Verification Go Forward Initial Risk Mitigated Scope/Breadth Of Violation(s) Penalty Proposed Filed With NERC Enforcement Process Typical Durations In Calendar Days 1 Day 1 to 3 Days 0 to 21 Days 0 to 90 Days 10 to 90 Days Actual processing times from receipt to filing of settlement with NERC has ranged from 30 Days [Simple/Already Fixed Matters] to 300 Days [Complex/Controversial Matters]

3. Enforcement Efficiency Initiatives  Enforcement Staff Generated 51 Efficiency Improvement Ideas During Brainstorming Session  Fully Implemented 23 Ideas  Partially Implemented 6 Ideas  Tabled 7 Ideas  Rejected15 Ideas  Adopted a “Reengineered” Enforcement Process  Immediate “Triage” of Violations – Identification of Low Effort/Rapid Filing Candidates  Immediate Issuance of “Stock” Request For Information Documents  Assignment of Appropriate Personnel by Skill Level/Experience to Specific Tasks  Synchronization Established Between Mitigation Plan Review & Verification Activities & Anticipated Filing Dates  Elimination of Some Internal Documents [3 Documents Combined Into 1]  Institution of Weekly Docket Lists & Projections  Elimination of Multiple Layers of Review & Sign Off 3

4. Enforcement Staff 2010 PREVIOUS 2010 ADDS Jason Blake Vimarie Luna STARTED AUGUST 23 Kristina Sims David Rosenfeldt Amanda Fried Theresa Cunniff 4

5. Enforcement NEW Initiatives & Developments  NERC led Streamlining Initiative  Activities in Compliance Monitoring & Lessons Learned to reduce # of violations  Providing a path for less serious violations to be processed at Regional level with only minimal reporting to NERC and FERC  Specific handling options for CIP violations  Developments in Opposition to Streamlining  FERC directed analysis and treatment of repeat violations  FERC and NERC directed corporate affiliate analysis  Continued increase in violation volume  Increase in FERC activity in extending review of NOPs in order to ask Regions questions  CIP matters are still matters of “first impression” 5

6. 6

7. 7 As of August 30, 2010

8. QUESTIONS? 8