NERC Response. In connection with the development of its Annual Audit Plan pursuant to Section 3.1.2 of the CMEP, NERC will conduct annual reviews to determine whether any changes to the GAO Standards have occurred, and if any such changes have occurred, will address in its annual audit plan whether any changes to NERC’s audit procedures are appropriate as a result. April 19 Order, P 42: With respect to section 3.1.1, we note that a compliance audit team will be authorized to conduct an audit subject to NERC “audit guides.” However, NERC has not filed these guides for our approval, nor is it clear whether these audit guides have as yet been developed by NERC. Accordingly, we direct NERC to submit the audit guides and to explain whether they should be incorporated into the Uniform Compliance Program.
NERC Response. The audit guides (also referred to as Reliability Standard Audit Worksheets) are posted on the NERC web site26 and revisions to the audit guides will be posted as they are made. As a result, the current versions of the audit guides will be readily available to Registered Entities and other interested entities. A sentence has been added to Section 3.1 of the CMEP stating that the audit guides will be posted on the NERC web site. The Reliability Standard Audit Worksheets were separately provided to the Office of Electric Reliability on October 25, 2007 (and, as noted, are available at the web address provided in footnote 26). The audit guides should not be incorporated into the CMEP. The audit guides are essentially procedural tools for the use of Compliance Audit teams. These documents do not create or add or impose substantive requirements to the Reliability Standards, the NERC ROP or the uniform CMEP. The substantive requirements (including recordkeeping requirements) are contained in the Commission-approved Reliability Standards against which Registered Entities will be audited for compliance. The audit guides should not be deemed to fall within the definition of an “Electric Reliability Organization Rule” in 18 C.F.R. §39.1, as they are not “the bylaws, a rule of procedure or other organizational rule or protocol of the Electric Reliability organization”. Further, NERC expects to revise audit guides on an ongoing basis based on review of revisions to the General Accountability Office Auditing Standards (as specified in P 41 of the 26xxxx://xxx.xxxx.xxx/~comply/auditor_resources.html April 19 Order) and on feedback from Compliance Audit teams and others as to the usefulness of these documents in conducting Compliance Audits. Any changes to the process whereby corresponding change to the uniform CMEP or to the ROP were required would have to occur in accordance with Section 1400 of the ROP, requiring a substantial amount of time to complete. Further, the CMEP is Appendix 4C to the NERC ROP and therefore is an ERO rule, revisions to which must be filed with and approved by the Commission pursuant to §215(f) of the FPA and 18 C.F.R. §39.10 before the revised version can become effective. From a practical perspective, incorporating the audit guides into the CMEP would make the audit guides ERO rules as well and would bring them within the prior review and approval requirements of §215(f) and 18
NERC Response. Section 7.0 has been revised to provide that a Remedial Action Directive must be provided by a notice to the Registered Entity and that the notice must include (i) a list of the violations or possible violations of Reliability Standards that are the basis for issuance of the Remedial Action Directive; (ii) a discussion of the factual basis for the Remedial Action Directive; (iii) a deadline for compliance and (iv) notice to the Registered Entity that failure to comply with the directive by the Required Date may result in further Remedial Action Directives or significantly increased sanctions. Section 7.0 has also been revised to state that the Registered Entity may contest the Remedial Action Directive by giving written notice to the Compliance Enforcement Authority within two business days after receipt of the notice of the Remedial Action Directive.
NERC Response. The first sentence of the last paragraph of Section 3.4 has been revised to read as follows: “Compliance Violation Investigations are confidential, unless FERC directs that a Compliance Violation Investigation should be public or that certain information obtained in the Compliance Violation Investigation should be publicly disclosed.” With respect to Section 403.13 of the ROP, due to subsequent revisions to Section 403 that NERC has filed and the Commission has approved, the language cited in footnote 83 of the April 19 Order is now in Section 403.14.27 NERC is proposing to revise the first sentence of current Section 403.14 to state: “All compliance violation investigations are to be non-public unless NERC, the regional entity or FERC or another applicable governmental authority with jurisdiction determines a need to conduct a public investigation.”
NERC Response. In revised Attachment 2, Paragraph 1.4.2 details the authority and responsibilities of the Hearing Officer, and Paragraph 1.4.3 details the authority of the Hearing Body. Additionally: (1) Regarding the composition of the Hearing Body, Paragraph 1.1.1 requires that “The composition of the [HEARING BODY], after any recusals or disqualifications, shall be such that no two industry segments may control, and no single industry segment may veto, any decision by the [HEARING BODY] on any matter brought before it for decision.” (2) Paragraph 1.7.8 states that issuance of a final order by the Hearing Body “shall require (i) a quorum of the [HEARING BODY], which shall be (after any recusals, disqualifications and appointments of replacement members) at least fifty (50) percent of the number of members normally assigned to the [HEARING BODY], and (ii) majority vote of the members of the [HEARING BODY] voting on the final order (which number of members voting shall not be less than a quorum).”
NERC Response. In revised Attachment 2, Paragraph 1.4.7 contains the detailed provisions concerning prohibited ex parte communications, and Paragraph 1.4.5 allows for any Participant in a hearing to file a motion for disqualification or recusal of a Hearing Officer, Technical Advisor or member of the Hearing Body on the grounds of (among others) an ex parte communication prohibited by Paragraph 1.4.7. Paragraph 1.4.5 also sets forth the procedures for consideration of and ruling on such motions.
NERC Response. In revised Attachment 2, Paragraph 1.7.1 expressly provides for the filing of both initial briefs and reply briefs, on a schedule set by the Hearing Officer. Additionally, Paragraph 1.7.5 expressly provides for the filing of briefs on exceptions to the Hearing Officer’s Initial Opinion and briefs in reply to exceptions. Further, Paragraph 1.3.2, which sets forth the Shortened Hearing Procedure, provides for the filing of initial comments, responsive comments and reply comments (see Paragraph 1.3.2(c), (d) and (e)) and, if requested by a Participant, the filing of briefs on exception to the Hearing Officer’s initial opinion and briefs in reply to exceptions (see Paragraph 1.3.2(g)).
NERC Response. In Section 3.3.1 of the CMEP, a new step 5 has been added to the steps of the Spot Checking Process: “The Compliance Enforcement Authority reviews its draft assessment of the Registered Entity’s compliance with the Registered Entity and provides an opportunity for the Registered Entity to comment on the draft assessment.”
