FERC Reviews NERC Budget, Voices Concern about Staffing Levels

On October 15, 2009, the Federal Energy Regulatory Commission ("FERC" or the "Commission") conditionally accepted the 2010 business plan and budget for the North American Electric Reliability Organization ("NERC"), the regional reliability entities and the Western Interconnection Regional Advisory Board. In its order, FERC expressed considerable concern about the staffing levels at NERC and whether they are sufficient for the organization to carry out its mission.

Section 215 of the Federal Power Act requires NERC, as the Commission-certified Electric Reliability Organization ("ERO"), to develop mandatory and enforceable Reliability Standards subject to Commission review and approval. FERC Order No. 672 requires NERC to receive FERC approval on funding for any expense necessary to carry out "statutory" functions. The NERC 2010 total budget represents a 15.1 percent increase over the 2009 budget. Of the $138 million total budget requirement, $122.4 million is for statutory activities.

In its order, the Commission raised concerns that NERC's monitoring and compliance staffing levels for 2010 were insufficient to complete investigations and ensure compliance with reliability rules. The Commission gave NERC 60 days to make a compliance filing explaining how 10 new compliance violation investigations and 40 new compliance inquiries will be completed in a timely manner with the proposed staffing.

The Commission also raised concerns over NERC's plan to use a $4 million line of credit instead of funding its working capital reserves, and asked for additional information on any conditions or restrictions on the line of credit. NERC also must explain why the working capital reserves were initially removed from the budget.