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Violations Mitigation Plans Penalties

Violations Mitigation Plans Penalties. 2008 FRCC Compliance Workshop. Violations. Possible, Alleged, and Confirmed Discovered from any of eight processes Violations are at the requirement level Must go through a review process. Possible Violations.

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Violations Mitigation Plans Penalties

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  1. Violations Mitigation Plans Penalties 2008 FRCC Compliance Workshop

  2. Violations • Possible, Alleged, and Confirmed • Discovered from any of eight processes • Violations are at the requirement level • Must go through a review process

  3. Possible Violations • Initial review by FRCC compliance staff • Submittal to NERC • Further review by FRCC compliance staff

  4. Alleged Violations • Notice of Alleged Violation and Proposed Penalty orSanction sent to entity and NERC • Within 30 days entity must select one of three options for response • No response in 30 days then entity deemed to have accepted • Mitigation plan requested, if not already submitted

  5. Confirmed Violations • Notice of Confirmed Violation and Penalty or Sanction sent to entity and NERC • Record sent to entity and NERC • After approval by NERC a Notice of Penalty is sent to FERC, FRCC, and the registered entity

  6. Mitigation Plans • To be submitted immediately with any violation • Will be reviewed by FRCC Compliance staff for acceptance • Submitted to NERC for approval • Submitted to FERC for review

  7. Mitigation Plans (continued) • Template for mitigation plans is on FRCC website • Must include milestones if over 90 days • Entity must submit updates at least quarterly if over 90 days • Request for extension of a milestone or completion date must be received by FRCC a minimum of five days prior

  8. Mitigation Plans (continued) If milestone or completion dates are not met: • Violations will be enforced immediately • Entity must submit a new mitigation plan • Compliance audit may be conducted or a Remedial Action Directive initiated

  9. Sanctions, Penalties and Remedial Action Directives • Necessary mechanisms for compliance enforcement: • Promote compliance behavior • Provide deterrence to future incidents, actions or situations of non-compliance • Implement actions to promptly correct behavior • Disgorge benefits that may have accrued to a violator as a consequence of violating • Place upon a violator some portion of damage their violation may have caused others • NERC Sanction Guidelines – located in NERC Rules of Procedure Appendix 4B.

  10. Remedial Action DirectivesShort Term Corrective Actions • Used when such action is immediately necessary to protect the reliability of the bulk power system. Examples: • Specifying operating or planning criteria, limits, or limitations • Requiring specific system studies • Defining operating practices or guidelines • Requiring confirmation of data, practices, or procedures through inspection testing or other methods • Requiring development of specific operating plans

  11. Remedial Action Directives • Prior to issuing, FRCC Compliance Staff will consult with the FRCC Reliability Coordinator • The directive will include a deadline for compliance • FRCC will monitor implementation of Remedial Action Directives to verify compliance

  12. Remedial Action Directives • A Registered Entity may contest a Remedial Action Directive • The Registered Entity must provide written notice within 2 business days • The Registered Entity may request an expedited hearing • The Registered Entity may proceed with implementing the directive even if contesting it

  13. Sanctions • Sanctions are applied with the objective of promoting reliability and compliance with the reliability standards. • Sanctions are usually non-monetary in nature and may include, but are not be limited to, the following: • Limitations on activities, functions, or operations • Placing an entity on a reliability watch list composed of major violators • Notification of boards of directors, regulators, and others

  14. Penalties • Penalties are monetary fines levied against an entity for violation of a Reliability Standard. • Penalties should bear a reasonable relationship to the seriousness of the violation in terms

  15. Key Penalty Concepts Violation Risk Factor Violation Severity Level Potential or actual impact to the BPS Aggravating and Mitigating Factors

  16. Violation Risk Factor • Assigned to each requirement in a Reliability Standard • Based on the impact that the violation of that requirement could or would likely have to the reliability of the Bulk Power System • Real time operation VRFs are often high, since they have the immediate impact on the BPS.

  17. Violation Severity Level The VSL indicates how badly the standard was violated. Example - Level of non-compliance for BAL 002 • Level 1 (lower) – value of average percent recovery for the quarter less than 100% but greater than or equal to 95% • Level 2 (moderate) – Value of the average percent recovery for the quarter is less than 95% but greater than or equal to 90% • Level 3 (high) – Value of the average percent recovery for the quarter is less than 90% but greater than or equal to 85% • Level 4 (severe) – Value of the average percent recovery for the quarter is less than 85%

  18. Potential or Actual Impact to BPS • The issue to be considered is as follows: Given the violation’s Violation Risk Factor and the Violation Severity Level, what is the relationship between the potential consequence of the violation and the actual consequence of the violation?

  19. Base Penalty Amount Table (Proposed) Note: Amounts listed in the Table are generally “per incident”; however, in the U.S NERC is authorized to assess them on a “per day” basis where warranted.

  20. Mitigating Factors – Deduct from base penalty • Self-disclosure & voluntary corrective action by the violator • The FRCC shall consider whether a violator self-disclosed the violation prior to detection or intervention by the FRCC or NERC, and any action undertaken by the violator to correct the situation. • Degree and quality of cooperation in violation investigation and remedial action • If the violator has cooperated with the FRCC in a manner and to a degree noticeably beyond what would be considered the norm.

  21. Mitigating Factors – Deduct from base penalty • Presence & quality of violator’s internal compliance program • The FRCC will not increase a violator’s penalty specifically on the grounds that the violator has no program or a poor quality program. • Extenuating circumstances • In cases where extenuating circumstances exist, for example a natural disaster, the penalty and/or sanctions may be significantly reduced or eliminated

  22. Aggravating Factors – Add to base penalty • Repetitive violations & the violator’s compliance history • If the violator has had repeated violations of the same or a closely related reliability standard, the FRCC will consider some increase to the penalty • Failure of the violator to comply with compliance directives • If the violator incurs a violation in spite of having received related compliance directives, the FRCC will consider some increase to the penalty

  23. Aggravating Factors – Add to base penalty • Violation Concealment • Any purposeful misrepresentation or an attempt to conceal the violation, or information needed to investigate the violation, will result in an increase in penalty. • Intentional violations • If the violation was intentional without just cause, i.e. to avoid a more significant threat or immediate risk to reliability, there will be significant increase to the penalty.

  24. Penalty Determination There are 3 primary steps to determining a financial penalty.

  25. Penalty Determination • Step 1: • The base penalty amount for the violation is determined based on the violation’s (VRF) & (VSL) and the potential or actual impact to the reliability of the BPS. • The impact helps determine where in the range the base penalty starts

  26. Penalty Determination • Step 2: • The base penalty amount determined in Step 1 may be adjusted in light of time horizon of the violation. • Generally if all other considerations are similar, violations involving immediate or real-time activities should generally incur larger penalties than violations with longer or broader timeframes.

  27. Penalty Determination • Step 3: • Make final adjustments based on the mitigating and aggravating factors. The resulting penalty is the final penalty. • By law the maximum penalty allowed is $1 Million dollars per day per violation

  28. QUESTIONS ???

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