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Federal Register / Vol. 86, No. 18 / Friday, January 29, 2021 / Proposed Rules interpreted section 215 of the FPA to require the ERO to comply with the certification criteria in section 215c of the FPA on a continuous basis.6 Further, the Commission mandated that the ERO
submit periodic assessments of its performance that affirmatively demonstrate to the Commission that the ERO satisfies the statutory and regulatory criteria for an ERO and is not only maintaining but improving the quality of its activities and those of the Regional Entities to which it has delegated such activities. 7
7. In Order No. 672, the Commission also said that the performance assessments should employ regular and systematic measurement and reporting of the EROs performance. The specific requirements for the performance assessments are set out in the Commissions regulations in 39.3c and provide that the ERO file an assessment of its performance three years from the date of initial certification, and every five years thereafter. Section 39.3c1 of the Commissions regulations specify that the ERO should include in its performance assessment: 1 An explanation of how it satisfies the requirements of 39.3 b; 8 2
recommendations from stakeholders on improvement for the ERO and Regional Entities performance and the EROs and Regional Entities response to those recommendations; 9 and 3 an evaluation of the effectiveness of each Regional Entitys performance of delegated functions.10 Section 39.3c2
of the Commissions regulations explain that the Commission will review the performance assessments and may require follow-up actions by the ERO to comply or improve compliance with the statutory and regulatory qualifications for the ERO if the Commission determines that the ERO has not satisfied specific criteria.11

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II. Discussion 8. Pursuant to section 215 of the FPA, we propose to amend 39.3c of the Commissions regulations to require the Commission-certified ERO to submit assessments of its performance every three years instead of the current period of every five years.12 We also propose to amend 39.3c1 to add a new requirement for the ERO to include in its performance assessment a detailed 6 Id.

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8 18 CFR 39.3c1i.
9 18 CFR 39.3c1ii, iii.
10 18 CFR 39.3c1iii.
11 Id.
12 18 CFR 39.3c.
7 Id.

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discussion of any areas of the EROs responsibilities and activities, or the Regional Entity delegated functions, beyond those required by 39.3c1i, ii, and iii that the Commission identifies at least 90 days prior to the expected performance assessment submission date. For example, a Commission-identified issue may be communicated to the ERO through a Commission order or the Commissions delegated authority to the Director of the Office of Electric Reliability.13
9. While Order No. 672 established a five-year period for submitting ERO
performance assessments following the initial three-year assessment, decreasing the periodicity to every three years would improve the EROs accountability to the public, stakeholders, and the Commission. Our proposed reduction in the assessment period aligns with the EROs own acknowledgement that it is facing unprecedented, rapid change in the electric industry, which raises new challenges to and opportunities for the reliability and security of the Bulk Power System. 14 We agree, and find that the Bulk-Power System is transitioning in myriad ways through innovation and technology at a pace unanticipated when the Commission originally established the five-year performance assessment period and identified topics for the ERO to include in those assessments.
10. The proposed three-year performance assessment cycle will enhance the Commissions oversight of the ERO and provide an opportunity to address issues arising with regard to ERO performance in a more timely fashion. We believe this will allow for changes to be made in a more timely manner, and improve the efficiency of the overall performance assessment process. A three-year performance assessment aligns more closely with certain ongoing NERC activities, such as the triennial Reliability Standards and reliability guidelines reviews. Moreover, the reduced period between assessments will allow better continuity in the Commissions review of the EROs operations, activities, oversight, procedures, and evaluation of the effectiveness of each Regional Entity in the performance of delegated functions.
13 See e.g., 18 CFR 375.303 a2v The Commission authorizes the Director or the Directors designee to . . . direct the Electric Reliability Organization, Regional Entities, or users, owners, and operators of the Bulk-Power System within the United States not including Alaska and Hawaii to provide such information as is necessary to implement Section 215 of the Federal Power Act. . . ..
14 North American Electric Reliability Corp., Docket No. RR197000, at 3 July 22, 2019 2019
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For example, a three-year period improves the likelihood that the NERC
staff preparing the performance assessment, the Commission staff reviewing the assessment, and Commissioners would be familiar with the performance assessment process thereby providing continuity and subject matter expertise. Three years also provides an earlier opportunity to address new and emerging areas of concern or recommendations for development identified by the Commission and stakeholders.
11. We believe that the proposed three-year performance cycle affords a reasonable amount of time between performance assessments. We note that this is the same three-year timeframe imposed in Order No. 672 on the initial performance assessment submitted by the ERO in 2010. The timing also aligns with the NERCs Rules of Procedure requirement of an independent audit of NERCs Compliance Monitoring and Enforcement Program CMEP and Organization Registration and Certification Program.15
12. The ERO has existing internal processes used to assess its ongoing performance of its statutory responsibilities, and the Regional Entities ongoing performance in their delegated activities.16 For example, NERC files itemized annual budgets for both its own activities and those of the Regional Entities, thereby tracking whether it allocates equitably reasonable dues, fees and charges among end users for all activities. 17
The ERO uses a program alignment process to identify, prioritize, and resolve inconsistencies among the 15 See e.g., NERC, Rules of Procedure, sec. 406
NERC shall provide for an independent audit of its CMEP at least once every three years, or more frequently as determined by the Board. The audit shall be conducted by independent expert auditors as selected by the Board.
16 For example, pursuant to 18 CFR 39.3 c1i, the ERO must include in its performance assessment an explanation of how its Reliability Standards program meet the requirements of 39.3b. NERC posts on its website the status of various Reliability Standards projects, and provides public access to all projects, including: Reliability Standards, Standard Authorization Requests, Periodic Reviews, and Interpretations. NERC, Reliability Standards Under Development, https
www.nerc.com/pa/Stand/Pages/Standards-UnderDevelopment.aspx. NERC has a formal oversight program for functions it has delegated to the Regional Entities. The programs include performance metrics that NERC uses to evaluate the Regional Entity performance from year to year, i.e., more frequently than what would be necessary for a three-year performance assessment. 2019
Performance Assessment at 10.
17 18 CFR 39.3b2ii.

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