Member Representatives Committee Meeting July 31, 2007 Vancouver, British Columbia. Minutes

Transcription

1 Member Representatives Committee Meeting July 31, 2007 Vancouver, British Columbia Minutes Chairman Billy Ball called to order the duly noticed meeting of the North American Electric Reliability Corporation Member Representatives Committee on July 31, 2007 at 1 p.m., PDT, and a quorum was declared present. The meeting announcement, agenda, and list of attendees are attached as Exhibits A, B, and C, respectively. NERC Antitrust Compliance Guidelines David Cook, vice president and general counsel, directed participants attention to the NERC Antitrust Compliance Guidelines included in the agenda. Minutes The Member Representatives Committee approved the draft minutes of the May 1, 2007 meeting (Exhibit D). On motion by Steve Naumann, the committee requested that NERC staff make corrections to the June 28, 2007 conference call minutes, and bring them back for approval at the MRC s next meeting. Future Meetings The Member Representatives Committee approved July 29 30, 2008 in Montreal, Québec as a future meeting date and location. The committee also approved changing the location for the May 2008 meeting from Washington, D.C. to Florida. Chairman Ball also scheduled the next committee conference call for 11 a.m. EDT on September 26, Business Plan and Budget, and Funding Mechanism for NERC and the Regional Entities Joe Conner, NERC CFO, gave a presentation on the 2008 NERC Business Plan and Budget, and the funding mechanism used (Exhibit E). Various committee members offered comments on the budget and the budget process. Chairman Ball expressed his appreciation for allowing the stakeholders multiple opportunities to comment on the business plan and budget. Report from MRC Working Group Vice Chairman Steve Hickok reviewed the five documents the working group created that describe how the MRC expects to operate. He also identified certain technical and conforming amendments to the documents. After discussion, on motion by Jorge Carrasco, the committee approved the documents, revised as described by Mr. Hickok (Exhibit F). Election Processes for 2008 MRC Officers and 2008 Member Representatives Chairman Ball informed the committee the election of committee officers for 2008 would take place at the October 22, 2007 committee meeting. Following discussion, on motion of Steve Village Boulevard, Princeton, New Jersey Phone: Fax:

2 Naumann, the committee adopted the following schedule and procedures for the election of officers: August 14 nomination period opens September 14 nomination period closes September 26 discussion of candidates during committee conference call October 22 election of officers without further nominations from the floor. The committee next discussed the schedule for the election to fill the committee memberships that expire at the February 2008 meeting. On motion of Michael Desselle, the committee approved the following schedule for election of committee members: September 10 nomination period opens November 9 nomination period closes December 10 election begins December 19 election ends NERC staff will facilitate the nominating and election process, using procedures similar to what were used last year. Update on Regulatory Matters David Cook and Julia Souder updated the committee on the regulatory filings made and FERC orders issued since the last committee meeting in May 2007 (Exhibit G). Mr. Cook made a presentation on FERC s recently issued notice of proposed rulemaking on NERC s proposed cyber security standards. At the request of the committee, he also summarized NERC s proposed compliance filing (Item 10 on the Board of Trustees agenda) and entertained questions from committee members. He then identified the other filings that NERC expected to make in the near future. Proposed Data Requests As requested by the committee, Gerry Adamski, director of standards, gave a presentation on the three proposed data requests to satisfy FERC Order No. 693 directives (Exhibit H), which include: 629 Restoration of Nuclear Power Plant Offsite Power Source Data 951 Interconnection Reliability Operating Limit (IROL) Data 1693 Transmission Planning Data These data requests are to be considered as Item 12 on the Board of Trustees agenda. After discussion by the committee members, Mr. Adamski agreed to remove the specific element in the IROL data request that deals with the projected result if critical contingency occurred. He also agreed to take this request to the Reliability Coordinator Working Group (RCWG) to determine the parameters and feasibility of providing the data. Mr. Adamski also agreed to remove the designation of critical energy infrastructure information (CEII) from the Transmission Planning Data request because it does not appear to meet FERC-required criteria to be considered CEII. These changes would be made prior to bringing the data requests for board approval the following day. Reliability Assessment and Performance Analysis David Nevius, senior vice president and director of reliability assessment and performance analysis, reviewed the status of the Long-Term Reliability Assessment (Exhibit I). Member Representatives Committee Meeting 2 Minutes July 31, 2007

3 Mr. Nevius reminded the committee that NERC will hold an open workshop on August 16, 2007 concentrating on the preliminary results of the Long-Term Reliability Assessment, discussing specific issues identified in the draft summary and obtaining feedback from stakeholders. The Long-Term Reliability Assessment is scheduled for release in October Edward A. Schwerdt, NPCC President and CEO, gave a presentation on the June 27, 2007 New York City outage event and answered questions from the committee (Exhibit J). NERC s Strategic Plan David Whiteley, executive vice president, presented to the committee an overview of process for developing the Strategic Plan (Exhibit K). He reviewed the background, priority goals for , the planning process coordination, and the timeline for the present plan. The board and the committee chairs will meet on the strategic plan in Chicago on August 15. Mr. Whiteley informed the committee that a first draft of the plan would be posted on September 14, with comments due by October 5. He expects the board to take action regarding the strategic plan at its October meeting. Reliability Readiness Evaluation and Improvement David Whiteley then presented a status report on the first three-year cycle for readiness evaluations (Exhibit L). He informed the committee that twenty areas are being evaluated, and nearly half of the 2,727 recommendations fall into three areas: training, real-time monitoring; and operating policies and procedures. He also reported on the industry feedback received from the first cycle of evaluations. Security Guidelines As requested by the committee, Stan Johnson made a presentation on the three revised security guidelines scheduled for consideration as Item 7 on the Board of Trustees agenda for the following day. Committee members then held an extended discussion on the nature of guidelines, whether NERC should develop guidelines, and the process to be followed in developing and adopting guidelines. Committee members offered different viewpoints on the various issues. Rick Sergel stated that in light of the discussion and the serious differences the discussion disclosed, he would pull the revised security guidelines from consideration by the board the following day. Management will return to the committee and the board with a proposal on how to deal with the issue of guidelines at a future time. Standards Work Plan Gerry Adamski outlined the schedule for developing the revised standards work plan that NERC must file with FERC and governmental authorities in Canada by the end of September. Among other things, he intends to include the plan as a discussion item on the agendas for the upcoming Planning Committee and Operating Committee meetings. The committee may also discuss the plan on its September 26 conference call. Next Agenda Steve Hickok briefly mentioned major items that are likely to appear on the committee and board agendas in October: officer elections and the strategic plan. Member Representatives Committee Meeting 3 Minutes July 31, 2007

4 Adjournment In view of the hour, the remaining items on the agenda were deferred, and the meeting was adjourned at 5:35 p.m. Submitted by, David Cook Secretary Member Representatives Committee Meeting 4 Minutes July 31, 2007

5 Exhibit A TO: MEMBER REPRESENTATIVES COMMITTEE Ladies and Gentlemen: Please respond by July 8, 2007 to Kathie Potts phone: fax: June 19, 2007 Member Representatives Committee and Board of Trustees Meetings Announcement and Registration July 31 August 1, 2007 Vancouver, British Columbia The next NERC Member Representatives Committee and Board of Trustees meetings will be held on July 31 August 1, 2007 at the Vancouver Marriott Pinnacle Downtown, 1128 West Hastings Street, Vancouver, British Columbia. The hotel is approximately 30 minutes from Vancouver International Airport. Taxi fares are approximately $26 35 CAD. No shuttle service is available. To make your room reservation, call the hotel directly (604) The room block is listed under NERC, and the rate is $235 CAD single/double occupancy. The hotel has set Monday, July 9, 2007 as the cut-off for room reservations. To register for the meeting, fill out the form below and e- mail or fax the completed form to Kathie Potts (kathie.potts@nerc.net). July 31, 2007 Board of Trustees Committee Meetings Member Representatives Committee Meeting Group Reception and Dinner 7:30 a.m. 12:00 p.m. 1 5 p.m. 6 9 p.m. Yes No August 1, 2007 Board of Trustees Meeting 8 a.m. 1 p.m. Dinner Selections Fish Lemongrass Poached Halibut Beef Macadamia Crusted Beef Tenderloin Self: Beef Fish Guest: Beef Fish Dress is business casual for all meetings and the reception and dinner. Name: Title: Company: Telephone: Name of Guest: cc: NERC Roster Meeting Guests Village Boulevard, Princeton, New Jersey Phone: Fax:

6 Member Representatives Committee Meeting July 31, p.m. Vancouver Marriott Pinnacle Downtown 1128 West Hastings Street Vancouver, British Columbia Agenda Introductions and Chairman s Remarks Antitrust Compliance Guidelines Consent Agenda Approve 1. Minutes May 1, 2007 Meeting June 28, 2007 Conference Call *2. Future Meetings Regular Agenda Business Plan and Budget, and Funding Mechanism for NERC and the Regional Entities a. Final Discussion Before Board Approval and Submission to FERC *4. Report from MRC Working Group a. Approve Final Documents *5. Election Processes for 2008 MRC Officers and 2008 Member Representatives *6. Update on Regulatory Matters *7. Reliability Assessment and Performance Analysis a. Status Report on Long-Term Reliability Assessment b. June 27 Disturbance in New York City c. Events Analysis and Information Exchange d. Reliability Metrics and Benchmarking Village Boulevard, Princeton, New Jersey Phone: Fax:

7 *8. NERC s Strategic Plan a. Status Report and Interactive Discussion of Issues *9. Reliability Readiness Evaluation and Improvement Update a. Lessons Learned from Examples of Excellence *10. Revised Standards Work Plan a. Discussion Prior to Board Approval in September *11. NERC Compliance Registry Update *12. Training, Education, and Personnel Certification Information Only 13. Comments by Observers 14. Upcoming Issues for Member Representatives Committee a. Preview of October 22 MRC Meeting Agenda 15. Other Business * Background material included Member Representatives Committee Meeting 2 Agenda July 31, 2007

8 Exhibit C List of Attendees Member Representatives Committee Meeting July 31, 2007 Member Representatives Committee Chairman Billy Ball Vice Chairman Steve Hickok Secretary David N. Cook Investor Owned Utility Scott Moore Investor Owned Utility Steven Naumann State/Municipal Jorge Carrasco Cooperative Michael H. Core Cooperative Michael L. Smith Federal/Provincial Ed Tymofichuk Federal/Provincial Julius Pataky Transmission Dependent Utility William Gallagher Merchant Electricity Generator Scott M. Helyer Merchant Electricity Generator William J. Taylor Electricity Marketer Daniel O Hearn Large End-use Electricity Marketer John A. Anderson Large End-use Electricity Marketer Irv Kowenski Small End-use Electricity Marketer Stephen Ahearn ISO/RTO Paul M. Murphy ISO/RTO Armando Perez RRO Michael Desselle RRO Terry Bundy RRO Stanley Szwed RRO Kevin Wailes RRO Charles White State Government State Government Paul Kjellander Canadian Federal R.J. Modray Canadian Provincial Jean-Paul Theoret U.S. Federal Kevin Kolevar U.S. Federal Joseph H. McClelland Chairman Board of Trustees Richard Drouin 1

9 John Q. Anderson Paul Barber Tom Berry Fred Gorbet James M. Goodrich Donald P. Hodel Sharon L. Nelson Ken Peterson Bruce A. Scherr Rick Sergel ERCOT ERCOT FRCC MRO NPCC RFC SERC SPP WECC EEI FRCC NAESB Northeast Utilities Pepco Holdings, Inc. EEI NRECA WAPA Florida Power & Light CCC Chairman CCC Vice Chairman SAC Chairman SAC Vice Chairman OC Chairman PC Chairman Quebec Energy Board Quebec Energy Board British Columbia Transmission Corp Guests Sam Jones Larry Grimm Sarah Rogers Dan Skaar Edward A. Schwerdt Timothy Gallagher Gerry Cauley Charles H. Yeung Louise McCarren Jim Fama Kevin Wailes Rae McQuade Dave Boguslawski Richard Kafka David Dworzak David Mohre Mark Fidrych Marty Mennes Ted Hobson Tom Abrams Linda Campbell Scott Henry Gayle Mayo Scott Helyer Caroline Dupuis Gilbert Neveu Julius Pataky List of Attendees 2 Stakeholders Committee Meeting May 2, 2006

10 ISO New England CEATI National Grid National Grid AEP IESO Dominion Resources British Columbia Utilities Commission British Columbia Utilities Commission US DOE Pepco Holdings, Inc. EPRI APPA APPA ReliabilityFirst CEA EPRI NPCC NPCC Xcel Energy/MRO Board Xcel Energy WECC WECC WECC NERC NERC NERC NERC NERC NERC NERC NERC NERC NERC NERC NERC NERC Matthew Goldberg Jacob Roiz Herb Schraysheun Vicki O Leary Scott Moore Stuart Brindley Harold Adams Lori Ann Zaozirny Don Fuintoff Michael Brairton Tsion Messick Stephen Lee Sue Kelly Allen Mosher Larry Bugh Eli Turk Stephen Lee Terry Bundy Jennifer Budd Mattiello David Goulding Doug Jaeger Terri Eaton Mark Maher Steve Rueckert Steve McCoy David A. Whiteley Joseph K. Conner, Jr. David W. Hilt Stan Johnson Julie Morgan Lynn Costantini Karen Spolar Julia Souder Gerry Adamski Rocio Wong Rebecca Michael Bob Cummings David Nevius List of Attendees 3 Stakeholders Committee Meeting May 2, 2006

11 Exhibit D Member Representatives Committee Meeting May 1, p.m. Marriott Fairview Park 3111 Fairview Park Drive Falls Church, Virginia Draft Minutes Chairman Billy Ball called to order the duly noticed meeting of the North American Electric Reliability Corporation Member Representatives Committee on May 1, 2007 at 1 p.m., EDT, and a quorum was declared present. The meeting announcement, agenda, and list of attendees are attached as Exhibits A, B, and C, respectively. NERC Antitrust Compliance Guidelines David Cook, vice president and general counsel, directed participants attention to the NERC Antitrust Compliance Guidelines included in the agenda. Minutes of the February 12, 2007 Member Representatives Committee Meeting The Member Representatives Committee approved the draft minutes of the February 12, 2007 meeting (Exhibit D). Future Meetings The Member Representatives Committee approved May 6 7, 2008, (T W) in Washington, D.C. as a future meeting date and location. Report from MRC Working Group Steve Hickok reported on behalf of the MRC Working Group. The purpose of the group is to make the sector representation system more effective within the MRC, and help make the MRC a better partner to NERC management and a better advisor to the NERC Board of Trustees. The Committee discussed the Working Group s fifth document and made suggestions for its improvement. After discussion, Chairman Ball said the Working Group will come back at the next regular meeting with a revised set of documents for adoption as the method of operation for the MRC Village Boulevard, Princeton, New Jersey Phone: Fax:

12 Recommendation for MRC Representatives on Board of Trustees Nominating Committee Chairman Ball reported that one of the responsibilities of the MRC under the NERC Bylaws is to elect the Trustees and to provide at least three MRC members to serve on the Board s Nominating Committee. Chairman Ball stated that the MRC believes there should be equal representation from the MRC and Board on the Nominating Committee. He had asked for volunteers and came up with a list of six names (Hickok, Core, Theoret, Gallagher, O Hearn, and Naumann.) After discussion, the MRC adopted the following resolution: The MRC recommends that the NERC Board of Trustees appoint to the Nominating Committee enough MRC members to equate to the number of Trustees on the Nominating Committee. The MRC recommends that the NERC Board of Trustees appoint the following members of the MRC to the Nominating Committee: Steve Hickok Michael Core Jean-Paul Theoret William Gallagher Dan O Hearn Steve Naumann If the Trustees choose to appoint less than six members of the MRC to the Nominating Committee the MRC recommends that at least Steve Hickok, Michael Core and Jean-Paul Theoret be appointed. Discussion of Committee Charters David Cook presented revised charters for the Operating Committee, Planning Committee, Standards Committee, Critical Infrastructure Protection Committee, and Personnel Certification Governance Committee, and a new Legal Advisory Committee. He indicated he would be recommending that that the Board approve the proposed charters, with the alternative for the Operating Committee and Planning Committee that followed the MRC model for regional representation. He noted the Board had already approved the Compliance and Certification Committee charter on March 12. MRC members discussed the issues at length. Chairman Ball summarized the two key issues: first, how to structure voting by regional representatives for the Planning Committee and Operating Committee; second, how to assure appropriate Canadian representation on the Planning Committee and Operating Committee. Mr. Cook indicated he would discuss those issues at the Board meeting the next day. President Sergel stated that all of the committees work extremely hard and do a great job. FERC Matters Update David Cook updated the MRC on recent FERC orders, the status of filings and the schedules for future filings. His presentation is attached as Exhibit E. Member Representatives Committee 2 Draft Minutes May 1, 2007

13 Reliability Assessment and Performance Analysis Mark Lauby made a presentation on the 2007 Summer Assessment and the preview of the 2007 Long-Term Reliability Assessment (Exhibit F). Mr. Lauby gave the schedule for the Summer Assessment and talked about how to make the Long-Term Reliability Assessment a better report. Joe McClelland responded that FERC will task the ERO with what they expect to see in the report; FERC then expects to submit the reports to Congress. NERC Compliance Registry David Hilt made a presentation about NERC s compliance registry (Exhibit G). Amendment to Rules of Procedure for Data Requests David Cook described a proposal to amend NERC s Rules of Procedure to add a section providing for Board approval of requests for data and information. The proposed rule change will be posted on the NERC website for industry comment and will be presented to the NERC Board for consideration at its August meeting. Discussion of First Draft of NERC s 2008 Business Plan and Budget Joe Conner led a discussion on the first draft of NERC s 2008 Business Plan and Budget, which will be considered for approval at the August Board meeting. Comments by Observers CEA Marlo Lair thanked NERC for the opportunity to provide written comments to the NERC meeting on May 15 to review the NERC Budget. EEI Jim Fama invited everyone to attend the May 15 budget review meeting in person, which is being held at the EEI offices in Washington, DC. EPRI Steve Lee commented on the role of technology. NERC as the ERO has raised the bar for understanding where the industry is going with guidelines and best practices. EPRI and others in the research industry can hold technical conferences to hear what the industry is doing. The information may inform NERC processes. Before new standards take over, there could be free objective discussion. He suggested the NERC Board s Technical Committee play a role in this. EPSA Mark Bennett wanted to recognize all the efforts at NERC and the regions on the transition to the ERO. EPSA appreciates the working relationship and looks forward to continuing it. NAESB Rae McQuade commented that NAESB is working on a couple projects with NERC which are getting some attention in the industry. Member Representatives Committee 3 Draft Minutes May 1, 2007

14 Quebec Energy Board Caroline Dupuis stated that QEB supports NPCC s policy input for allocation. Discussion of Upcoming Issues for Member Representatives Committee Chairman Ball talked about some of the topics for the next meeting, which will include a status report on strategic planning, the 2008 business plan and budget, a report on the long-term reliability assessment, and the process for electing 2008 members and officers. There being no further business, Chairman Ball adjourned the meeting at 4:50 p.m. Respectfully submitted, David N. Cook Secretary, Member Representatives Committee Member Representatives Committee 4 Draft Minutes May 1, 2007

15 Exhibit D Member Representatives Committee Meeting May 1, p.m. Marriott Fairview Park 3111 Fairview Park Drive Falls Church, Virginia Draft Minutes Chairman Billy Ball called to order the duly noticed meeting of the North American Electric Reliability Corporation Member Representatives Committee on May 1, 2007 at 1 p.m., EDT, and a quorum was declared present. The meeting announcement, agenda, and list of attendees are attached as Exhibits A, B, and C, respectively. NERC Antitrust Compliance Guidelines David Cook, vice president and general counsel, directed participants attention to the NERC Antitrust Compliance Guidelines included in the agenda. Minutes of the February 12, 2007 Member Representatives Committee Meeting The Member Representatives Committee approved the draft minutes of the February 12, 2007 meeting (Exhibit D). Future Meetings The Member Representatives Committee approved May 6 7, 2008, (T W) in Washington, D.C. as a future meeting date and location. Report from MRC Working Group Steve Hickok reported on behalf of the MRC Working Group. The purpose of the group is to make the sector representation system more effective within the MRC, and help make the MRC a better partner to NERC management and a better advisor to the NERC Board of Trustees. The Committee discussed the Working Group s fifth document and made suggestions for its improvement. After discussion, Chairman Ball said the Working Group will come back at the next regular meeting with a revised set of documents for adoption as the method of operation for the MRC Village Boulevard, Princeton, New Jersey Phone: Fax:

16 Recommendation for MRC Representatives on Board of Trustees Nominating Committee Chairman Ball reported that one of the responsibilities of the MRC under the NERC Bylaws is to elect the Trustees and to provide at least three MRC members to serve on the Board s Nominating Committee. Chairman Ball stated that the MRC believes there should be equal representation from the MRC and Board on the Nominating Committee. He had asked for volunteers and came up with a list of six names (Hickok, Core, Theoret, Gallagher, O Hearn, and Naumann.) After discussion, the MRC adopted the following resolution: The MRC recommends that the NERC Board of Trustees appoint to the Nominating Committee enough MRC members to equate to the number of Trustees on the Nominating Committee. The MRC recommends that the NERC Board of Trustees appoint the following members of the MRC to the Nominating Committee: Steve Hickok Michael Core Jean-Paul Theoret William Gallagher Dan O Hearn Steve Naumann If the Trustees choose to appoint less than six members of the MRC to the Nominating Committee the MRC recommends that at least Steve Hickok, Michael Core and Jean-Paul Theoret be appointed. Discussion of Committee Charters David Cook presented revised charters for the Operating Committee, Planning Committee, Standards Committee, Critical Infrastructure Protection Committee, and Personnel Certification Governance Committee, and a new Legal Advisory Committee. He indicated he would be recommending that that the Board approve the proposed charters, with the alternative for the Operating Committee and Planning Committee that followed the MRC model for regional representation. He noted the Board had already approved the Compliance and Certification Committee charter on March 12. MRC members discussed the issues at length. Chairman Ball summarized the two key issues: first, how to structure voting by regional representatives for the Planning Committee and Operating Committee; second, how to assure appropriate Canadian representation on the Planning Committee and Operating Committee. Mr. Cook indicated he would discuss those issues at the Board meeting the next day. President Sergel stated that all of the committees work extremely hard and do a great job. FERC Matters Update David Cook updated the MRC on recent FERC orders, the status of filings and the schedules for future filings. His presentation is attached as Exhibit E. Member Representatives Committee 2 Draft Minutes May 1, 2007

17 Reliability Assessment and Performance Analysis Mark Lauby made a presentation on the 2007 Summer Assessment and the preview of the 2007 Long-Term Reliability Assessment (Exhibit F). Mr. Lauby gave the schedule for the Summer Assessment and talked about how to make the Long-Term Reliability Assessment a better report. Joe McClelland responded that FERC will task the ERO with what they expect to see in the report; FERC then expects to submit the reports to Congress. NERC Compliance Registry David Hilt made a presentation about NERC s compliance registry (Exhibit G). Amendment to Rules of Procedure for Data Requests David Cook described a proposal to amend NERC s Rules of Procedure to add a section providing for Board approval of requests for data and information. The proposed rule change will be posted on the NERC website for industry comment and will be presented to the NERC Board for consideration at its August meeting. Discussion of First Draft of NERC s 2008 Business Plan and Budget Joe Conner led a discussion on the first draft of NERC s 2008 Business Plan and Budget, which will be considered for approval at the August Board meeting. Comments by Observers CEA Marlo Lair thanked NERC for the opportunity to provide written comments to the NERC meeting on May 15 to review the NERC Budget. EEI Jim Fama invited everyone to attend the May 15 budget review meeting in person, which is being held at the EEI offices in Washington, DC. EPRI Steve Lee commented on the role of technology. NERC as the ERO has raised the bar for understanding where the industry is going with guidelines and best practices. EPRI and others in the research industry can hold technical conferences to hear what the industry is doing. The information may inform NERC processes. Before new standards take over, there could be free objective discussion. He suggested the NERC Board s Technical Committee play a role in this. EPSA Mark Bennett wanted to recognize all the efforts at NERC and the regions on the transition to the ERO. EPSA appreciates the working relationship and looks forward to continuing it. NAESB Rae McQuade commented that NAESB is working on a couple projects with NERC which are getting some attention in the industry. Member Representatives Committee 3 Draft Minutes May 1, 2007

18 Quebec Energy Board Caroline Dupuis stated that QEB supports NPCC s policy input for allocation. Discussion of Upcoming Issues for Member Representatives Committee Chairman Ball talked about some of the topics for the next meeting, which will include a status report on strategic planning, the 2008 business plan and budget, a report on the long-term reliability assessment, and the process for electing 2008 members and officers. There being no further business, Chairman Ball adjourned the meeting at 4:50 p.m. Respectfully submitted, David N. Cook Secretary, Member Representatives Committee Member Representatives Committee 4 Draft Minutes May 1, 2007

19 Exhibit E 2008 Business Plan and Budget Joe Conner July 31, 2007

20 Overview Changes since May report 2008 Assessments Recommendation on 2007 under spending Assessment Methodologies 2

21 Changes from May Removed Emerging issues studies Expansion of GADS mandatory submittals Reliability assessment tool Education delivery Change in assessments from 2007 $3.25M down from $5.2M 3

22 2008 Assessments NERC 2007 $21,682, $24,938,994 Change $3,256,442 (15% increase over 2007) Regional Entities $53,716,420 (including WECC RC costs) $69,068,199 (with WECC changes - 7/27) Regional Advisory Body (WIRAB) $477, $477,261 4

23 2007 Projections (as of 6/30/07) NERC $532K under budget Regional Entities $4.0M under budget Recommendation that under spending is held in reserve 5

24 Assessments Methodologies 3 different ways to assess NERC & RE costs Net Energy for Load (NEL) default method NEL excluding certain entities performing compliance and enforcement activities IDC Defined Shares special allocation to equitably distribute IDC contract expenses 6

25 Timeline Aug 1 Seek board approval Aug 23 Submittal to FERC and Canadian governmental authorities 7

26 Exhibit F General Requirements for Meetings and Actions [Document 1, Draft Final Version] Board of Trustees Regular meetings established by resolution at February annual meeting (or at any other meeting). Special meetings may be called by the Chair, or by any 2 Trustees, on 5 days' notice. Notice and materials must be available to public within 24 hours of availability to Trustees. Quorum is majority of Trustees (no attendance-by-proxy). Action requires majority vote of Trustees present when a quorum is present (unless super-majority specified) (no proxies). Trustees may participate by conference phone. (All participants must be able to hear each other.) Action without a meeting may be called for by the Chair or 2 Trustees. Action requires written approval of a majority of BOT (unless a super-majority action). Notice and materials must be available to public within 24 hours of availability to Trustees (but Trustees may already have acted). Member Representatives Committee Regular meetings established by resolution at February annual meeting (or at any other meeting). Special meetings may be called by the Chair, or by 5 members who represent at least 3 sectors, on 7 days' notice. Notice and materials must be available to public within 24 hours of availability to MRC. Quorum is two-thirds of the voting members of the MRC attending in person or by proxy. Proxy holder must be from the same sector. Action requires majority vote of MRC members who are attending in person or by proxy when a quorum is present (unless supermajority specified). MRC Members may participate by conference phone. (All participants must be able to hear each other.) Action without a meeting may be called for by the Chair or 5 members who represent at least 3 sectors. Action requires written approval of majority of MRC (unless a super-majority action). Notice and materials must be available to public within 24 hours of availability to MRC (but MRC may have already acted).

27 MRC Functions (Including Election of the Member Representatives) [Document 2, Draft Final Version] *Sept. 10-Nov. 10 *November 1 *Dec *May 1 [*June-Dec. (See BOT function: "Nominate Trustees")] *February 1 *Any Meeting *Any Time *February 1 *Various (See BOT functions) Elect MRs and MRC Officers Nominating period for sector elections of Member Representatives. MRC selection of Chair and Vice Chair for upcoming year by vote of majority of MRs who are eligible to vote. (Incumbent Chair and Vice Chair are not eligible to vote in this election.) Sector elections of Member Representatives (30 days after nominating period) by majority vote of Members in the sector who cast ballots. Elect Trustees MRC recommends at least 3 MRs to serve on BOT's Nominating Committee (NC). [NC produces slate of nominees.] MRC elects Trustees from NC's slate by vote of two-thirds of MRs who are eligible to vote. Amend NERC Bylaws Amend Bylaws on days' notice by vote (at a meeting at which quorum is present) of majority of MRs who are eligible to vote. [Also requires vote of majority of Trustees.] Propose Change to NERC Rules of Procedure Propose changes in NERC Rules of Procedure. Advise BOT Annual priorities-and-emphasis discussion of the upcoming year. Relationships development Tools development Advocacy of reliability Program and budgetpriorities Process improvements NERC cost efficiency Other Inputs to BOT. *Suggested Approximate Dates

28 BOT Functions Which May Involve Obtaining MRC Participation or Advice [Document 3, Draft Final Version] *May 1 *June-Aug. *Sept.-Oct. *Nov.-Dec. [*February 1] *February 1 *March *March-July *April *May 1 *May *June *July *August 1 *August 2 *Any Time *From Time to Time *July 2008-July 2009 Nominate Trustees Establish Nominating Committee (NC) consisting of the Trustees whose terms are not expiring, at least 3 MRC members, and others as BOT may specify. NC organizational preparations, assessment of Board situation, determination of desired characteristics, and solicitation of Members for suggested candidates. NC selection of candidates for interview. NC interviews of candidates. NC selection of slate of nominees. NC preparation of draft report and transmittal to MRC. NC preparation of final report and transmittal to MRC. [MRC elects Trustees from NC's slate by vote of two-thirds of MRs who are eligible to vote.] Planning and Budgeting Obtain from MRC a high level priorities-and-emphasis discussion of upcoming year. Relationships development Tools development Advocacy of reliability Program and budget priorities Process improvements NERC cost efficiency Finance and Audit Committee (FAC) addresses funding mechanism (cost allocation and collection) issues. FAC development of business plan/budget/funding mechanism for upcoming year. FAC release of first draft of business plan/budget/funding mechanism. Obtain from MRC a discussion of first draft of business plan/budget/funding mechanism. Public Workshop on Budget in Washington, DC. FAC release of second draft of business plan/budget/funding mechanism. FAC recommendation of final business plan/budget/funding mechanism to BOT. Obtain from MRC a discussion of FAC recommendation. Approve business plan/budget/funding mechanism (not later than 135 days before fiscal year; i.e., by August 18). Modify business plan/budget/funding mechanism. Obtain participation from one or more MRC members in long-range strategic planning. Develop with input from MRC a framework for evaluation of the REs and a self-evaluation of the ERO. Contract for conduct of the evaluation and self-evaluation. Submit to FERC/Provinces within three years of NERC's certification as ERO.

29 * May 1, August 1, November 1 Financial and Program Performance Obtain from MRC discussion of significant deviations from annual business plan/budget/funding mechanism. *May 1 *May 1 *August 1 *Sept. *November 1 *May 1 *July Reliability Assessments Obtain from MRC a discussion of summer assessment. Preview issues of next long-term assessment. Obtain from MRC a discussion of draft long-term assessment. Approve long-term assessment. Obtain from MRC a discussion of winter assessment. First-Year Report to FERC and Provinces Obtain from MRC a discussion of draft first-year report to FERC/Provinces on reliability improvement activities. Approve first-year report to FERC/Provinces. Delegation Agreements, Rules of Procedure, Regulatory Orders and Compliance Filings *Any Time Approve amendments to DAs. *Any Time Approve changes in ROPs after 45-day posting and public comment period. *Any Time Approve response to FERC/Provincial order or demand for compliance filing. *Any Meeting *Any Time Amend NERC Bylaws Amend Bylaws on days' notice by vote (at meeting at which a quorum is present) of majority of BOT. [Also requires a vote of a majority of MRC.] Create and Appoint Committees of the Corporation Obtain MRC input on issues of balance, technical expertise, opportunity for Canadian NEL-level participation. Hear and Discuss Status (Information Only) *Any Meeting Hear, discuss situation awareness and event analysis. *Any Meeting Hear, discuss program reports (including needs for new standards development). *Any Meeting Hear from Forums. Transmission Owners and Operators Forum. *Any Time Hear, discuss ERO relationship with FERC/Provinces. *Suggested Approximate Dates

30 Pro Forma Agendas for MRC Meetings [Framework for the Operation of the MRC, Document 4, Approved 7/31/07] February 1 May 1 Elect Trustees Receive CEO's annual state-of-theunion presentation Conduct annual priorities-andemphasis discussion of upcoming year August 1 Prepare for Officer elections Prepare for sector MR nominations Discuss draft long-term reliability assessment Hear, discuss significant deviations from current-year business plan/budget/funding mechanism Discussion of FAC recommendation to BOT of final business plan/budget/funding mechanism for next year Recommend at least 3 MRs to BOT's Nominating Committee Hear, discuss significant deviations from current-year business plan/budget/funding mechanism Discuss summer reliability assessment Preview issues of next long-term reliability assessment Discuss first draft of business plan/budget/funding mechanism for next year November 1 Elect Officers for upcoming year Prepare for sector elections and orientation of new MRs Hear, discuss significant deviations from current-year business plan/budget/funding mechanism Discuss winter reliability assessment Any Meeting Amend Bylaws Propose changes in Rules of Procedure Hear, discuss situation awareness and event analysis Hear, discuss individual program or project report Hear, discuss ERO relationship with FERC and Provinces Hear from Forums Hear, discuss changed new needs for standards development or modification Discuss needed modifications to business plan/budget/financial mechanism Discuss needed responses to FERC/Provincial order or demand for compliance filing Governance Status Planning

31 MRC Protocols and Logistics [Document 5, Draft Final Version] 1. Purposes and Setup of the MRC a. The purposes of the MRC, as set out in the NERC Bylaws, are to elect the NERC Trustees, make changes in the Bylaws, and advise the Board of Trustees. b. In order to provide adequate representation of the interests of the NERC Members and provide sound advice to the Board, a principal activity of the MRC will be assessment of the progress and effectiveness of the NERC programs. To this end, the MRC may divide the responsibilities for this activity among its membership. c. The MRC will aid the NERC Membership in the sectors periodic evaluation of the effectiveness of the MRC, including the adequacy of these protocols and of its preparations for bringing the Members concerns and interests to the attention of NERC management and the Board of Trustees. d. The MRC will hold regular meetings each year on the day ahead of the regular meetings of the Board of Trustees, and additionally will hold such special meetings as it may require. 2. Preparation for MRC Meetings and Operations a. An orientation program for new MRC members will be conducted prior to the February regular meeting each year. b. Materials required both for the conduct of the regular meeting and for use in sector discussions prior to the meeting should be available at least four weeks in advance of the MRC meeting. Other materials required for the conduct of the meeting, including the final meeting agenda, should be available at least two weeks in advance of the MRC meeting. c. The meeting agenda will tag all agenda items by type of action expected of the MRC at the meeting. Types of action: (1) Receive information and seek clarification; (2) Discuss and advise BOT or NERC management; (3) Decide by vote. Preview of a draft agenda for the next regular meeting (with types of actions tentatively identified) will be a routine agenda item of each regular meeting. d. Reports to the MRC by NERC management on the status of NERC programs and projects should conform to communication protocols jointly developed by the MRC and NERC management. The purpose of such protocols should be to ensure transparency, ease access to the information content, and ensure coverage of what is most important to the Members. Large volumes of material provided by NERC management should be accompanied by short, cogent summaries. e. A special meeting of the MRC will be held by teleconference about four weeks before each regular meeting of the MRC. The purpose of this special meeting, which should be timed to allow subsequent sector meetings on the subject matter of the next regular MRC meeting, will be to discuss the agenda for the regular meeting, identify the issues that will need discussion time during the regular meeting, check on the adequacy of the information that has been provided for the agenda items, and identify any further preparations that should be made before the regular meeting. The date and time for this special meeting will be established when the date and time for the regular MRC meeting is set.

32 3. Conduct of MRC Meetings a. The chair, vice chair, or other designated discussion leader will facilitate a discussion of an agenda item in the MRC meeting so as to define clearly the differences of opinion that may exist among the discussion participants. During this discussion, the chair will determine if passage of a resolution by the MRC on the matter is needed and appropriate. Notwithstanding the chair s determination, an MRC member may call for such determination to be made by majority vote of a quorum present. If such call is moved and seconded, a discussion of the need for and appropriateness of passing a resolution will proceed, and a vote on that need and appropriateness will take place immediately following that discussion. If a resolution is determined to be needed and appropriate, the chair will designate at least two MRC members to draft such resolution and bring it before the MRC for discussion and vote. b. Trustees in attendance at an MRC meeting will be encouraged to ask questions and seek clarification of positions expressed by MRC members during our discussions. c. Other persons who are not MRC members but are in attendance at an MRC meeting may be invited to comment at the discretion of the chair who should take into account both our desire for inclusiveness and our need for containment of the length and focus of these meetings in order to make best use of the members time. d. When the MRC believes it needs to have a formal and explicit response from the Board of Trustees to instances of MRC discussion and advice, it should formally and explicitly identify such instances to the Board. 4. Cooperation of the MRC, the BOT, and NERC Management a. The MRC should coordinate with the BOT on placement of purely informational items (such as status reports from NERC management) into the MRC and BOT agendas for their regular quarterly meetings so that these items are not repeated in both meetings. The MRC and BOT, in their respective meetings, should each accommodate questions and comments from members of the other body during its engagement of such informational items. (Note: Such informational agenda items would not require any action by either body during its current regular quarterly meeting. Action items, on the other hand, either in the MRC agenda or the BOT agenda, should be reserved to the exclusive evaluation and debate of the respective body within its own meeting and among its own members.) b. NERC should support the operation of the MRC and the MRC members engagement of their sector Members by providing administrative staff whose responsibilities include anticipation of and providing for the MRC members information and communication needs. c. NERC should make available to the use of the MRC a location in its website that can support the communication needs of the MRC membership in the conduct of their responsibilities as Member Representatives. These needs will include support of their engagement of the Members in their sectors.

33 Exhibit G Regulatory Update & Overview David Cook Julia Souder July 31, 2007

34 NERC Filings June 18 Informational Compliance Filing of NERC in Response to Paragraph 77 of Order No. 693 (BES definition-regions) June 18 NERC/ NAESB Work Plan and Status Report for Order No. 890 and 693 July 9 Petition for clarification or rehearing of June 7 Order July 20 One-year anniversary filing of additional programs to enhance reliability

35 FERC Orders May 17 Order approving Violation Risk Factors June 7 Order on March 19 compliance filing (Violation Severity Levels, CCC Charter, and Rules of Procedure) June 8 Order approving WECC regional standards July 19 Order on Joint Registration Organization July 19 Order 693A July 19 NOPR CIP Standards

36 FERC s Proposal Adopt the eight cyber standards NERC filed August 2006 CIP Critical Cyber Asset Identification CIP Security Management Controls CIP Personnel & Training CIP Electronic Security Perimeters CIP Physical Security of Critical Cyber Assets CIP Systems Security Management CIP Incident Reporting and Response Planning CIP Recovery Plans for Critical Cyber Assets Simultaneously direct NERC to make modifications to the standards

37 General Issues Applicability NERC and regional entities Use NERC compliance registry, for the present Performance-based standards OK, but how sometimes necessary Must comply with the requirements in standards

38 General Issues Requirement to have plan or procedure interpreted to require implementation NERC s implementation plan and timetable OK, but... More frequent self-certification Include cyber in readiness evaluations Not proposing NIST standards at this time

39 Terminology Issues Flexibility and discretion, but... Reasonable business judgment Proposed direction: Remove from standards Technical feasibility Proposed direction: Interpret narrowly - existing equipment only Require alternative course of action Annual report on frequency of invocation Acceptance of risk Proposed direction: Remove from standards

40 Directed modifications CIP (4 modifications) CIP (7 modifications) CIP (7 modifications) CIP (7 modifications) CIP (5 modifications) CIP (11 modifications) CIP (8 modifications) CIP (7 modifications)

41 Proposals on Violation Risk Factors Approve 162 VRFs submitted for the cyber standards Direct changes to 43 VRFs R2 and R3 of CIP to high Remainder to medium Require development of 9 missing VRFs File 60 days after final rule

42 Timetable Comments on NOPR: late September Final Rule: Year-end 2007/early 2008 (?) NERC Implementation Plan Three-year plan, with milestones Begin work Be substantially compliant Be compliant Be auditably compliant Start dates depend on registration dates

43 Upcoming NERC filings August 6 Compliance Filing due in response to the June 7 Order August 16 Compliance Filing due in response to the May 18 Order (further explanation of violation risk factors) August 23 Annual Budget and Business Plan September 17 revised standards work plan October 16 Compliance Filing on revised delegation agreements Related filings with provinces and NEB in Canada

44 Exhibit H Proposed Data Requests to Satisfy Order 693 Requirements Gerry Adamski July 31, 2007

45 Board Action Requested Approve three proposed data requests to satisfy Order No. 693 directives 629 Restoration of Nuclear Power Plant Offsite Power Source Data 951 Interconnection Reliability Operating Limit (IROL) Data 1693 Transmission Planning Data 2

46 Background Data gathering authority granted to ERO by Order 672 and CFR Title 18, Section 39.2 Approach consistent with proposed data rule Draft requests submitted for 30-day stakeholder comments 20 sets of comments received Modified data requests in response 3

47 Commenters Ameren ATC California ISO Dominion Virginia Power Duke Energy EEI ERCOT FirstEnergy FRCC IESO NRECA Omaha Public Power District ISO-New England ISO/RTO Council SERC SCE&G Southern Company TVA WECC 4

48 Restoration of Nuclear Power Plant Offsite Power Source Data

49 Directive EOP-005-1: System Restoration Plans Gather data from simulations and drills of system restoration on the time it takes to restore power to the auxiliary power systems of nuclear power plants. Transmission operators in the U.S. who have a nuclear power plant tied to a transmission line that it controls. Report due to FERC quarterly 6

50 Response to Comments TOP is the reporting entity in support of EOP Clarified the qualifying criteria EOP exercises; not individual operator training Request does not impose additional restoration exercises. Report quarterly if EOP exercise conducted. 7

51 Response to Comments Reports should include restoration information for all offsite sources. Add base case assumptions for restoration exercises Clarified 4Q2007 as the first reporting period Data due to regional entity (RE) 15 th of month RE report to NERC by 30 th of month 8

52 Interconnection Reliability Operating Limit (IROL) Data

53 Directive IRO-005-1: Reliability Coordinator Current-Day Operations Conduct a survey on IROL practices and actual operating experiences by requiring reliability coordinators to report any violations of IROL, their causes, the date and time, the durations and magnitudes in which actual operations exceeds IROLs. Reliability coordinators (RCs) in the U.S. report on a monthly basis for one year beginning August 17,

54 Response to Comments Included IROL facility description Did not include reporting dead band Include description of how RCs determine IROLs Reporting date changed to 20 th of month Include projected outcome if critical contingency occurred Requests are not duplicative to existing standards Cost for RCs to implement may be significant

55 Transmission Planning Data

56 Directive/Response to Comments TPL through TPL Standards In addition to regional criteria, all utility and RTO/ISO differences in transmission planning criteria that are more stringent than those specified by the TPL group of Reliability Standards. Responsible entities for compliance with TPL through TPL standards One-time exception request due by September 30, 2007 to regional entity Data due to NERC by October 31, 2007 Clarified that the request is for criteria that is more stringent. 13

57 General Comments Data requests are fishing expeditions Impose unnecessary resource burdens Explained that failure to comply is a violation of FERC regulations Each data request should be treated as CEII information Voluntary request to non-u.s. entities Reporting entity responsible for validation

58 Exhibit I Status Report on Long-Term Reliability Assessment Dave Nevius July 31, 2007

59 2007 LTRA Schedule Drafting LTRA Open Meeting Goals: 1. Increased Transparency 2. Identify Enhancements Finalize Draft PC Review Board Approval Release Ongoing August 16 August 31 Sept Mid-October October 15

60 2007 LTRA Emerging Issues

61 Key Observations Capacity Margins tight in CA, AZ/SNV/NM, Rocky Mtn, Alberta, TX, MRO-US and New England More Transmission Projects proposed for Investments in Connecticut are improving reliability

62 Key Findings & Conclusions Continued dependency on natural gas in New England, Florida, and California Uncertainty regarding capacity and transmission expansion plans limits ability to judge long-term adequacy and reliability More grid investment needed to integrate intermittent resources Some reliability projects face uncertainty due to regulatory action

63 High-Level Scenarios Reliability Impacts of Significant penetration of wind energy High integration of demand response Natural gas unavailability due to supply or delivery limitations Possible reductions in capacity as a result of emissions restrictions

64 Questions and Suggestions Any issues or concerns not being addressed? Additional scenarios to be considered? Changes in presentation of results vs LTRA? Other suggestions?

65 Exhibit J Overview of the New York City Outage Event on June 27 th, 2007 Presented to NERC Member Representatives Committee July 31, 2007

66 Discussion Con Edison System Design Concepts Initiating Event General Description of the Event Preliminary Assessment Restoration Effort 2

67 Information on the Con Edison System Electric Service Area: 604 sq. mi. Population: 9.15 Million Electric Customers: 3.1M (80% Network) Forecasted Peak Load: 13,575 MW Average Annual Growth Rate = 1.5% Load Density Manhattan: 221 MW / sq. mi. Highest Density Network: 2000 MW / sq. mi. Reliability Network Interruption Rate = 21 / 1000 customer- year National Avg = 1050 / 1000 customer-year 3

68 Con Edison System Design Concepts Unique system design targeted to high reliability at the distribution level and low probability of adverse conditions spreading across the system to other customers Bulk power transmission at the 345 kv level is highly interconnected, including ties to outside areas, and has generation resources The 345 kv system supplies an underlying 138 kv system and 138 kv load pockets Some of these pockets also have generation resources Area substations step down 138 kv to 13 kv, which in turn radially supply network loads through multiple 13 kv primary feeders Every primary feeder supplies multiple 13 kv to 120 volt network transformers, dispersed throughout an area of many square blocks A 120 volt secondary network is akin to a wire mesh that can sustain multiple breaks without affecting the supply to customers 4

69 Design Concept of the Con Edison System G G Bulk power 345 kv transmission system interconnected to external areas G G Underlying 138 kv non-bulk grid Area substations Load Pocket 13 kv feeders, radial from one area substation 120 volt networks, radial from 13 kv substations Transformer Network G Generator 5

70 Initiating Event Initiated by a powerful stroke of lightning in the vicinity of the Queensbridge Substation in the borough of Queens, at 3:41PM on Wednesday June 27, 2007 The National Lightning Detection System reports one lightning strike aligned exactly in time with the onset of the event Ranks in the 90th percentile among lightning strikes recorded historically in the New York City metropolitan area No obvious evidence of lightning strike damage was found in the vicinity The area contains roof-top radio antennae, roof-top water towers, lightning rods, floodlight towers and smokestacks There was no fault on the power system itself nor any damage to substation equipment including the telecommunications line 6

71 7

72 General Description of the Event Prior to the event: New York City temperature 89º F. Con Edison system load 12,120 MW (vs. an all-time peak of 13,141 MW on August 2, 2006). Substations were manned because of the high loads. Event resulted in the de-energization of the Astoria West load pocket. Service was interrupted to approximately 137,000 customers in the Yorkville network in Manhattan and the West Bronx network in The Bronx. 8

73 The Astoria West Load Pocket Yorkville Load 120 volts West Bronx Load 120 volts Con Edison System Connections Hell Gate 13 kv Bruckner 13 kv Con Edison System Connections 300 MW 175 MW 179 th Street 1 line Astoria West 4 lines Queensbridge 138 kv 5 MW 138 kv 725 MW 138 kv 1205 MW Generating Units 9

74 Affected Network Overview East 179 th St West Bronx 58,000 Customers Bruckner Hell Gate Yorkville 79,000 Customers Astoria West Queensbridge 10

75 Preliminary Assessment The lightning flash caused a momentary disruption in the flow of signals on the digitally independent telecommunications circuits used in a relaying scheme for four 138 kv feeders between Astoria West and Queensbridge substations Relays then tripped the breakers associated with the four lines in rapid succession 11

76 Preliminary Assessment cont d Interruption of the 725 MW on the four lines created a significant imbalance between supply and load in Astoria West As a result, the remaining 138 kv line as well as the 138/13 kv load transformers also tripped All this took place within 6 seconds All generation tripped over a period of about one minute A detailed review of the event by Con Edison is in progress 12

77 Preliminary Assessment cont d The Astoria West load pocket became de-energized and electrically disconnected from the rest of the network The event was effectively contained within a localized nonbulk portion of the system The rest of the Con Edison grid operated normally before, during and after the event The relay operations prevented electrical equipment damage 13

78 Restoration Immediately after the shutdown, operating personnel implemented the Company s Rapid Restoration Procedure, which resulted in the closing of 85 circuit breakers in proper sequence The restoration process is quite involved and complex and operating personnel are trained to properly execute restoration protocols Includes inspection of equipment, resetting and recording of protective relays and closing circuit breakers These efforts restored power to all affected networked customers within 48 minutes of the initial event 14

79 Thank You 15

80 Exhibit K Status Report on NERC s Strategic Plan Development David A. Whiteley July 31, 2007

81 Contents Background prior plan Present planning process Approach to new plan Timeline for new plan development Summary of collective input Strategy versus tactics Questions raised MRC discussion

82 Prior Strategic Plan June 10, 2003 Given the pursuit of legislation in the US, the plan served as a policy guide, information resource, and planning tool Mission to ensure that the bulk electric system in North America is reliable, adequate and secure Vision to be a trusted leader and convener of choice regarding reliability matters within the North American bulk electric industry Values independence, fairness and balance, inclusiveness, technical excellence, flexibility, integrity, and market solutions

83 Priority Goals for Legislation was uncertain at this time, so goals were set independently - Complete a new system for establishing reliability standards Strengthen the compliance enforcement program Assess and be an advocate for adequate generation and transmission Expand efforts to foster critical infrastructure protection Support reliable operations Establish strong relationships Create an effective organization

84 Present Planning Process Coordination How it all ties together Strategic Plan (5-year) Provides overall company direction Incorporates new industry trends Program Area Work Plans (3-year) Establishes goals and work to be done Includes resource requirements Annual Business Plan and Budget (1-year) Defines what will actually be implemented Filed with FERC and Canadian counterparts

85 Approach to Development of New Plan Given that Section 215 and the Bilateral Principles between the US and Canada provide a well defined space to operate within, it is possible to look to potential new areas without much of the context setting work typically done in strategic planning processes i.e. cut to the chase. Direct Interviews Indirect comments Look for common themes and questions Discussion at BOT workshop

86 Timeline for Plan Development Milestones set April 1 Background information and interviews May, June MRC update and discussion July 31 Further comments due August 10 Board workshop August 15 Draft plan posted September 14 Comments due October 5 Revised draft to Board for approval October 8 ] Opportunity for additional input

87 Board Workshop August 15 Attendees Board members, Committee chairs (MRC, SC, OC, PC, CIPC, CCC, REMG), and 4 staff No action item agenda workshop retreat Results made public and posted for comment Activity Consider and discuss common themes and questions raised to narrow, refine, and select strategic direction

88 Common Themes from Interviews (1 of 5) Focus only on current activities and achieve excellence in those areas. This will consume all available resources. Narrow, not broaden, what is done. Identify new technology needs. Advocate new technology development, but do not necessarily complete the work internally. Foster tool development. Fundamental issue is no cascading blackouts then move on to reliability improvement. Note These are common themes, not necessarily consistent themes.

89 Common Themes from Interviews (2 of 5) NERC should not get into real-time operations. Reevaluate Readiness program and realign activity to provide more value. Boundary between bulk power system and distribution has become gray and needs definition, not just a cut-off voltage. Internal resources must be adequate to handle next major system event. There is too much open loop thinking. Improve metrics and benchmarking, create feedback to standards development.

90 Common Themes from Interviews (3 of 5) Lead the development in areas such as modeling of renewables, wind generation, and load issues. Adopt common processes and reporting tools for NERC/RE operations. Take a leadership role in communication. Communication skills must be top-notch. NERC is the convener of discussions. Leverage this to achieve goals. Reach a North American understanding of common goals and agree to the methods of achieving them.

91 Common Themes from Interviews (4 of 5) Lead improvement in reliability through examples of excellence and development of best practices. Analyze human performance issues. One example is in relay engineering and maintenance. Assessments should be expanded. One example is in the area of grid impacts due to changes in environmental requirements (eg. carbon). Coordinate resource adequacy assessment activities and lead efforts to report results. Define NERC s future role vis-à-vis the states and state authority.

92 Common Themes from Interviews (5 of 5) Investigate where NERC can add value by way of studies. Clarify relationships with Canadian provinces and US agencies (DOE, DHS, FERC, etc.) and establish a comfort level in operations that encourages joint efforts to explore new areas for the ERO to improve reliability. Volunteers are important part of what we do.

93 Unique Perspectives Update the functional model and make it the basis for all standards. Standards should not be prescriptive. Foster functional consolidation to improve compliance performance. Consider employee rotation from industry and regulatory agencies.

94 Strategy vs. Tactics Highlighting the important distinction between strategy and tactics will start the workshop Strategy the act of devising or employing plans toward a goal [Direction setting Board] Tactics a course of action followed in order to achieve an immediate or short-term aim [Implementation Management] The basic operational requirements for NERC are set, at least for the near term. So what real strategies should be pursued? Perhaps common questions raised during interviews will help lead our thinking.

95 Common Questions (1 of 3) What is NERC called to do and what is NERC called not to do in the next 5 years? Who are NERC s customers? What is NERC good at? What is the gap between the level of reliability today versus what is desired? If there is a gap, then what? What are NERC s customers expectations? What are the lower priority activities that should be deferred? Are there activities NERC should transfer to others?

96 Common Questions (2 of 3) Who will administer the phasor measurement program or other new technologies in the future? What can be done to improve the current compliance program operation? By 2013, what relationship should NERC have achieved with FERC? Canadian provincial authorities? Mexico? Is the current business model the best one for the future? Does NERC staff have the depth to handle the demands of a significant disturbance?

97 Common Questions (3 of 3) How can the value of the committee structure be improved or leveraged? Can forum(s) replace some committees? Can we move to the INPO model without the cost implications? Should NERC pursue common services to reduce costs? What should NERC be doing in the area of physical security? Should NERC educate and advocate what it does?

98 Summary Next Steps Reminder on upcoming dates: Further comments due August 10 Board workshop August 15 Draft plan posted September 14 Comments due October 5 Revised draft to Board for approval October 8

99 MRC Discussion Questions? What have we not heard so far? Is there a strategy to pursue or just tactics to execute? What are the elements that should be used in the development of a strategic statement?

100 Exhibit L Reliability Readiness Evaluation and Improvement Program David A. Whiteley July 31, 2007