FINAL Business Plan and Budget. Florida Reliability Coordinating Council, Inc. Approved by: FRCC Board of Directors

Transcription

1 FINAL 2013 Business Plan and Budget Florida Reliability Coordinating Council, Inc. Approved by: FRCC Board of Directors DATE: June 28, 2012

2 Table of Contents Introduction... 3 Organizational Overview... 3 Membership and Governance... 4 Statutory Functional Scope Goals and Key Deliverables (Regional Entity Division) Statutory Budget and Projection and 2013 Budget Comparisons Section A Statutory Programs Reliability Standards Development Program Compliance Monitoring and Enforcement Program and Organization Registration and Certification Program Reliability Assessment and Performance Analysis Program Training, Education, and Operator Certification Program Situation Awareness and Infrastructure Security Program General and Administrative Section B Supplemental Financial Information Reserve Balance Breakdown by Statement of Activity Sections Section C NonStatutory Activities Member Services Budget and Projection and 2013 Budget Comparisons Section D Additional Consolidated Financial Statements... 62

3 2013 Business Plan and Budget Introduction Introduction TOTAL RESOURCES (in whole dollars) Statutory FTEs 30.1 Nonstatutory FTEs 14.7 Total FTEs 44.8 Statutory Expenses $ 6,596,036 NonStatutory Expenses $ 6,507,411 Total Expenses $ 13,103,447 Statutory Inc(Dec) in Fixed Assets $ (64,254) NonStatutory Inc(Dec) in Fixed Assets $ 54,564 Total Inc(Dec) in Fixed Assets $ (9,690) Statutory Working Capital Requirement * (157,311) NonStatutory Working Capital Requirement ** 0 Total Working Capital Requirement (157,311) Total Statutory Funding Requirement $ 6,374,471 Total NonStatutory Funding Requirement $ 6,561,975 Total Funding Requirement $ 12,936, Budget U.S. Canada Mexico Statutory Funding Assessments $ 5,957,971 $ 5,957,971 NonStatutory Fees $ 6,250,975 $ 6,250,975 NEL NEL% *Refer to Table B1 on page 41 in Section B. **Refer to the Reserve Analysis on page 57 in Section C. Organizational Overview The Florida Reliability Coordinating Council (FRCC) is a Florida notforprofit corporation that was formed in 1996 and is one of the eight regions of the North American Electric Reliability Corporation (NERC). The FRCC s mission is to ensure and enhance the reliability and adequacy of the Bulk Electric System (BES) in Florida now and into the future. The FRCC s Web site is The FRCC Region is comprised of all of Florida east of the Apalachicola River. Florida s unique geography and its highly integrated transmission system coupled with its single interface boundary to the rest of the Eastern Interconnection required the development of a reliability focus in the FRCC Region. Membership in the FRCC s Regional Entity Division is open to any entity, without cost, that has a material interest in the reliability of the BES in the FRCC Region. Currently there are 70 Registered Entities within the FRCC Region. The FRCC is governed by a balanced stakeholder Board of Directors, and accomplishes its activities through qualified professional staff and standing committees which also have balanced stakeholder governance. Approved by the Board of Directors June 28,

4 2013 Business Plan and Budget Introduction The FRCC provides the statutory functions and services for the FRCC Region through its Regional Entity Division. Nonstatutory services for the FRCC Region are provided through its Member Services Division. This divisional structure is an efficient and effective means of clearly separating statutory and nonstatutory activities and related funding for each. The revised FRCC Bylaws, creating this divisional structure, were first approved by the Federal Energy Regulatory Commission ( FERC ) on March 21, The FRCC Regional Entity Division works to enhance the reliability of the BES in the FRCC Region pursuant to the approved Regional Delegation Agreement with NERC, as the Electric Reliability Organization ( ERO ), under the authority of the FERC. The functions performed by the FRCC Regional Entity Division include regional reliability standards development, compliance monitoring and enforcement of reliability standards, reliability assessment and performance analysis, event analysis and reliability improvement, training and education, situation awareness and infrastructure security. The FRCC Member Services Division also promotes the reliable and efficient operation of the BES in the FRCC Region through establishment of regionallyspecific criteria, coordination of system planning, design and operations, and monitoring adherence to such voluntary criteria. The FRCC standing committees actively participate in the development and approval of their committee s budget. The budgets reflect activities of each committee s responsibilities, such as reliability coordination, resource adequacy, stability studies, transmission studies, reliability assessments, operations tools, system operator training, telecommunication tools and infrastructure. Each year, the total FRCC budget is presented to the FRCC Board of Directors in the second quarter for informational purposes prior to final approval in June. This process gives all FRCC members advanced indication of the funding level, both statutory and nonstatutory, which will be required for the coming fiscal year (January 1 December 31). This allows for timely inclusion of each member s funding responsibility in their individual budgeting process. The final budget is presented for approval to the FRCC Board of Directors in June of each year and is then submitted to NERC for approval by the NERC Board of Trustees and then by FERC. Membership and Governance The FRCC's members (in both divisions) include investorowned utilities, cooperative utilities, municipal utilities, power marketers, independent power producers and others. Membership is currently 31 FRCC members in the Regional Entity Division and 23 FRCC members in the Member Services Division including affiliate and adjunct members. The FRCC has six (6) membership sectors which include the following: NonInvestor Owned Utility Wholesale Load Serving Entity Generating Load Serving Entity Investor Owned Utility Suppliers General Approved by the Board of Directors June 28,

5 2013 Business Plan and Budget Introduction There are currently two (2) members in the General Sector of the Regional Entity Division and no members in the General Sector of the Member Services Division. The activities of FRCC are governed by its Board of Directors. The Board is comprised of senior level executives from members of FRCC. As part of its responsibilities, NERC, as the ERO, delegates its authority to Regional Entities to perform certain functions through delegation agreements. On October 21, 2010, FERC approved revised delegation agreements between NERC and the eight (8) Regional Entities that became effective January 1, These delegation agreements describe the responsibility and authority delegated to the Regional Entities. NERC and the Regional Entities revised the delegation agreements in 2010 to improve the efficiency, transparency, quality and effectiveness of the combined NERC and Regional Entity operations. The funding for Regional Entities is approved separately with each Regional Entity submitting its own business plan and budget for consideration by NERC and FERC. Statutory Functional Scope The FRCC carries out its delegated functions as outlined and detailed in Exhibits A, B, C, D and E of the delegation agreement. These delegated functions as defined by the NERC Rules of Procedures include: Reliability Standards Development ( RSD ) Section 300 Compliance Monitoring and Enforcement ( CMEP ) Section 400 Organization Registration and Certification Section 500 (This program budget has been combined with the Compliance Monitoring and Enforcement function budget.) Reliability Assessment and Performance Analysis ( RA ) Section 800 (including necessary data gathering activities and Events Analysis) Training, Education and Operator Certification ( TE ) Section 900 Situation Awareness and Infrastructure Security ( SA ) Section Goals and Key Deliverables (Regional Entity Division) Support NERC s improvements in the standards development process, for continent wide standards as well as regional standards, that include setting specific timeframes for standards process milestones; setting clear criteria for cancellation of projects that have not yielded timely results; and implementing a cost effectiveness analysis or assessment of how proposed standards will impact resources. Continue to work closely with NERC and the industry to develop clear, resultsbased mandatory reliability standards that establish threshold requirements for ensuring the Bulk Electric System ( BES ) is designed, planned, maintained, and operated in a manner that minimizes risks of cascading failures or interruptions of bulk power supply. Implement an exception process that will be required upon FERC approval of the revised definition of the BES. Approved by the Board of Directors June 28,

6 2013 Business Plan and Budget Introduction Work with NERC and the other seven (7) Regional Entities, to continue refinement, improvement and prioritization of risk based compliance monitoring efforts. Start the transition to performance based audits focused on the purpose, intent and reliability risk associated with applicable standards. Work with NERC and the other regions for better coordination, planning and management of training programs. Work with NERC and the other regions to develop and implement an Auditor credentialing program. Perform delegated functions with independence, without conflict of interest, with objectivity and fairness and with increased transparency. Continue to improve consistency, quality, timeliness and cost effectiveness of NERC and Regional Entity data collection, analysis systems and capabilities through process improvements and more effective coordination and collaboration. Support NERC s efforts to move toward and implement an outcome based approach in Reliability Assessments to achieve measureable improvements in the BES reliability. Work closely with the other Regional Entities and NERC to ensure that the delegated functions are implemented consistently and rationally and to promote the success of the ERO as a collaborative enterprise Key Assumptions The NERC and Regional Entity business plans and budgets reflect a set of common assumptions (see Exhibit A of the 2013 NERC Business Plan and Budget) developed jointly by NERC and the Regional Entities as part of the annual business plan and budget process. The significant assumptions underlying FRCC s 2013 business plan include: 1. NERC and the Regional Entities are expected to continue to work under the existing regulatory framework established in the United States and Canada, as well as the authorizations contained in FERC s order approving NERC as the ERO. 2. The framework for delegation to Regional Entities is expected to remain relatively constant over the next three (3) years and the terms of the existing delegation agreements will continue to apply over the planning period. NERC and the Regional Entities will work to refine and revise procedures and processes to eliminate duplication, increase operational efficiencies, enhance EROwide consistency and to achieve measurable reliability outcomes. 3. Cost pressures continue to strain stakeholder participation in NERC and Regional Entity activities. However, the assumption of continued industry participation in support of key program areas such as event analysis, reliability assessments and standards development is included in this business plan and budget. 4. Additional resources will be needed to support improvements in the quality of standards development and guidance, including related training activities for stakeholders. 5. Implementation of a BES exception process is expected to impact resource requirements and will be based on the number of exception requests, which are unpredictable at this time. Implementation of the BES definition is not expected to place large resource Approved by the Board of Directors June 28,

7 2013 Business Plan and Budget Introduction demands in the Registration area for the FRCC region but there may be significant resource demands in the Reliability Assessment area processing exception requests depending upon the number of requests. 6. NERC will continue to budget and incur costs to operate and maintain the situation awareness tool for FERC, NERC, Regional Entities ( SAFNR ) and stakeholder needs. However, NERC will continue to review the appropriateness of continued funding of other reliability tools, with any proposed changes thereto subject to review and input from the Regional Entities, NERC Committees and working groups, and other affected parties. 7. The number of events requiring review, analysis, and reporting will increase but is not expected to impact resource requirements. 8. The number of noncip violations discovered is expected to decrease as most registered entities have now been audited at least once and the standards and their application has matured. 9. The number of CIP violations is not expected to decrease and may increase over the planning period until all entities have undergone a CIP audit and until a measure of stability in the standards is reached. 10. Integration of the assessment of registered entity internal controls programs as part of the compliance monitoring program will allow NERC and the Regional Entities to further prioritize risk based compliance monitoring activities. Greater emphasis on internal controls provide positive incentives for industry to demonstrate effective management of compliance programs that are focused on reliability, as well as place downward pressure on compliance resource requirements for both industry, NERC and the Regional Entities Overview of Cost Impacts The FRCC s proposed 2013 Statutory Expense Budget (see page 3) is $6,596,036, which is a $155,443 or 2.4% increase over the 2012 budget. The major drivers of this increase are the net effect of: Addition of one (1) position to support increased activity in Reliability Standards Development and the processing of BES exception requests. Deletion of three (3) positions from the 2012 Business Plan and Budget in Compliance Monitoring and Enforcement. The improved internal efficiencies gained with the implementation of additional compliance enforcement discretion have allowed the FRCC not to fill two (2) Enforcement positions. Additionally, the FRCC Compliance staff has improved internal procedures such that the filling of (1) Compliance Program Administrator, budgeted for 2012, became unnecessary. Increase in time spent in Reliability Assessment and Training for Increase in lease commitment and space moving to new headquarters. Increased meeting costs associated with the System Operator Training (which is offset by increased funding for the seminars). Approved by the Board of Directors June 28,

8 2013 Business Plan and Budget Introduction Statutory Accounting Methodology The FRCC, in order to be consistent with all the regions, has modified its accounting reporting as follows: ERO assessments needed to fund working capital are reflected in the General and Administrative Program within Administrative Services. The majority of the Operating Expenses are accounted for within their related department s budget. If an expense cannot be specifically linked to a department, it is included in the General and Administrative Program, within Administrative Services. All expenses for the Administrative Services Programs, referred to as indirect expenses for 2013, are allocated to the delegated program areas by their respective FTEs and are shown on one line of each delegated program area Statement of Activities as Indirect Expenses. Capital expenditures are broken out as fixed assets at the end of each statement of activities rather than being included in their related lines in the operating expenses section. Expenses include depreciation, but since funding is not being requested for depreciation expense, it has been deducted from the funding requirement for capital expenditures Key Deliverables In 2013, FRCC will achieve the following key deliverables: Reliability Standards Development Continue support of NERC in its efforts to transition to results based reliability standards over a fiveyear period, utilizing a NERC Board of Trustee endorsed prioritization process with consideration of FERC directives to address those projects with the most positive impact for reliability of the BES. Support NERC in its efforts to modify the standards development procedure to streamline the development and approval process utilizing more of a project management discipline. Develop regional reliability standards as needed to support NERC s prioritized work plan and provide increased coordination of standards development activities. Using compliance program results, system events, trends analysis and a revised definition of an adequate level of reliability, identify key areas needing improvement, educational programs and other technical assistance programs to improve education and understanding for new or revised standards. Compliance Monitoring and Enforcement Continue to monitor Registered Entities for compliance with mandatory reliability standards, in accordance with the established periodicity identified in the CMEP and NERC Rules of Procedure ( ROP ) for the near term while working with NERC and the other Regional Entities to further refine the riskbased approach to compliance monitoring and enforcement. Enforce compliance with mandatory reliability standards by Registered Entities, in accordance with the CMEP and NERC ROP while consistency, quality, timeliness and utilization of more enforcement discretion for those violations that have minimal impact to the reliability of the BES continues to improve. Ensure timely and thorough mitigation of all violations of mandatory reliability standards. Work with NERC and the other Regional Entities to modify compliance procedures to promote greater process transparency to registered Approved by the Board of Directors June 28,

9 2013 Business Plan and Budget Introduction entities and greater consistency in the determination of violations and penalties. Promote a strong culture of compliance excellence, reliability improvement, and riskbased methods among all registered entities in the FRCC Region. Promote a culture of compliance excellence through education, transparency, information sharing, and incentives. Event Analysis Continue to support improved reliability through reporting and categorizing of system events and security incidents. Provide timely written lessons learned and recommendations to be published through the NERC Event Analysis Subcommittee (EAS). Work with NERC to develop and provide root cause analysis training and other related training. Critical Infrastructure Protection and Cyber Security Facilitate, educate and support Registered Entities in complying with CIP reliability standards and responding to cyber security alerts. Facilitate a proactive action plan by industry that demonstrates effective identification and mitigation of security risks, including safeguarding of assets, developing mitigation alternatives, and preparing and testing recovery plans. Assist Registered Entities with the implementation of the brightline criteria for identification of critical BES assets. Reliability Assessments Provide annual, seasonal, postseasonal, probabilistic, scenario and special reliability assessments of the reliability of the FRCC BES in accordance with definitions and requirements. Work with NERC to develop a revised definition of adequate level of reliability (ALR) of the bulk electric system. Work with NERC and the other Regional Entities to develop and demonstrate BES performance metrics for the purpose of analyzing and trending reliability improvements and benefits, as well as risk/severity based methods. Situation Awareness Continue to support NERC in maintaining and enhancing the current and future situation awareness capabilities that include near realtime information and communications protocols that meet the needs of FERC, NERC, and applicable Registered Entities. Share information learned in Situation Awareness with the Events Analysis program to develop relevant lessons learned. Effective Financial Controls Provide rigorous cost controls and efficient management of resources to remain an efficient provider of ERO delegated functions. Long Term Business Planning NERC and the Regional Entities continue to work together to improve the overall ERO business planning and budgeting process, including longterm resource and financial planning. The 2013 Business Plan and Budget process builds upon the improvements made over the past several years including facetoface meetings, conference calls and exchanges of documentation among senior management and staff of NERC and Regional Entities regarding budget assumptions, resource requirements, and opportunities to improve operational efficiency and effectiveness. As an important first step in the development of a longterm business plan and budgeting process, the Common Business Plan and Budget Assumptions (attachment Exhibit A of the 2013 NERC Business Plan and Budget) incorporate assumptions affecting resource demands through the 2016 planning horizon. NERC and the Regional Entities continue to work together to develop, strengthen and improve an integrated long term ERO business plan and budget that leverages and builds on the combined strengths and resources of NERC and the Regional Entities to improve Approved by the Board of Directors June 28,

10 2013 Business Plan and Budget Introduction the overall effectiveness and efficiency of ERO operations and improve the reliability of the BES of North America. Detailed Business Plans and Budgets by Program Details of the planning, operation, review, and adjustment for each program area are included in Section A. The corresponding budget details are shown in Section B. Below is an overall summary of the changes by program area. Program Budget 2012 Projection 2012 Budget 2013 Variance 2013 Budget v 2012 Budget Variance % Reliability Standards Development 327, , ,675 73, % Compliance Monitoring & Enforcement and Org Reg 4,608,999 4,608,999 4,289,553 (319,447) 6.9% Reliability Assessment and Performance Analysis 1,152,785 1,150,945 1,399, , % Training, Education and Operator Certification 215, , , , % Situation Awareness and Infrastructure Security 90,092 90,092 63,601 (26,491) 29.4% Total Funding All Sources 6,394,454 6,385,254 6,531, , % This graphical representation does not include an allocation of working capital requirements among the Program Areas. Comparison of 2013 To 2012 Budgeted Expenses 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000, Expenses 2013 Expenses 1,500,000 1,000, ,000 Reliability Standards Development Compliance Monitoring & Enforcement and Org Reg Reliability Assessment and Performance Analysis Training, Education and Operator Certification Situation Awareness and Infrastructure Security Approved by the Board of Directors June 28,

11 2013 Business Plan and Budget Introduction 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 20.0% 40.0% % Change in Funding Reliability Standards Development Compliance Monitoring & Enforcement and Org Reg Reliability Assessment and Performance Analysis Training, Education and Operator Certification Situation Awareness and Infrastructure Security % Change in Funding 22.5% 6.9% 21.4% 75.9% 29.4% % Change in Funding Total FTE's by Program Area Budget 2012 STATUTORY Projection 2012 Direct FTEs 2013 Budget Shared FTEs Budget Total FTEs 2013 Budget Change from 2012 Budget Operational Programs Reliability Standards Development Compliance Monitoring & Enforcement and Org Reg Reliability Assessment and Performance Analysis Training, Education and Operator Certification Situation Awareness and Infrastructure Security Total FTEs Operational Programs Administrative Programs General & Administrative Total FTEs Administrative Programs Total FTEs A shared FTE is defined by NERC as an employee who performs both Statutory and NonStatutory functions. Approved by the Board of Directors June 28,

12 2013 Business Plan and Budget Introduction 2012 Statutory Budget and Projection and 2013 Budget Comparisons Statement of Activities, Fixed Assets Expenditures and Change in Working Capital 2012 Budget & Projection, and 2013 Budget STATUTORY Variance Variance 2012 Projection 2013 Budget v 2012 Budget 2013 v 2012 Budget Budget Projection Over(Under) Budget Over(Under) Funding ERO Funding ERO Assessments $ 4,424,850 $ 4,424,850 $ 5,957,971 $ 1,533,121 Penalty Sanctions 874, , ,500 (570,200) Total ERO Funding $ 5,299,550 $ 5,299,550 $ $ 6,262,471 $ 962,921 Membership Dues $ $ $ $ $ Testing Fees Services & Software 22,000 20,160 (1,840) 22,000 Workshops 79,430 72,070 (7,360) 90,000 10,570 Interest Miscellaneous Total Funding $ 5,400,980 $ 5,391,780 $ (9,200) $ 6,374,471 $ 973,491 Expenses Personnel Expenses Salaries $ 3,667,708 3,421,708 $ (246,000) $ 3,741,113 $ 73,405 Payroll Taxes 246, ,835 35, ,656 (6,129) Benefits 550, ,303 (100,975) 533,629 (16,649) Retirement Costs 501, ,161 (10,950) 526,863 25,752 Total Personnel Expenses $ 4,965,882 $ 4,643,007 $ (322,875) $ 5,042,261 $ 76,379 Meeting Expenses Meetings $ 62,776 $ 61,206 $ (1,570) $ 83,259 $ 20,483 Travel 239, ,180 (45,000) 232,363 (6,817) Conference Calls 19,858 16,914 (2,944) 19,347 (511) Total Meeting Expenses $ 321,814 $ 272,300 $ (49,514) $ 334,969 $ 13,155 Operating Expenses Consultants & Contracts $ 203,016 $ 333,823 $ 130,807 $ 176,977 $ (26,039) Office Rent 437, ,847 (11,800) 572, ,638 Office Costs 183, ,559 (80,400) 199,513 15,554 Professional Services 177, ,242 13, ,538 (838) Miscellaneous Depreciation 150, ,179 (17,720) 93,493 (57,406) Total Operating Expenses $ 1,152,897 $ 1,187,650 $ 34,753 $ 1,218,806 $ 65,909 Total Direct Expenses $ 6,440,593 $ 6,102,957 $ (337,636) $ 6,596,036 $ 155,443 Indirect Expenses $ 0 $ $ (0) $ $ (0) Other NonOperating Expenses $ $ $ $ $ Total Expenses $ 6,440,593 $ 6,102,957 $ (337,636) $ 6,596,036 $ 155,443 Change in Assets $ (1,039,613) $ (711,177) $ 328,436 $ (221,565) $ 818,048 Fixed Assets Depreciation $ (150,899) $ (133,179) $ 17,720 $ (93,493) $ 57,406 Total Fixed Asset Purchases 104,760 89,209 (15,615) 29,239 (75,521) Change in Fixed Assets 46,139 43,970 (2,105) 64,254 18,115 TOTAL BUDGET $ 6,394,454 $ 6,058,987 $ (335,531) $ 6,531,782 $ 137,328 TOTAL CHANGE IN WORKING CAPITAL $ (993,474) $ (667,207) $ 326,331 $ (157,311) $ 836,163 FTEs (5.24) (0.57) Approved by the Board of Directors June 28,

13 Section A Statutory Programs 2013 Business Plan and Budget

14 Section A 2013 Business Plan and Budget Reliability Standards Development Program Reliability Standards Development Program Reliability Standards Development Program (in whole dollars) 2012 Budget 2013 Budget Increase (Decrease) Total FTEs Direct Expenses $ 293,116 $ 359,836 $ 66,720 Indirect Expenses $ 35,028 $ 41,958 $ 6,930 Inc(Dec) in Fixed Assets $ (1,053) $ (1,119) $ (66) Total Funding Requirement $ 327,091 $ 400,675 $ 73,584 Program Scope and Functional Description The FRCC may develop, through the FRCC Regional Reliability Standards Development Process, separate Regional Reliability Standards that are specific to the FRCC Region and go beyond, add detail to, or implement NERC Reliability Standards. FRCC Regional Reliability Standards will not be inconsistent with or less stringent than NERC Reliability Standards. The FRCC Regional Reliability Standards Development Process is an open, balanced and fair process that ensures all interested and affected parties have an opportunity to participate in the development of FRCC Regional Reliability Standards for the FRCC Region. FRCC Regional Reliability Standards uphold NERC's Reliability Principles and Market Interface Principles. Each FRCC Regional Reliability Standard shall enable or support one or more of NERC's Reliability Principles and must accommodate competitive electricity markets by being consistent with NERC's Market Interface Principles. FRCC staff follows and participates in NERC s Standards Development Process. This includes FRCC standards staff participation in the NERC Standards Committee, the NERC Standards Committee Process Subcommittee, ERO Regional Standards Group and NERC standards drafting teams as appropriate. Regional Standards Process The FRCC Regional Reliability Standards Development Process is overseen by the FRCC RE Division Operating Committee (OC) and the FRCC RE Division Planning Committee (PC) whose purpose, in addition to other activities, is to ensure that all stakeholder interests are fairly represented in the development of Regional Reliability Standards. The RE Division OC and RE Division PC are balanced stakeholder committees consisting of members from each of the six (6) FRCC sectors. Membership is open to any entity that has a material interest in the reliability of the BES in the FRCC region. Approved by the Board of Directors June 28,

15 Section A 2013 Business Plan and Budget Reliability Standards Development Program The FRCC RE Division OC and RE Division PC will review all requests submitted to develop, modify or withdraw a FRCC Regional Reliability Standard to determine if the request will be accepted or rejected. If the standard request is accepted, the RE Division OC and/or the RE Division PC will assign and direct a Standard Drafting Team (SDT) to develop the draft Regional Reliability Standard. The SDT will consist of technical experts, such as members of FRCC Subcommittees, Working Groups, Task Forces, Industry Volunteers and/or the FRCC Staff. The SDT will develop the details of the FRCC Regional Reliability Standard, consider and respond to industry comments and assist in the implementation of approved standards. Development of each Regional Reliability Standard will provide at least one opportunity for the submission of stakeholder comments prior to a voting activity. The Registered Ballot Body (RBB) comprises potential ballot participants for the voting on standards. FRCC membership is not a requirement to participate in the development of and voting on FRCC Regional Reliability Standards. Any entity or person that has a material interest in the reliability of the FRCC BES shall be allowed to register as a potential ballot participant in the RBB. A separate ballot pool for each voting activity will be established to allow RBB members to register and participate in the vote. The FRCC Board of Directors considers for adoption as FRCC Regional Reliability Standards, those standards that have been developed and approved by this process. Upon adoption by the Board of Directors, such standards are submitted to NERC for adoption. When adopted by NERC, they will be submitted to FERC for approval. The FRCC Regional Reliability Standards Development Process shall be administered by the FRCC Manager of Reliability Standards who will ensure the integrity of the process and the consistency of quality and completeness of the FRCC Regional Reliability Standards Key Assumptions The key assumptions included in the Common Business Plan and Budget Assumptions, Exhibit A, affecting the Reliability Standards Program include: 1. NERC will continue to implement the ResultsBased Standards initiative, which will be based on a NERC Board of Trustees endorsed prioritization process which will focus on revisions to existing reliability standards and new reliability standards development that lead to the greatest improvement in BES reliability. NERC will work to increase a project management discipline which it believes is necessary to satisfy standards development goals and priorities, including the assurance of a requisite level of quality. 2. The number of projects contained in NERC s Reliability Standards Development Plan is expected to increase over the planning period. However, the scope of these projects is generally expected to be narrower than would otherwise exist in the absence of the resultsbased standards initiative. 3. The number of interpretation and guidance requests is expected to decrease over time, reflecting the impact of the resultsbased standards initiative and improved standards development initiative. Approved by the Board of Directors June 28,

16 Section A 2013 Business Plan and Budget Reliability Standards Development Program 4. NERC and the Regions will address and appropriately prioritize all fillintheblank standards. 5. FRCC will continue to keep several regional standards development projects on hold while NERC development, on standards addressing the same reliability issues, proceeds to a conclusion. At that time, the need for a regional standard will be reassessed to determine if the regional standards development project is to continue, a regional variance to the NERC standard is to be developed or the regional project is to be terminated. 6. NERC will modify the standards development process to improve speed and quality, and to explicitly address costeffectiveness while maintaining ANSI accreditation. 7. NERC and the Regional Entities will continue communication and outreach opportunities with stakeholders, continue project level communications and continue education and training for new or revised standards. Along with this effort, improvements in the NERC and FRCC Reliability Standards portions of the websites will be made. 8. FERC Orders associated with the revision of the NERC Glossary of Terms definition of Bulk Electric System include regional entity responsibilities associated with the implementation of regional transition plans and administration of the Rules of Procedure Exception Process. Therefore, the FRCC standards staff will lead the implementation of the NERC ROP BES Exception Process. This will include coordination with other FRCC departments and committees (Compliance, Reliability Assessment, Planning and Operations Committees) Goals and Key Deliverables The Standards Program objectives for 2013 are outlined below: Continue to follow and participate in NERC s Standards Development Process. This includes FRCC standards staff participation in the NERC Standards Committee, the NERC Standards Committee Process Subcommittee, ERO Regional Standards Group and NERC standards drafting teams as appropriate. Continue the development of Regional Reliability Standards that are required by NERC Reliability Standards or are needed for reliability within the FRCC region. Implement the NERC ROP for the BES Exception Process. This will include coordinating with other FRCC departments and committees (Compliance, Reliability Assessment, Planning and Operations Committees for example). Participate in the development and approval of NERC Reliability Standards. Assist the FRCC members and registered entities in following and understanding NERC standards development activities by increasing education and outreach programs to include: o Development and presentation at Standards Workshops, Webinars and committee meetings to address continentwide and regional reliability issues. o Develop and deliver project level communications, education and training for new or revised reliability standards. Approved by the Board of Directors June 28,

17 Section A 2013 Business Plan and Budget Reliability Standards Development Program o Develop enhanced Standards reports that provide a broader view of the NERC and FRCC standards development activities and provide detailed information on standards under development. This additional information will assist the members and registered entities in increasing their understanding of future standards and will help them develop specific comments for consideration of standard drafting teams. o Review, analyze and identify potential Regional concerns associated with NERC Reliability Standards under development. o Establish a stronger relationship with the FRCC standing committees to fully vet the concerns and assist in articulating the concern to support regional communication efforts between functional entities within the region. Funding Sources and Requirements Explanation of Increase (Decrease) Personnel Expenses The addition of one engineer is budgeted to accommodate the BES exception process and to accomplish the 2013 Goals and Deliverables. With this addition, a reduction of time spent by shared staff will offset the impact of this full time person and enable the shared staff to enhance other RE programs. Operating Expenses Increase in lease commitment and space moving to new headquarters. Approved by the Board of Directors June 28,

18 Section A 2013 Business Plan and Budget Reliability Standards Development Program Reliability Standards Development Program Funding sources and related expenses for the reliability standards section of the 2013 business plan are shown in the table below. Statement of Activities, Fixed Assets Expenditures and Change in Working Capital 2012 Budget & Projection, and 2013 Budget Reliability Standards Development Variance Variance 2012 Projection 2013 Budget v 2012 Budget 2013 v 2012 Budget Budget Projection Over(Under) Budget Over(Under) Funding ERO Funding ERO Assessments $ 283,143 $ 283,143 $ $ 381,622 $ 98,479 Penalty Sanctions $ 43,948 $ 43,948 19,053 (24,895) Total ERO Funding $ 327,091 $ 327,091 $ $ 400,675 $ 73,584 Membership Dues $ $ $ $ $ Testing Fees Services & Software Workshops Interest Miscellaneous Total Funding $ 327,091 $ 327,091 $ $ 400,675 $ 73,584 Expenses Personnel Expenses Salaries $ 160,141 $ 222,141 $ 62,000 $ 204,940 $ 44,799 Payroll Taxes 10,775 21,275 10,500 13,183 2,408 Benefits 27,479 26,679 (800) 34,059 6,580 Retirement Costs 21,880 32,380 10,500 28,862 6,982 Total Personnel Expenses $ 220,275 $ 302,475 $ 82,200 $ 281,044 $ 60,769 Meeting Expenses Meetings $ 2,814 $ 714 $ (2,100) $ 1,002 $ (1,812) Travel 45,423 37,423 (8,000) 35,721 (9,702) Conference Calls Total Meeting Expenses $ 48,355 $ 39,055 $ (9,300) $ 37,490 $ (10,865) Operating Expenses Consultants & Contracts $ 86 $ 86 $ $ $ (86) Office Rent 9,018 11,418 2,400 18,690 9,672 Office Costs 6,585 7, ,136 2,551 Professional Services 7,744 17,844 10,100 12,134 4,390 Miscellaneous Depreciation 1,053 2,653 1,600 1, Total Operating Expenses $ 24,486 $ 39,386 $ 14,900 $ 41,302 $ 16,816 Total Direct Expenses $ 293,116 $ 380,916 $ 87,800 $ 359,836 $ 66,720 Indirect Expenses $ 35,028 $ 52,028 $ 17,000 $ 41,958 $ 6,930 Other NonOperating Expenses $ $ $ $ $ Total Expenses $ 328,144 $ 432,944 $ 104,800 $ 401,794 $ 73,650 Change in Assets $ (1,053) $ (105,853) $ (104,800) $ (1,119) $ (66) Fixed Assets Depreciation $ (1,053) $ (2,653) $ (1,600) $ (1,342) $ (289) Total Fixed Asset Purchases 3,815 3, Change in Fixed Assets $ 1,053 $ (1,162) $ (2,215) $ 1,119 $ 66 TOTAL BUDGET $ 327,091 $ 434,106 $ 107,015 $ 400,675 $ 73,584 TOTAL CHANGE IN WORKING CAPITAL $ $ (107,015) $ (107,015) $ $ FTEs Approved by the Board of Directors June 28,

19 Section A 2013 Business Plan and Budget Compliance Monitoring and Enforcement Program Compliance Monitoring and Enforcement Program and Organization Registration and Certification Program Compliance Monitoring and Enforcement and Organization Registration and Certification Program (in whole dollars) Increase 2012 Budget 2013 Budget (Decrease) Total FTEs (2.01) Direct Expenses $ 4,116,882 $ 3,887,367 $ (229,515) Indirect Expenses $ 521,241 $ 455,943 $ (65,299) Inc(Dec) in Fixed Assets $ (29,124) $ (53,757) $ (24,633) Total Funding Requirement $ 4,608,999 $ 4,289,553 $ (319,447) Program Scope and Functional Description Monitoring, evaluating, investigating and enforcing compliance with Reliability Standards by owners, operators and users of the BES, as well as the development and adoption of the reliability standards themselves, are at the core of FRCC s mission. Compliance and Enforcement activities are carried out by the FRCC compliance staff and are independent of all users, owners and operators of the BES. Compliance activities are governed by the delegation agreement between the North American Electric Reliability Corporation (NERC) and the FRCC. Portions of NERC s authority as the Electric Reliability Organization (ERO) have been delegated under Section 215 of the Federal Power Act, to FRCC (the FRCC/NERC Delegation Agreement ). Through a rigorous program of monitoring, evaluating and enforcing, and if necessary, the imposition of penalties and sanctions for noncompliance with Reliability Standards, FRCC will strive to increase the level of reliable operation of the BES in the FRCC Region. Reliable operation of the BES is in the public interest, because it will benefit all owners, operators and users of the BES, and, ultimately, all users and consumers of electric power in the FRCC Region. The NERC Compliance Monitoring and Enforcement Program (CMEP) is the program used by the FRCC to monitor, assess, and enforce compliance with Reliability Standards within the FRCC Region. The FRCC compliance staff works with the compliance staff of the other Regional Entities and with NERC to achieve as much consistency and transparency as possible in the implementation of the CMEP. The workload related to the Critical Infrastructure Protection Standards continues to require significant resources, both in monitoring and in enforcement. As NERC and the Regional Entities move towards riskbased compliance monitoring it will take additional effort to develop and maintain reliability risk profiles of the 70 registered entities along with the workload increase due to additional spot checks anticipated. In addition increased outreach and education of registered entities and increased training of compliance auditors and enforcement personnel will continue in However, the increased efficiencies developed through collaboration and coordination of NERC and the Regional Entities and the efficiencies of increased enforcement Approved by the Board of Directors June 28,

20 Section A 2013 Business Plan and Budget Compliance Monitoring and Enforcement Program discretion capabilities will enable the additional work to be accomplished without the need for additional staff resources in the compliance program Highlights Compliance Monitoring and Enforcement Processes In 2013 the FRCC will monitor, assess and enforce compliance with Reliability Standards using seven (7) monitoring processes (Compliance Audits, SelfCertifications, Spot Checking, Compliance Investigations, SelfReporting, Periodic Data Submittals, and Complaints) to collect information in order to make assessments of compliance to Reliability Standards. However as risk based monitoring activities increase, strong consideration will be given by NERC and the Regions to modifying the current three (3) and six (6) year audit cycles for registered entities. The rigor, scope, depth and recurrence of audits and spot checks will be assessed by the reliability risk and not a predetermined schedule. Registration and Certification The FRCC has registered the organizations responsible for complying with Reliability Standards in accordance with Section 500 of the NERC Rules of Procedure. Currently there are 70 Registered Entities with a total of 244 registered functions. In addition, there are three (3) Joint Registration Organization (JRO) registrations covering TO, DP and GO functions. Maintaining a complete and accurate database will be an ongoing activity. The FRCC will develop, maintain and provide to NERC accurate information on entity registration within the FRCC Region with updates as changes occur. While expectations of increased activity are associated with the implementation of the BES Exception Process, we do not expect significant increases in activity associated with registration and certification of registered entities. Enforcement and Mitigation Enforcement actions taken by FRCC through the CMEP may include the imposition of remedial action directives, sanctions and penalties, when applicable, which shall be based on the schedule of penalties and sanctions approved for implementation by FERC. Mitigation of violations of the approved Reliability Standards remains central to the FRCC s CMEP. Registered Entities found in violation of a Reliability Standard will be required to fully mitigate the violation regardless of any enforcement actions taken brought significant advances in enforcement discretion of violations with minimal impact to the reliability of the BES. This additional discretion will continue in 2013 allowing for more focus being placed on those violations that pose more of a risk to the reliability of the BES Key Assumptions Audits will continue under the schedule to complete BA, TOP, and RC audits every three years and other entities every six years in the planning period as NERC and the Regional Entities transition to a more riskbased approach to compliance monitoring. Reliability risk profiles for all registered entities will be developed and audit scopes will be tailored to the risk profiles which may increase the depth and complexity of some audits and require an increased number of unscheduled audits or spot checks. Entities with a higher risk profile will be audited more often while an entity with a lower one will be audited less often. Staffing resources required for CMEP activities are expected to be flat, as compared to 2012 actual results, during the planning period. Approved by the Board of Directors June 28,

21 Section A 2013 Business Plan and Budget Compliance Monitoring and Enforcement Program Resource implications associated with the FERC approved Find Fix and Track (FFT) process are unclear at this point but are expected to lead to continued refinement, improvement and prioritization of risk based compliance monitoring efforts. In general the number of CIP violations is not expected to decrease and may increase over the planning period until all entities have undergone a CIP audit and until a measure of stability in the standards is reached. The CIP002 V4 Reliability Standard, if approved by FERC, in particular, is expected to result in a substantial increase in the number of entities and critical assets required to be monitored for compliance over the planning period. The Technical Feasibility Exception (TFE) program is expected to require significant staffing resources at NERC and across the industry as the Regional Entities perform reviews and gauge compensating measures. NERC and the Regional Entities are assessing possible changes in the TFE processing to improve efficiency. Efforts will continue to improve the efficiency and effectiveness of the regional compliance delegation model through active collaboration with NERC and the other Regional Entities to improve uniformity, consistency and transparency of compliance processes and procedures. The current trend of alleged violations is expected to continue during the planning period. The number of noncip violations is expected to decrease while an increase in CIP violations is expected to continue until the CIP standards reach a level of stability. NERC will continue to provide increased training for auditors to increase understanding and promote consistency of audit practices and procedures. NERC and the Regional Entities will coordinate and expand registered entity training in the application of Reliability Standards in order to better prepare registered entities and improve compliance. Integration of the assessment of registered entity internal controls programs as part of the compliance monitoring program will allow NERC and the Regional Entities to further prioritize risk based compliance monitoring activities. Greater emphasis on internal controls provide positive incentives for industry to demonstrate effective management of compliance programs that are focused on reliability, as well as place downward pressure on compliance resource requirements for industry, NERC and the Regional Entities Goals and Key Deliverables The Compliance Monitoring and Enforcement Program objectives for 2013 are outlined below: Continue to assess and update entity registration and certification. The FRCC will maintain an accurate registration of all owners, operators, and users of the BES in the FRCC Region for compliance monitoring purposes. Enforce compliance with mandatory reliability standards in accordance with the CMEP and ROP while improving consistency, quality, timeliness and utilizing more enforcement discretion for those violations that have minimal impact to the reliability of the BES. Develop and maintain reliability risk profiles of all registered entities in the FRCC Region for use in the continued transition to a more riskbased compliance monitoring. Approved by the Board of Directors June 28,

22 Section A 2013 Business Plan and Budget Compliance Monitoring and Enforcement Program Work with NERC Compliance staff and other Regional Entity Compliance staff to modify compliance procedures to promote greater process transparency to registered entities and greater consistency in the determination of violations and penalties. Conduct periodic audits, spot checks, selfcertifications, and compliance investigations as required by the NERC Compliance Monitoring and Enforcement Program. There are currently fourteen (14) Operations & Planning Audits and eleven (11) CIP Audits planned for In addition, the FRCC plans to conduct four (4) CIP Mock Audits in 2013 to assist Registered Entities in their readiness for implementation of the CIP Version 4 standards. Ensure timely and thorough mitigation of all violations of mandatory reliability standards. Promote a culture of compliance excellence through education, transparency, information sharing and incentives. Fully implement and convert all Compliance documents to the Document Management System including all documents currently in storage, thus alleviating all need for paper copies of documents. Funding Sources and Requirements Explanation of Increase (Decrease) Personnel Expenses This decrease is the result of not filling 2 enforcement staff positions budgeted for in 2012 and 1 administrative assistant which were determined not to be needed as the result of improved internal efficiencies and the FERC approval of increased enforcement discretion (the Find Fix and Track process). Operating Expenses Increase in lease commitment and space moving to new headquarters. Approved by the Board of Directors June 28,