NERC Abbreviated Notice of Penalty regarding New Covert Generating Company, LLC, FERC Docket No. NP

Transcription

1 July 28, 2011 Ms. Kimberly D. Bose Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, DC Re: NERC Abbreviated Notice of Penalty regarding New Covert Generating Company, LLC, FERC Docket No. NP Dear Ms. Bose: The North American Electric Reliability Corporation (NERC) hereby provides this Abbreviated Notice of Penalty (NOP) regarding New Covert Generating Company, LLC (New Covert), 1 with information and details regarding the nature and resolution of the violation 2 discussed in detail in the Settlement Agreement (Attachment a) and the Disposition Document (Attachment d), in accordance with the Federal Energy Regulatory Commission s (Commission or FERC) rules, regulations and orders, as well as NERC Rules of Procedure including Appendix 4C (NERC Compliance Monitoring and Enforcement Program (CMEP)). 3 This NOP is being filed with the Commission because ReliabilityFirst Corporation (ReliabilityFirst) and New Covert have entered into a Settlement Agreement to resolve all outstanding issues arising from ReliabilityFirst s determination and findings of the violation of PRC Requirement (R) 1. According to the Settlement Agreement, New Covert admits the 1 New Covert was originally included on the NERC Compliance Registry under NCR00837 for the Generator Owner (GO) (May 30, 2007) and Generator Operator (GOP) (August 22, 2007) functions. NAES bought out the entity, which led to a split of the GO and GOP functions. New Covert became inactive as NCR00837 and was registered for the GO function only on January 23, 2009 under NCR The GOP function of NCR00837 was taken over by NAES Corp. Covert, which became active on January 30, 2009 under NRC For purposes of this document, each violation at issue is described as a violation, regardless of its procedural posture and whether it was a possible, alleged or confirmed violation. 3 Rules Concerning Certification of the Electric Reliability Organization; and Procedures for the Establishment, Approval, and Enforcement of Electric Reliability Standards (Order No. 672), III FERC Stats. & Regs. 31,204 (2006); Notice of New Docket Prefix NP for Notices of Penalty Filed by the North American Electric Reliability Corporation, Docket No. RM (February 7, 2008). See also 18 C.F.R. Part 39 (2011). Mandatory Reliability Standards for the Bulk-Power System, FERC Stats. & Regs. 31,242 (2007) (Order No. 693), reh g denied, 120 FERC 61,053 (2007) (Order No. 693-A). See 18 C.F.R 39.7(c)(2) Village Blvd. Princeton, NJ

2 NERC Notice of Penalty New Covert Generating Company, LLC July 28, 2011 Page 2 violation and has agreed to the assessed penalty of twelve thousand five hundred dollars ($12,500) in addition to other remedies and actions to mitigate the instant violation and facilitate future compliance under the terms and conditions of the Settlement Agreement. Accordingly, the violation identified as NERC Violation Tracking Identification Number RFC is being filed in accordance with the NERC Rules of Procedure and the CMEP. Statement of Findings Underlying the Violation This NOP incorporates the findings and justifications set forth in the Settlement Agreement executed on March 25, 2011, by and between ReliabilityFirst and New Covert. The details of the findings and the basis for the penalty are set forth in the Disposition Document. This NOP filing contains the basis for approval of the Settlement Agreement by the NERC Board of Trustees Compliance Committee (NERC BOTCC). In accordance with Section 39.7 of the Commission s regulations, 18 C.F.R. 39.7, NERC provides the following summary table identifying each violation of a Reliability Standard resolved by the Settlement Agreement, as discussed in greater detail below. NOC ID NERC Violation ID Reliability Std. Req. (R) VRF Duration NOC-848 RFC PRC High 4 1/23/09-5/10/11 Total Penalty ($) 12,500 The text of the Reliability Standard at issue and further information on the subject violations are set forth in the Disposition Document. PRC R1 OVERVIEW In the course of conducting a Compliance Audit from October 18, 2010 to October 29, 2010, ReliabilityFirst determined that New Covert, as a Generator Owner, did not include maintenance and testing intervals and a basis for all of its voltage and current sensing devices in its Protection System Maintenance and Testing Program in violation of PRC R1. Voltage and current sensing devices constitute 248 of 318 (78%) of all New Covert s Protection System devices. Statement Describing the Assessed Penalty, Sanction or Enforcement Action Imposed 5 Basis for Determination Taking into consideration the Commission s direction in Order No. 693, the NERC Sanction Guidelines, the Commission s July 3, 2008, October 26, 2009 and August 27, 2010 Guidance 4 When NERC filed VRFs for PRC-005-1, NERC originally assigned a Medium VRF to PRC R1. In the Commission s May 18, 2007 Order on Violation Risk Factors, the Commission approved the VRF as filed but directed modifications. On June 1, 2007, NERC filed a modified High VRF for PRC-005 R1 for approval. On August 9, 2007, the Commission issued an Order approving the modified VRF. Therefore, the Medium VRF was in effect from June 18, 2007 until August 9, 2007 and the High VRF has been in effect since August 9, See 18 C.F.R. 39.7(d)(4).

3 NERC Notice of Penalty New Covert Generating Company, LLC July 28, 2011 Page 3 Orders, 6 the NERC BOTCC reviewed the Settlement Agreement and supporting documentation on July 11, The NERC BOTCC approved the Settlement Agreement, including ReliabilityFirst s assessment of a twelve thousand five hundred dollars ($12,500) financial penalty against New Covert and other actions to facilitate future compliance required under the terms and conditions of the Settlement Agreement. In approving the Settlement Agreement, the NERC BOTCC reviewed the applicable requirements of the Commission-approved Reliability Standards and the underlying facts and circumstances of the violation at issue. In reaching this determination, the NERC BOTCC considered the following factors: 1. the violation constituted New Covert s first occurrence of violation of the subject NERC Reliability Standards; 2. ReliabilityFirst considered a prior violation by Lincoln Generating Facility, LLC, an affiliate of New Covert, to be an aggravating factor, as discussed in more detail in the Disposition Document; 3. ReliabilityFirst reported that New Covert was cooperative throughout the compliance audit and enforcement process; 4. ReliabilityFirst determined that New Covert shares a compliance program with Tenaska Energy and considered some aspects of this program to be a mitigating factor in determining the penalty amount. ReliabilityFirst also determined that the program does not relate to compliance with PRC-005; 5. there was no evidence of any attempt to conceal a violation nor evidence of intent to do so; 6. ReliabilityFirst determined that the violation posed moderate risk to the reliability of the bulk power system (BPS), as discussed in the Disposition Document; and 7. ReliabilityFirst reported that there were no other mitigating or aggravating factors or extenuating circumstances that would affect the assessed penalty. For the foregoing reasons, the NERC BOTCC approved the Settlement Agreement and believes that the assessed penalty of twelve thousand five hundred dollars ($12,500) is appropriate for the violation and circumstances at issue, and is consistent with NERC s goal to promote and ensure reliability of the BPS. Pursuant to 18 C.F.R. 39.7(e), the penalty will be effective upon expiration of the 30 day period following the filing of this NOP with FERC, or, if FERC decides to review the penalty, upon final determination by FERC. 6 North American Electric Reliability Corporation, Guidance Order on Reliability Notices of Penalty, 124 FERC 61,015 (2008); North American Electric Reliability Corporation, Further Guidance Order on Reliability Notices of Penalty, 129 FERC 61,069 (2009); North American Electric Reliability Corporation, Notice of No Further Review and Guidance Order, 132 FERC 61,182 (2010).

4 NERC Notice of Penalty New Covert Generating Company, LLC July 28, 2011 Page 4 Attachments to be included as Part of this Notice of Penalty The attachments to be included as part of this NOP are the following documents: a) Settlement Agreement by and between ReliabilityFirst and New Covert executed March 25, 2011 included as Attachment a; i. ReliabilityFirst s Summary of Possible Violation, included as Attachment A to the Settlement Agreement; 7 ii. New Covert s Mitigation Plan dated February 4, 2011, included as Attachment B to the Settlement Agreement; 8 b) New Covert s Certification of Mitigation Plan Completion dated July 6, 2011, included as Attachment b ; c) ReliabilityFirst s Verification of Mitigation Plan Completion dated July 26, 2011, included as Attachment c; and d) Disposition Document included as Attachment d. A Form of Notice Suitable for Publication 9 A copy of a notice suitable for publication is included in Attachment e. 7 The Summary of Possible Violation incorrectly states the violation (1) was discovered on December 17, 2010; (2) began on June 18, 2007; and (3) was assigned a High Violation Severity Level. 8 The Mitigation Plan has a signature date of February 14, See 18 C.F.R. 39.7(d)(6).

5 NERC Notice of Penalty New Covert Generating Company, LLC July 28, 2011 Page 5 Notices and Communications Notices and communications with respect to this filing may be addressed to the following: Gerald W. Cauley Rebecca J. Michael* President and Chief Executive Officer Associate General Counsel for Corporate and David N. Cook* Regulatory Matters Sr. Vice President and General Counsel North American Electric Reliability Corporation North American Electric Reliability Corporation 1120 G Street, N.W Village Boulevard Suite 990 Princeton, NJ Washington, DC (609) (202) (609) facsimile (202) facsimile david.cook@nerc.net rebecca.michael@nerc.net Robert K. Wargo* Director of Enforcement and Regulatory Affairs ReliabilityFirst Corporation 320 Springside Drive, Suite 300 Akron, OH (330) bob.wargo@rfirst.org L. Jason Blake* Corporate Counsel ReliabilityFirst Corporation 320 Springside Drive, Suite 300 Akron, OH (330) jason.blake@rfirst.org Megan E. Gambrel* Associate Attorney ReliabilityFirst Corporation 320 Springside Drive, Suite 300 Akron, OH (330) megan.gambrel@rfirst.org Dan Keiner* O&M Support Manager New Covert Generating Company, LLC 1044 N 115th St, Suite 400 Omaha, Nebraska (402) dkeiner@tenaska.com Todd Jonas* Vice President, Operations New Covert Generating Company, LLC 1044 N. 115th Street, Suite 400 Omaha, Nebraska (402) (402) facsimile tjonas@tenaska.com Richard Slakes* Plant Engineer New Covert Generating Company, LLC th Street Covert, Michigan (269) rslakes@tpfholdings.com *Persons to be included on the Commission s service list are indicated with an asterisk. NERC requests waiver of the Commission s rules and regulations to permit the inclusion of more than two people on the service list.

6 NERC Notice of Penalty New Covert Generating Company, LLC July 28, 2011 Page 6 Conclusion Accordingly, NERC respectfully requests that the Commission accept this Abbreviated NOP as compliant with its rules, regulations and orders. Respectfully submitted, Gerald W. Cauley President and Chief Executive Officer David N. Cook Sr. Vice President and General Counsel North American Electric Reliability Corporation Village Boulevard Princeton, NJ (609) (609) facsimile david.cook@nerc.net /s/ Rebecca J. Michael Rebecca J. Michael Associate General Counsel for Corporate and Regulatory Matters North American Electric Reliability Corporation 1120 G Street, N.W. Suite 990 Washington, DC (202) (202) facsimile rebecca.michael@nerc.net cc: New Covert Generating Company, LLC ReliabilityFirst Corporation Attachments

7 Attachment a Settlement Agreement by and between ReliabilityFirst and New Covert executed 25, 2011

8 In re: NEW COVERT GENERATING ) Docket No. RFC COMPANY, LLC ) ) NERC Registry ID No. NCR10295 ) NERC Reliability Standard: ) PRC-005-1, Requirement 1 SETTLEMENT AGREEMENT BETWEEN RELIABILITYFIRST CORPORATION AND NEW COVERT GENERATING COMPANY, LLC I. INTRODUCTION 1. ReliabilityFirst Corporation ( ReliabilityFirst ) and New Covert Generating Company, LLC ( New Covert ) enter into this Settlement Agreement ( Agreement ) to resolve all outstanding issues arising from ReliabilityFirst s findings, pursuant to the North American Electric Reliability Corporation ( NERC ) Rules of Procedure, of the alleged violation by New Covert of the Reliability Standard PRC-005-1, Requirement New Covert owns a generating facility comprised of three combined cycle plants that each contain a gas turbine generator. New Covert s peak system output is 1,180 MW total for the three plants. New Covert is an indirect subsidiary of TPF II, LP which is a limited partnership and a private equity fund. The general partner of TPF II, LP is Tenaska PFG II, LLC which is owned by employee owners of Tenaska. Tenaska owns and operates several other affiliated entities registered on the NERC Compliance Registry. 3. New Covert was listed on the Compliance Registry as a Generator Owner in the ReliabilityFirst region with the NERC Registry ID Number Reliability Standard PRC is applicable to New Covert in its capacity as a Generator Owner. 4. New Covert and ReliabilityFirst agree and stipulate to this Agreement in its entirety. The facts stipulated herein are stipulated solely for the purpose of resolving between New Covert and ReliabilityFirst the subject matter of this Agreement and do not constitute admissions or stipulations for any purpose, other Docket No. RFC Page 1 of 7

9 than New Covert s admission that the facts stipulated herein constitute a violation of Reliability Standard PRC-005-1, R1. II. ALLEGED VIOLATION OF PRC-005-1, R1 5. In pertinent part, PRC-005-1, R1 states: R1. Each Transmission Owner and any Distribution Provider that owns a transmission Protection System and each Generator Owner that owns a generation Protection System shall have a Protection System maintenance and testing program for Protection Systems that affect the reliability of the BES. The program shall include: R1.1. Maintenance and testing intervals and their basis. 6. From October 18, 2010 through October 29, 2010, ReliabilityFirst conducted a Compliance Audit of New Covert, at which ReliabilityFirst discovered a possible violation of PRC-005-1, R1. See Summary for Possible Violation (attached as Attachment A). New Covert failed to include maintenance and testing intervals and an acceptable basis for all of its voltage and current sensing devices in its Protection System maintenance and testing program. Voltage and current sensing devices constitute 248 (78%) of New Covert s 318 Protection System devices. 7. ReliabilityFirst alleges that New Covert violated PRC-005-1, R1 by failing to include maintenance and testing intervals and an acceptable basis for all Protection System devices in its Protection System maintenance and testing program. Risk Consideration and Violation Duration 8. PRC-005-1, R1 has a Violation Risk Factor of High, consistent with the Violation Risk Factor Matrix promulgated by NERC. Applying the Violation Severity Level Matrix promulgated by NERC, ReliabilityFirst assigned this alleged violation a Violation Severity Level of Severe. 9. This alleged violation did not pose a serious or substantial risk to the reliability of the bulk electric system. Throughout the duration of the alleged violation, New Covert continuously monitored its voltage and current sensing devices through relay metering. New Covert also has alarms in place for many Protection System devices that will alert the control room if an issue arises on the associated Protection System device. 10. For example, voltage and current sensing devices are direct inputs into relays, and if a relay trips a breaker, an alarm alerts the control room. The relay and a digital fault recorder located in the control house each record the cause of such a breaker trip. New Covert has received very few remote trip alarms when conditions indicated that a breaker may trip. As a result of these fully-functioning alarms, Docket No. RFC Page 2 of 7

10 New Covert was immediately aware of, investigated, and took all necessary actions to address the conditions. New Covert experienced no misoperations during the relevant time period. Additionally, New Covert s systems are designed both with redundant and backup protection in place. 11. The duration of this alleged violation is from December 22, 2008, the date on which New Covert was required to comply with PRC-005-1, until May 30, 2011, the date on which New Covert will complete its mitigation plan. Mitigating Actions 12. On February 4, 2011, New Covert submitted to ReliabilityFirst its mitigation plan to address the alleged violation of PRC-005-1, R1. See, New Covert Mitigation Plan, (attached as Attachment B). ReliabilityFirst accepted this mitigation plan on February 18, 2011, and, on that same date, sent it to NERC for approval. 13. In this mitigation plan, New Covert memorialized the actions it took to address the possible violation of PRC-005-1, R1. New Covert committed to catalog all of its voltage and current sensing devices associated with the reliability of the bulk electric system and define the maintenance and testing of such devices in its Protection System maintenance and testing program. New Covert committed to define the recurring maintenance interval for voltage and current sensing devices in its program. Additionally, New Covert committed to perform a full inspection of the catalogued devices during the facility s spring maintenance outage. 14. Pursuant to Section 6.6 of the NERC Compliance Monitoring and Enforcement Program, New Covert will submit a certification of mitigation plan completion to ReliabilityFirst. Upon verification of the completion of this mitigation plan, ReliabilityFirst will report the completion to NERC. III. COMPLIANCE CULTURE AND VIOLATION HISTORY 15. ReliabilityFirst considered certain aspects of New Covert s compliance program as mitigating factors. New Covert s vice president of operations has direct access to New Covert s CEO, who has direct access to the CEO of Tenaska. New Covert also distributes its compliance program, which is the Tenaska corporate compliance program, to all employees with direct or indirect responsibility for compliance with the Reliability Standards. Furthermore, New Covert annually trains those individuals with direct and indirect responsibility for compliance with the Standards. 16. ReliabilityFirst negatively considered that it discovered the alleged violation at a Compliance Audit, rather than through a self report. 17. ReliabilityFirst considered as a mitigating factor the positive degree and quality of New Covert s cooperation and remedial action during the audit and subsequent enforcement processes. New Covert was cooperative throughout its interaction Docket No. RFC Page 3 of 7

11 with ReliabilityFirst in connection with the alleged violation and also promptly submitted an effective mitigation plan to remedy the alleged violation. 18. When assessing the monetary penalty for the alleged violation at issue in this Agreement, ReliabilityFirst considered whether the facts of this alleged violation evidenced any (a) repeated or continuing conduct similar to that underlying a prior violation of the same or a closely-related Reliability Standard Requirement; (b) conduct addressed in any previously submitted mitigation plan for a prior violation of the same or a closely-related Reliability Standard Requirement; or (c) multiple violations of the same Standard and Requirement. The alleged violation addressed herein is New Covert s first alleged violation of a Reliability Standard. 19. ReliabilityFirst also considered these factors in light of the fact that New Covert has numerous affiliates registered on the NERC Compliance Registry in various regions. ReliabilityFirst noted that one of New Covert s affiliates, Lincoln Generating Facility, LLC, with whom New Covert shares compliance-related services, had a previous violation of PRC-005-1, R2.1 in the ReliabilityFirst region. 1 No other New Covert affiliated entities have violated PRC Therefore, ReliabilityFirst determined that the instant violation constitutes a repetitive infraction because New Covert and Lincoln Generating Facility, LLC are both indirect subsidiaries of TPF II, LP, which is a limited partnership and a private equity fund, and they share compliance-related services. The general partner of TPF II, LP is Tenaska PFG II, LLC which is owned by employee owners of Tenaska. IV. MONETARY PENALTY 21. Based upon the foregoing, New Covert shall pay a monetary penalty of $12,500 to ReliabilityFirst. 22. ReliabilityFirst shall present an invoice to New Covert within 20 days after the Agreement is approved by the Commission or affirmed by operation of law. Upon receipt, New Covert shall have 30 days to remit payment. ReliabilityFirst will notify NERC if it does not timely receive the payment from New Covert. 23. If New Covert fails to timely remit the monetary penalty payment to ReliabilityFirst, interest will commence to accrue on the outstanding balance, pursuant to 18 C.F.R a (a)(2)(iii), on the earlier of (a) the 31 st day after the date on the invoice issued by ReliabilityFirst to New Covert for the monetary penalty payment or (b) the 51 st day after the Agreement is approved by the Commission or operation of law. V. ADDITIONAL TERMS 1 See FERC Docket No. NP , RFC Docket No. RFC Page 4 of 7

12 24. ReliabilityFirst and New Covert agree that this Agreement is in the best interest of bulk electric system reliability. The terms and conditions of the Agreement are consistent with the regulations and orders of the Commission and the NERC Rules of Procedure. 25. ReliabilityFirst shall report the terms of all settlements of compliance matters to NERC. NERC will review the Agreement for the purpose of evaluating its consistency with other settlements entered into for similar violations or under similar circumstances. Based on this review, NERC will either approve or reject this Agreement. If NERC rejects the Agreement, NERC will provide specific written reasons for such rejection and ReliabilityFirst will attempt to negotiate with New Covert a revised settlement agreement that addresses NERC s concerns. If a settlement cannot be reached, the enforcement process shall continue to conclusion. If NERC approves the Agreement, NERC will (a) report the approved settlement to the Commission review and approval by order or operation of law and (b) publicly post the alleged violation and the terms provided for in this Agreement. 26. This Agreement shall become effective upon the Commission s approval of the Agreement by order or operation of law or as modified in a manner acceptable to the parties. 27. New Covert agrees that this Agreement, when approved by NERC and the Commission, shall represent a final settlement of all matters set forth herein and binds New Covert to perform the actions enumerated herein. New Covert expressly waives its right to any hearing or appeal concerning any matter set forth herein, unless NERC or Commission action constitutes a material modification to this Agreement. 28. ReliabilityFirst reserves all rights to initiate enforcement actions against New Covert in accordance with the NERC Rules of Procedure in the event that New Covert fails to comply with any of the terms or conditions of this Agreement, including failure to timely complete mitigation plans or other remedies of this Agreement. In the event New Covert fails to comply with any of the terms or conditions of this Agreement, ReliabilityFirst may initiate an action or actions against New Covert to the maximum extent allowed by the NERC Rules of Procedure, including, but not limited to, the imposition of the maximum statutorily allowed monetary penalty. New Covert will retain all rights to defend against such action or actions in accordance with the NERC Rules of Procedure. 29. New Covert consents to ReliabilityFirst s future use of this Agreement for the purpose of assessing the factors within the NERC Sanction Guidelines and applicable Commission orders and policy statements, including, but not limited to, the factor evaluating New Covert s history of violations. Such use may be in any enforcement action or compliance proceeding undertaken by NERC or any Docket No. RFC Page 5 of 7

13 Regional Entity or both, provided however that New Covert does not consent to the use of the conclusions, determinations, and findings set forth in this Agreement as the sole basis for any other action or proceeding brought by NERC or any Regional Entity or both, nor does New Covert consent to the use of this Agreement by any other party in any other action or proceeding. 30. New Covert affirms that all of the matters set forth in this Agreement are true and correct to the best of its knowledge, information, and belief, and that it understands that ReliabilityFirst enters into this Agreement in express reliance on the representations contained herein, as well as any other representations or information provided by New Covert to ReliabilityFirst during any New Covert interaction with ReliabilityFirst relating to the subject matter of this Agreement. 31. Each of the undersigned warrants that he or she is an authorized representative of the entity designated below, is authorized to bind such entity, and accepts the Agreement on the entity's behalf. 32. The signatories to this Agreement agree that they enter into this Agreement voluntarily and that, other than the recitations set forth herein, no tender, offer, or promise of any kind by any member, employee, officer, director, agent, or representative of ReliabilityFirst or New Covert has been made to induce the signatories or any other party to enter into this Agreement. 33. The Agreement may be signed in counterparts. 34. This Agreement is executed in duplicate, each of which so executed shall be deemed to be an original. [SIGNATURE PAGE TO FOLLOW] [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Docket No. RFC Page 6 of 7

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15 Attachment A

16 Summary for Possible Violation (PV) This document is to be completed and sent to the Compliance Director, Manager of Enforcement, Manager of Compliance Audits, Bob Berglund, Abby Sheatzley and Vimarie Luna, upon confirmation of a Possible Violation. Registered Entity: New Covert Generating Company, LLC NERC ID#: NCR10295 Compliance Monitoring Process: Compliance Audits Standard and Requirement: PRC-005-1, Requirement 1 Registered Function(s) in Violation: GO Initial PV Date (Actual Date Discovered): 12/17/2010 Date for Determination of Penalty/Sanction (Beginning Date of Violation): 6/18/2007 Violation Risk Factor: VRF - High Violation Severity Level: High Violation Reported By: Bob Berglund, Derek Kassimer, John Kellerhals Basis for the PV: Maintenance and testing intervals were not included in the Entity's Maintenance and Testing Procedures for voltage and current sensing devices. Facts and Evidence pertaining to the PV: For voltage and current sensing devices, New Covert states in their Protection System Maintenance and Testing Program document These device types have been identified as robust devices requiring testing at the time of installation only. The audit team found that since no maintenance and testing intervals for voltage and current sensing devices, New Covert was in possible violation of PRC-005-1, Requirement 1. Potential Impact to Bulk Electrical System (BES): Moderate 5/14/2010 Rev. 2 - Page 1 of 3

17 Provide Explanation for Potential Impact to BES: Neglecting to establish maintenance and testing intervals and the basis for these devices increases the possibility of equipment failure which may impact the reliability of the BES 5/14/2010 Rev. 2 - Page 2 of 3

18 REVISION HISTORY Revision Prepared By Approved By Date Comments Rev. 0 Renata Fellmeth Gary Campbell 7/1/2009 New Document Rev. 1 Renata Fellmeth Gary Campbell 9/3/2009 Changed PAV to PV. Removed the word Alleged. Rev. 2 Renata Fellmeth Gary Campbell 5/14/2010 Added word Potential to sentences, Impact to Bulk Electrical System (BES) and Provide Explanation for Impact to BES. Added clarification in brackets after the following sentences: Initial PV Date and Date for Determination of Penalty/Sanction. Rev. 3 Renata Fellmeth Gary Campbell 6/15/2010 Unlocked form so that the form is user friendly cutting and pasting. Rev. 4 Renata Fellmeth Gary Campbell 9/15/2010 Added Vimarie Luna to the distribution list. 5/14/2010 Rev. 2 - Page 3 of 3

19 Attachment B

20 FOR PUBLIC RELEASE - JULY 28, 2011 RFC

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30 Attachment b New Covert s Certification of Mitigation Plan Completion dated

31 Certification of Mitigation Plan Completion Submittal of a Certification of Mitigation Plan Completion shall include data or information sufficient for ReliabilityFirst Corporation to verify completion of the Mitigation Plan, ReliabilityFirst Corporation may request additional data or information and conduct follow-up assessments, on~site or other Spot Checking, or Compliance Audits as it deems necessary to verify that all required actions in the Mitigation Plan have been completed and the Registered Entity is in compliance with the subject Reliability Standard. (CMEP Section 6.6) Registered Entity Name: New Covert Generating Company, LLC NERC Registry ID: NCRI0295 Date of Submittal of Certification: 7/6/11 NERC Violation ID No(s): RFC Reliability Standard and the Requirement(s) of which a violation was mitigated: PRC~005-1 Rl Date Mitigation Plan was scheduled to be completed per accepted Mitigation Plan: 5/30/11 Date Mitigation Plan was actually completed: 5/10/11 Additional Comments (or List of Documents Attached): From Mitigation Plan Section ])3 - For Items 1 ~ 3, please see, "Excerpt of RCP-NERC~PRC-ATT-OOl~Rl Mitgation Plan." For Item 4, please see, ncts and PTs Inspection Document for Mitigation Plan," performed per Work Order I certify that the Mitigation Plan for the above named violation has been completed on the date shown above and that all submitted information is complete and correct to the best of my knowledge. Name: Richard W. Evans Title: Plant M.anager revans@tpfholdings.com Phone: Authorized Signature ~~/ 7 I)ate ~t' Page 1 of3

32 Please direct completed forms or any questions regarding completion of this form to the ReliabilityFirst Compliance address Please indicate the company name and reference the NERC Violation ID # (if known) in the subject line of the . Additionally, any ReliabilityFirst Compliance Staff member is available for questions regarding the use of this form. Please see the contact list posted on the ReliabilityFirst Compliance web page. Page 2 of 3

33 DOCUMENT CONTROL Title: Certification of Mitigation Plan Completion Issue: Version 1 Date: 5 January 2008 Distribution: Public Filename: Certification of a Completed Mitigation Plan_Ver1.doc Control: Reissue as complete document only DOCUMENT APPROVAL Prepared By Approved By Approval Signature Date Robert K. Wargo Manager of Compliance Enforcement Raymond J. Palmieri Vice President and Director Compliance 1/5/2009 DOCUMENT CHANGE/REVISION HISTORY Version Prepared By Summary of Changes Date 1.0 Robert K. Wargo Original Issue 1/5/2009 Page 3 of 3

34 Attachment c ReliabilityFirst s Verification of Mitigation Plan Completion dated

35 In re: NEW COVERT GENERATING ) Docket No. RFC COMPANY, LLC ) ) NERC Registry ID No. NCR10295 ) NERC Reliability Standards: ) PRC-005-1, Requirement 1 ) VERIFICATION OF MITIGATION PLAN COMPLETION FOR MIT I. RELEVANT BACKGROUND New Covert Generating Company, LLC ( New Covert Generating ) was subject to a Compliance Audit from October 18, 2010 to October 29, The Audit Team identified a possible violation of PRC-005-1, Requirement 1. New Covert Generating s Protection System Maintenance and Testing Program document did not include maintenance and testing intervals for voltage and current sensing devices as required by PRC-005-1, R1. New Covert Generating submitted a proposed mitigation plan to ReliabilityFirst on February 4, 2011, whereby stating New Covert Generating would complete all mitigating actions on May 30, This mitigation plan, designated MIT , was accepted by ReliabilityFirst on February 18, 2011, and approved by NERC on March 16, II. MITIGATION PLAN COMPLETION REVIEW PROCESS On July 6, 2011, New Covert Generating certified that the mitigation plan for PRC-005-1, Requirement 1 was completed as of May 10, ReliabilityFirst requested and received evidence of completion for actions taken by New Covert Generating as specified in the mitigation plan. ReliabilityFirst performed an in-depth review of the information provided to verify that all actions specified in the mitigation plan were successfully completed. A. Evidence Reviewed per Standard and Requirement. Evidence Reviewed Applicable Standard and Requirement 1. PRC005 CTS PTS Certification of a Completed Mitigation Plan PRC-005-1, R1 Final[1], which includes PRC Attachment 1 of New Covert s Protection System Maintenance and Testing Program 2. CTs and PTs Inspection Document and Log, April 2011 PRC-005-1, R1

36 B. Verification of Mitigation Plan Completion. 1. PRC-005-1, Requirement 1 PRC-005-1, Requirement 1 states: R1. Each Transmission Owner and any Distribution Provider that owns a transmission Protection System and each Generator Owner that owns a generation Protection System shall have a Protection System maintenance and testing program for Protection Systems that affect the reliability of the BES. The program shall include: R1.1. Maintenance and testing intervals and their basis. R1.2. Summary of maintenance and testing procedures. New Covert Generating s Mitigation Plan consisted of four milestones toward becoming compliant to Requirement 1 of Reliability Standard PRC Pursuant to Milestone 1, New Covert Generating cataloged all of the Voltage & Current Sensing Devices associated with the reliability of the bulk electric system. ReliabilityFirst reviewed supporting documentation to verify completion of Milestone 1, including a listing of all applicable Current Transformers ( CTs ) and Potential Transformers ( PTs ) in PRC Attachment 1 of New Covert Generating s Protection System Maintenance and Testing Program. ReliabilityFirst determined that New Covert Generating fully completed Milestone 1 of its Mitigation Plan. 2. Pursuant to Milestone 2, New Covert Generating defined maintenance and testing of CTs and PTs in the Protection System Maintenance and Testing Program by physically inspecting the devices in location and by verifying proper connections from devices to protection relays. ReliabilityFirst reviewed supporting documentation to verify completion of Milestone 2, including maintenance and testing procedures for voltage and current sensing devices in PRC Attachment 1 in New Covert Generating s Protection System Maintenance and Testing Program. ReliabilityFirst determined that New Covert Generating fully completed Milestone 2 of its Mitigation Plan. 3. Pursuant to Milestone 3, New Covert Generating performed a one-time 100% inspection of in-scope devices during the plant s spring maintenance outage. ReliabilityFirst reviewed supporting documentation to verify completion of Milestone 3, including the CTs and PTs Inspection Document and Log, from April 2011, which reports the maintenance and testing performed per Work Order on New Covert Generating s CTs and PTs. ReliabilityFirst determined that New Covert Generating fully completed Milestone 3 of its Mitigation Plan. 4. Pursuant to Milestone 4, New Covert Generating defined the recurring maintenance interval. ReliabilityFirst reviewed supporting documentation to verify completion of Milestone 4, including voltage and current sensing devices in MIT for Docket Number RFC

37 the Equipment and Summary section of New Covert Generating s Protection System Maintenance and Testing Program, which now requires that CTs and PTs be subject to the maintenance and testing intervals of six years, internal, as outlined in PRC Attachment 1 in New Covert Generating s Protection System Maintenance and Testing Program. ReliabilityFirst determined that New Covert Generating fully completed Milestone 4 of its Mitigation Plan. ReliabilityFirst considers New Covert Generating to be in compliance with PRC-005-1, R1, having incorporated maintenance and testing intervals for voltage and current sensing devices in its Protection System Maintenance and Testing Program and completing 100% inspection of in-scope devices during the plant's spring maintenance outage. III. CONCLUSION ReliabilityFirst Corporation reviewed the evidence New Covert Generating submitted in support of its Certification of Completion. This evidence demonstrates successful completion of the mitigating activities in mitigation plan MIT associated with PRC-005-1, Requirement 1. ReliabilityFirst hereby verifies that the mitigation plan associated with the alleged violation of the aforementioned NERC Reliability Standard is completed in accordance with its terms and conditions. Accepted: Kristina C. Sims Date: July 25, 2011 Associate Attorney ReliabilityFirst Corporation Approved: signing on behalf of: L. Jason Blake Date: July 26, 2010 Corporate Counsel ReliabilityFirst Corporation MIT for Docket Number RFC

38 Attachment d Disposition Document

39 Attachment d DISPOSITION OF VIOLATION 1 Dated July 11, 2011 NERC TRACKING REGIONAL ENTITY TRACKING NOC# NO. NO. RFC RFC NOC-848 REGISTERED ENTITY NERC REGISTRY ID New Covert Generating Company, LLC (New Covert) NCR REGIONAL ENTITY ReliabilityFirst Corporation (ReliabilityFirst) I. REGISTRATION INFORMATION ENTITY IS REGISTERED FOR THE FOLLOWING FUNCTIONS (BOTTOM ROW INDICATES REGISTRATION DATE): BA DP GO GOP IA LSE PA PSE RC RP RSG TO TOP TP TSP X 1/23/09 * VIOLATION APPLIES TO SHADED FUNCTIONS DESCRIPTION OF THE REGISTERED ENTITY New Covert owns a generating facility comprised of three combined cycle plants that each contain a gas turbine generator. New Covert s peak system output is 1,180 MW total for the three plants. New Covert is an indirect subsidiary of TPF II, LP which is a limited partnership and a private equity fund. The general partner of TPF II, LP is Tenaska PFG II, LLC, which is owned by employee owners of Tenaska Energy. Tenaska Energy owns and operates several other affiliated entities registered on the NERC Compliance Registry. 1 For purposes of this document and attachments hereto, each violation at issue is described as a violation, regardless of its procedural posture and whether it was a possible, alleged or confirmed violation. 2 New Covert was originally included on the NERC Compliance Registry under NCR00837 for the GO (May 20, 2007) and GOP (August 22, 2007) functions. NAES bought out the entity, which led to a split of the GO and GOP functions. New Covert became inactive as NCR00837 and was registered for the GO function only on January 23, 2009 under NCR The GOP function of NCR00837 was taken over by NAES Corp. Covert, which became active on January 30, 2009 under NRC New Covert Generating Company, LLC Page 1 of 8

40 Attachment d II. VIOLATION INFORMATION RELIABILITY REQUIREMENT(S) SUB- VRF(S) VSL(S) STANDARD REQUIREMENT(S) PRC High 3 Severe The purpose statement of PRC provides: To ensure all transmission and generation Protection Systems [4] affecting the reliability of the Bulk Electric System (BES) are maintained and tested. (Footnote added.) PRC R1 provides: R1. Each Transmission Owner and any Distribution Provider that owns a transmission Protection System and each Generator Owner that owns a generation Protection System shall have a Protection System maintenance and testing program for Protection Systems that affect the reliability of the BES. The program shall include: R1.1. Maintenance and testing intervals and their basis. R1.2. Summary of maintenance and testing procedures. VIOLATION DESCRIPTION ReliabilityFirst conducted a Compliance Audit of New Covert from October 18, 2010 through October 29, 2010 and discovered a violation of PRC R1. New Covert failed to include maintenance and testing intervals and a basis for all of its voltage and current sensing devices in its Protection System maintenance and testing program. The voltage and current sensing devices constitute 78%, or 248 of 318, of New Covert s total protection system devices. RELIABILITY IMPACT STATEMENT- POTENTIAL AND ACTUAL ReliabilityFirst determined that the violation posed moderate risk to the reliability of the bulk power system (BPS) because throughout the duration of the violation, New Covert continuously monitored its voltage and current sensing devices. New Covert s relay metering indicators signaled that the voltage and current sensing devices were operating properly. New Covert also had alarms in place designed to alert the control room if an issue associated with the Protection System devices were 3 When NERC filed Violation Risk Factors (VRF) it originally assigned PRC R1 a Medium VRF. The Commission approved the VRF as filed; however, it directed NERC to submit modifications. NERC submitted the modified High VRF and on August 9, 2007, the Commission approved the modified High VRF. Therefore, the Medium VRF for PRC R1 was in effect from June 18, 2007 until August 9, 2007 when the High VRF became effective. 4 The NERC Glossary of Terms Used in Reliability Standards defines Protection System as Protective relays, associated communication systems, voltage and current sensing devices, station batteries and DC control circuitry. New Covert Generating Company, LLC Page 2 of 8

41 Attachment d to arise. Additionally, New Covert did not experience any misoperations during this time period. Furthermore, New Covert s systems are designed both with redundant and backup protection in place. IS THERE A SETTLEMENT AGREEMENT YES NO WITH RESPECT TO THE VIOLATION, REGISTERED ENTITY NEITHER ADMITS NOR DENIES IT (SETTLEMENT ONLY) YES ADMITS TO IT YES DOES NOT CONTEST IT (INCLUDING WITHIN 30 DAYS) YES WITH RESPECT TO THE ASSESSED PENALTY OR SANCTION, REGISTERED ENTITY ACCEPTS IT/ DOES NOT CONTEST IT YES III. DISCOVERY INFORMATION METHOD OF DISCOVERY SELF-REPORT SELF-CERTIFICATION COMPLIANCE AUDIT COMPLIANCE VIOLATION INVESTIGATION SPOT CHECK COMPLAINT PERIODIC DATA SUBMITTAL EXCEPTION REPORTING DURATION DATE(S) 1/23/09 (when NAES, the new owner of New Covert, was registered as a GO with NERC) through 5/10/11 (Mitigation Plan completion) DATE DISCOVERED BY OR REPORTED TO REGIONAL ENTITY 10/29/10 IS THE VIOLATION STILL OCCURRING YES NO IF YES, EXPLAIN REMEDIAL ACTION DIRECTIVE ISSUED YES NO PRE TO POST JUNE 18, 2007 VIOLATION YES NO New Covert Generating Company, LLC Page 3 of 8

42 Attachment d IV. MITIGATION INFORMATION FOR FINAL ACCEPTED MITIGATION PLAN: MITIGATION PLAN NO. MIT DATE SUBMITTED TO REGIONAL ENTITY 2/4/11 5 DATE ACCEPTED BY REGIONAL ENTITY 2/18/11 DATE APPROVED BY NERC 3/16/11 DATE PROVIDED TO FERC 3/17/11 MITIGATION PLAN COMPLETED YES NO EXPECTED COMPLETION DATE 5/30/11 EXTENSIONS GRANTED ACTUAL COMPLETION DATE 5/10/11 DATE OF CERTIFICATION LETTER 7/6/11 CERTIFIED COMPLETE BY REGISTERED ENTITY AS OF 5/10/11 DATE OF VERIFICATION LETTER 7/26/11 VERIFIED COMPLETE BY REGIONAL ENTITY AS OF 5/10/11 ACTIONS TAKEN TO MITIGATE THE ISSUE AND PREVENT RECURRENCE New Covert cataloged all of its voltage and current sensing devices and defined the maintenance and testing of these devices in its Protection System program. Additionally, New Covert performed a full inspection of the cataloged devices during its spring 2011 maintenance outage. LIST OF EVIDENCE REVIEWED BY REGIONAL ENTITY TO EVALUATE COMPLETION OF MITIGATION PLAN (FOR CASES IN WHICH MITIGATION IS NOT YET COMPLETED, LIST EVIDENCE REVIEWED FOR COMPLETED MILESTONES) PRC005 CTS PTS Certification of a Completed Mitigation Plan Final[1], which includes PRC Attachment 1 of New Covert s Protection System Maintenance and Testing Program CTs and PTs Inspection Document and Log, April New Covert submitted its Mitigation Plan on February 4, New Covert made revisions to the plan and resubmitted it on February 14, ReliabilityFirst considers this Mitigation Plan to be submitted on February 4, New Covert Generating Company, LLC Page 4 of 8

43 Attachment d V. PENALTY INFORMATION TOTAL ASSESSED PENALTY OR SANCTION OF $12,500 FOR ONE VIOLATION OF A RELIABILITY STANDARD. (1) REGISTERED ENTITY S COMPLIANCE HISTORY PREVIOUSLY FILED VIOLATIONS OF ANY OF THE INSTANT RELIABILITY STANDARD(S) OR REQUIREMENT(S) THEREUNDER YES NO LIST VIOLATIONS AND STATUS ADDITIONAL COMMENTS New Covert does not have prior violations of the Reliability Standards, but one of its affiliates, Lincoln Generating Facility, LLC, which shares compliance services with New Covert, had a violation of PRC R2 in A Settlement Agreement covering violation (NOC-447) for Lincoln Generating Facility, LLC, was approved by the BOTCC on May 4, 2010 and filed with FERC under NP on July 6, On August 5, 2010, FERC issued an order stating it would not engage in further review of the Notice of Penalty. ReliabilityFirst considered this affiliate s prior violation to be an aggravating factor in determining New Covert s penalty amount. PREVIOUSLY FILED VIOLATIONS OF OTHER RELIABILITY STANDARD(S) OR REQUIREMENTS THEREUNDER YES NO LIST VIOLATIONS AND STATUS ADDITIONAL COMMENTS On March 31, 2010, NERC filed a Settlement Agreement covering a FAC R1 violation for Tenaska Alabama Partners, L.P. (NCR01335), an affiliate of Tenaska Energy, filed in Docket No. NP (NOC-408). On April 30, 2010, the Commission issued an order stating it would not engage in further review of the Notice of Penalty. As affiliates of Tenaska Energy, Tenaska Alabama Partners and New Covert share compliance services with Tenaska Energy and Tenaska s other affiliated entities. ReliabilityFirst did not consider this affiliate s violation in the penalty determination because it was not a violation of the same or similar Reliability Standard. New Covert Generating Company, LLC Page 5 of 8

44 Attachment d (2) THE DEGREE AND QUALITY OF COOPERATION BY THE REGISTERED ENTITY (IF THE RESPONSE TO FULL COOPERATION IS NO, THE ABBREVIATED NOP FORM MAY NOT BE USED.) FULL COOPERATION YES NO IF NO, EXPLAIN (3) THE PRESENCE AND QUALITY OF THE REGISTERED ENTITY S COMPLIANCE PROGRAM IS THERE A DOCUMENTED COMPLIANCE PROGRAM YES NO UNDETERMINED EXPLAIN ReliabilityFirst considered certain aspects of New Covert s compliance program as mitigating factors. Because Tenaska PFG II, LLC has an indirect ownership interest in New Covert, New Covert uses the same compliance program as Tenaska Energy Inc. The Compliance program was in place at the time the violation occurred. Nevertheless, ReliabilityFirst determined that although New Covert uses Tenaska Energy s corporate Compliance Program, the program does not relate to compliance with PRC-005. Senior management is involved in New Covert s compliance program. Its Vice President of operations has direct access to the CEO, who has direct access to the CEO of Tenaska. The compliance program is distributed to all employees with compliance responsibilities and annual training is provided to these employees. EXPLAIN SENIOR MANAGEMENT S ROLE AND INVOLVEMENT WITH RESPECT TO THE REGISTERED ENTITY S COMPLIANCE PROGRAM, INCLUDING WHETHER SENIOR MANAGEMENT TAKES ACTIONS THAT SUPPORT THE COMPLIANCE PROGRAM, SUCH AS TRAINING, COMPLIANCE AS A FACTOR IN EMPLOYEE EVALUATIONS, OR OTHERWISE. Please see above. (4) ANY ATTEMPT BY THE REGISTERED ENTITY TO CONCEAL THE VIOLATION(S) OR INFORMATION NEEDED TO REVIEW, EVALUATE OR INVESTIGATE THE VIOLATION. YES NO IF YES, EXPLAIN New Covert Generating Company, LLC Page 6 of 8

45 Attachment d (5) ANY EVIDENCE THE VIOLATION(S) WERE INTENTIONAL (IF THE RESPONSE IS YES, THE ABBREVIATED NOP FORM MAY NOT BE USED.) YES NO IF YES, EXPLAIN (6) ANY OTHER MITIGATING FACTORS FOR CONSIDERATION YES NO IF YES, EXPLAIN (7) ANY OTHER AGGRAVATING FACTORS FOR CONSIDERATION YES NO IF YES, EXPLAIN ReliabilityFirst considered the fact that the violation was discovered at a Compliance Audit rather than a Self-Report, and therefore did not apply mitigating credit when determining the penalty amount. (8) ANY OTHER EXTENUATING CIRCUMSTANCES YES NO IF YES, EXPLAIN EXHIBITS: SOURCE DOCUMENT ReliabilityFirst s Summary for Possible Violation undated 6 MITIGATION PLAN New Covert s Mitigation Plan MIT dated February 4, 2011 CERTIFICATION BY REGISTERED ENTITY New Covert s Certification of Mitigation Plan Completion submitted July 6, 2011 VERIFICATION BY REGIONAL ENTITY ReliabilityFirst Verification of Mitigation Plan Completion dated July 26, The Summary of Possible Violation incorrectly states the violation (1) was discovered on December 17, 2010; (2) began on June 18, 2007; and (3) was assigned a High Violation Severity Level. New Covert Generating Company, LLC Page 7 of 8