Business Performance

Reliability Compliance

2013 marked a decade since the 2003 Northeast blackout that left 55 million people in the dark in the United States and Canada. The blackout was the catalyst for more stringent rules and regulations to protect the grid from another such event. Since then, the North American Electric Reliability Corporation (NERC) has been authorized by the Federal Energy Regulatory Commission (FERC) to enact and enforce rules and standards protecting the U.S. bulk power system. These rules and standards are constantly evolving, and they affect virtually everything we do in operating, maintaining and protecting the grid day to day.

In May 2013, AEP convened its first NERC grid reliability summit focused on building stronger relationships with regulators and grid operators and improving AEP’s reliability compliance performance.

The reliability standards in place today require processes and procedures to advance the reliability and resiliency of the bulk electricity system. We also must demonstrate a strong commitment to compliance; noncompliance with NERC reliability standards can lead to serious financial consequences as well as reputational risk.

In May 2013, AEP convened its first NERC grid reliability summit focused on building stronger relationships with regulators and grid operators and improving AEP’s reliability compliance performance. The emphasis is now shifting to a focus on management controls related to how the nation’s electric grid is managed. The summit brought together AEP executives, NERC, Southwest Power Pool and ReliabilityFirst Corporation officials to discuss regulator expectations, company reliability performance and the future of reliability compliance.

Reliability Assurance Initiative

We expect that the future of NERC compliance lies with the Reliability Assurance Initiative (RAI). RAI is a new approach to compliance that shifts the process from a focus on historical compliance and zero tolerance standards, to a more collaborative process of identifying reliability risks and using that information to better gauge future compliance monitoring and enforcement efforts. We agree that this new reliability philosophy has the potential to be much more effective and efficient. We also recognize the job of compliance will not become any easier. Rather, RAI intends to require registered entities – bulk power system owners, operators and users who are registered with NERC – to focus more on activities that matter most to reliability.

With RAI, the emphasis is on reforming both the monitoring and enforcement areas of reliability regulation. Regulators want companies to monitor their own activities, detect issues when they occur, assess the risk of those issues, and correct the causes of those issues in a timely manner. NERC conducted several pilots in 2013 to develop a uniform approach to audits that aligns with this new reliability culture. AEP participated in one of those pilots in late 2013, in partnership with ReliabilityFirst, allowing us to have input in the evolution of the monitoring and audit scoping process.

AEP was again asked by ReliabilityFirst to participate in a new enforcement pilot in 2014. The pilot will allow AEP to internally log minor violations of select NERC requirements rather than individually reporting each one. The logs would track the potential violations and the remedial actions taken. The logs will be periodically reviewed by ReliabilityFirst; the first review is tentatively scheduled for late April 2014.

AEP believes that registered entities should be committed to a reliability culture more than a compliance culture because it shifts the focus from complying with the bare minimum to truly ensuring the reliability and resiliency of the grid.

Our Commitment to Zero Harm

At AEP, our focus on zero harm - zero injuries, illnesses or fatalities - means compliance with regulations is just a starting point. We are committed to continuous safety and health improvement.

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