January 31, Ms. Kimberly Bose Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, DC 20426

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1 January 31, 2011 Ms. Kimberly Bose Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, DC Re: NERC Abbreviated Notice of Penalty regarding Sharyland Utilities, LP, as successor in interest to Cap Rock Energy Corporation, FERC Docket No. NP Dear Ms. Bose: The North American Electric Reliability Corporation (NERC) hereby provides this Abbreviated Notice of Penalty (NOP) regarding Sharyland Utilities, LP (Sharyland), as successor in interest to Cap Rock Energy Corporation (Cap Rock), with information and details regarding the nature and resolution of the violation 1 discussed in detail in the Settlement Agreement (Attachment a) and the Disposition Document attached thereto, 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)). 2 This NOP is being filed with the Commission because Texas Reliability Entity, Inc. (Texas RE) 3 and Sharyland have entered into a Settlement Agreement to resolve all outstanding issues arising 1 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. 2 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 (2010). 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). 3 NERC delegated authority to Texas Reliability Entity, Inc. to become the regional entity for the Electric Reliability Council of Texas, Inc. (ERCOT) region effective July 1, 2010, pursuant to Section 215(e)(4) of the Federal Power Act. NERC also delegated to Texas Reliability Entity, Inc. the authority and responsibility for the continuation of all compliance monitoring and enforcement activities that it had previously delegated to Texas Regional Entity (a division of Electric Reliability Council of Texas, Inc.). The term Texas RE is used herein to refer to both Texas Regional Entity and Texas Reliability Entity, Inc Village Blvd. Princeton, NJ

2 NERC Notice of Penalty Sharyland Utilities, LP, as successor in interest to Cap Rock Energy Corporation January 31, 2011 Page 2 from Texas RE s determination and findings of the enforceable violation of PRC Requirement (R) 1. According to the Settlement Agreement, Sharyland neither admits nor denies the violation, but has agreed to the assessed penalty of two thousand five hundred dollars ($2,500), in addition to other remedies and actions to mitigate the instant violation and facilitate future compliance under the terms and conditions of the Settlement Agreement. Accordingly, the violation identified as NERC Violation Tracking Identification Number TRE is being filed in accordance with the NERC Rules of Procedure and the CMEP. Statement of Findings Underlying the Violation This NOP incorporates the findings and justifications set forth in the Settlement Agreement executed on December 29, 2010, by and between Texas RE and Sharyland. The details of the findings and the basis for the penalty are set forth in the Disposition Document. This NOP filing contains the basis for approval of the Settlement Agreement by the NERC Board of Trustees Compliance Committee (NERC BOTCC). In accordance with Section 39.7 of the Commission s regulations, 18 C.F.R. 39.7, NERC provides the following summary table identifying each violation of a Reliability Standard resolved by the Settlement Agreement, as discussed in greater detail below. NOC ID NERC Violation ID Reliability Std. Req. (R) VRF NOC-689 TRE PRC Medium Duration 6/19/09-8/28/09 Total Penalty ($) 2,500 The text of the Reliability Standard at issue and further information on the subject violation is set forth in the Disposition Document. PRC R1 - OVERVIEW Cap Rock self-certified discovery of this violation on August 31, Texas RE determined that Cap Rock, as a Distribution Provider did not have a written Underfrequency Load Shedding (UFLS) equipment identification, maintenance and testing schedule in place from the date it was included on the NERC Registry to August 28, Statement Describing the Assessed Penalty, Sanction or Enforcement Action Imposed 4 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 Orders, 5 the NERC BOTCC reviewed the Settlement Agreement and supporting documentation on December 10, The NERC BOTCC approved the Settlement Agreement, including 4 See 18 C.F.R. 39.7(d)(4). 5 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).

3 NERC Notice of Penalty Sharyland Utilities, LP, as successor in interest to Cap Rock Energy Corporation January 31, 2011 Page 3 Texas RE s assessment of a two thousand five hundred dollar ($2,500) financial penalty against Sharyland 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 Sharyland and Cap Rock s first occurrence of violation of NERC Reliability Standards; 2. Texas RE reported that Cap Rock was cooperative throughout the compliance enforcement process; 3. Cap Rock had a compliance program at the time of the violation 6 which Texas RE considered a mitigating factor, as discussed in the Disposition Document; 4. there was no evidence of any attempt to conceal a violation nor evidence of intent to do so; 5. Texas RE determined that the violation did not pose a serious or substantial risk to the reliability of the bulk power system (BPS), as discussed in the Disposition Document; and 6. Texas RE 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 approves the Settlement Agreement and believes that the assessed penalty of two thousand five hundred dollars ($2,500) 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 As Cap Rock was the owner and operator of the relays at the time of the violation, Texas RE only reviewed Cap Rock s compliance program for purposes of this evaluation.

4 NERC Notice of Penalty Sharyland Utilities, LP, as successor in interest to Cap Rock Energy Corporation January 31, 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 Texas RE and Sharyland executed December 29, 2010, included as Attachment a; i. Disposition Document dated December 27, 2010, included as Attachment A to the Settlement Agreement; ii. Cap Rock s Self-Certification for PRC R1 dated August 31, 2009, included as Attachment B to the Settlement Agreement; iii. Cap Rock s Mitigation Plan MIT for PRC R1 submitted September 16, 2009, included as Attachment C to the Settlement Agreement; 7 iv. Cap Rock s Certification of Mitigation Plan Completion for PRC R1 dated September 16, 2009, included as Attachment D to the Settlement Agreement; and v. Texas RE s Verification of Mitigation Plan Completion for PRC R1 dated April 16, 2010, included as Attachment E to the Settlement Agreement. A Form of Notice Suitable for Publication 8 A copy of a notice suitable for publication is included in Attachment b. 7 The Mitigation Plan incorrectly states that the violation date is June 17, See 18 C.F.R. 39.7(d)(6).

5 NERC Notice of Penalty Sharyland Utilities, LP, as successor in interest to Cap Rock Energy Corporation January 31, 2011 Page 5 Notices and Communications Notices and communications with respect to this filing may be addressed to the following: 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 Richard E. Biggerstaff* Manager, NERC Compliance Sharyland Utilities, LP 511 W Ohio, Suite 600 Midland, TX (432) (432) facsimile rbiggerstaff@sharylandutilities.com Greg Boggs* Director Resource, Regulatory Admin. Sharyland Utilities, L.P. 511 W Ohio, Suite 600 Midland, TX (432) (432) facsimile gboggs@sharylandutilities.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. Rebecca J. Michael* Assistant General Counsel North American Electric Reliability Corporation 1120 G Street, N.W. Suite 990 Washington, DC (202) (202) facsimile rebecca.michael@nerc.net Susan Vincent* General Counsel Texas Reliability Entity, Inc. 805 Las Cimas Parkway Suite 200 Austin, TX (512) (512) facsimile susan.vincent@texasre.org Rashida Caraway* Manager, Compliance Enforcement Texas Reliability Entity, Inc. 805 Las Cimas Parkway Suite 200 Austin, TX (512) (512) facsimile rashida.caraway@texasre.org

6 NERC Notice of Penalty Sharyland Utilities, LP, as successor in interest to Cap Rock Energy Corporation January 31, 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 Assistant General Counsel North American Electric Reliability Corporation 1120 G Street, N.W. Suite 990 Washington, DC (202) (202) facsimile rebecca.michael@nerc.net cc: Sharyland Utilities, LP, as successor in interest to Cap Rock Energy Corporation Texas Reliability Entity, Inc. Attachments

7 Attachment a Settlement Agreement by and between Texas RE and Sharyland executed December 29, 2010

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14 Disposition Document dated December 27, 2010

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24 Attachment b Cap Rock s Self-Certification for PRC R1 dated August 31, 2009

25 Portal Home TexasRE.org PORTAL CAP ROCK ENERGY CORPORATION Logged in as: miguel alvarado Log Out System Administration Compliance All Forms PRC Forms TOP Forms Historical Forms Certification Statements Pending Certification Statements PRC Self Certification (DP) Save Item Delete Item Cancel Changes Save PDF Return To Search Results New Mitigation Plan Attachments (0) This form was marked as ready to be added to a certification statement on 8/31/2009. *Required Fields Technical Contact * Status: Saved miguel alvarado (malvarado@caprockenergy.com) Find Clear New Contact Notice: Prior to submitting this self-certification form, you are directed to review the complete text of the applicable reliability standard (including interpretations) that is found at Each registered entity should evaluate its compliance with the official standard in preparing this filing. Evidence must be retained to support the responses to this Self-Certification, including any follow-up investigation, until the completion of the next scheduled audit, unless the NERC or Regional Entity advises otherwise. Texas Regional Entity will disclose this information to NERC and other third parties, only as required, and in accordance with established procedures pursuant to section 1500 of the NERC rules of procedure. This self-certification covers the Reporting Period for The response to the certification should accurately reflect the entity's compliance status for the entire Reporting Period. Applicable Function: DP As an authorized representative of CAP ROCK ENERGY CORPORATION, I certify the following: nmlkj nmlkji 1. CAP ROCK ENERGY CORPORATION was in Compliance with the NERC Reliability Standard PRC for the entire Reporting Period. 2. CAP ROCK ENERGY CORPORATION is Not in Compliance for a portion of or the entire Reporting Period with the following requirement(s) of NERC Reliability Standard PRC (indicated by checkmark) but was in compliance with all other requirements of the standard for the entire Reporting Period. gfedcb CAP ROCK ENERGY CORPORATION is indicating a possible violation that has not been previously identified to Texas Regional Entity. gfedc CAP ROCK ENERGY CORPORATION is indicating a possible violation that was previously identified to Texas Regional Entity. Provide issues tracking number, if known. gfedcb Check all requirements for which CAP ROCK ENERGY CORPORATION was Not in Compliance for a portion of or the entire Reporting Period: R1. The Transmission Owner and Distribution Provider with a UFLS program (as required by its Regional Reliability Organization) shall have a UFLS equipment maintenance and testing program in place. This UFLS equipment maintenance and testing program shall include UFLS equipment identification, the schedule for UFLS equipment testing, and the schedule for UFLS equipment maintenance. NOTE: While submittal of a mitigation plan is not required until after a determination of a violation is confirmed, early submittal of a mitigation plan to address and remedy an identified deficiency is encouraged. Submittal of a mitigation plan shall not be deemed an admission of a violation. (See NERC Rules of Procedure, Appendix 4C, Section 6.4.) Provide a detailed explanation why this was not accomplished Cap Rock Energy was recently certified as a DP, the UFLS program was not implemented for a portion of the reporting For Public Release - January 31, 2011

26 gfedc nmlkj period. A UFLS is now implemented for Cap Rock Energy. Violation Severity Level VSL - Lower Enter date of alleged violation 6/17/2009 Enter time of alleged violation hh:mm:ss R2. The Transmission Owner and Distribution Provider with a UFLS program (as required by its Regional Reliability Organization) shall implement its UFLS equipment maintenance and testing program and shall provide UFLS maintenance and testing program results to its Regional Reliability Organization and NERC on request (within 30 calendar days). 3. The NERC Reliability Standard PRC does not apply to CAP ROCK ENERGY CORPORATION because Additional Comments: Return to top gfedcb Ready to Create Certification Statement Save Item Delete Item Cancel Changes Save PDF Return To Search Results For Public Release - January 31, 2011

27 Attachment c Cap Rock s Mitigation Plan MIT for PRC R1 submitted September 16, 2009

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36 Attachment d Cap Rock s Certification of Mitigation Plan Completion for PRC R1 dated September 16, 2009 For Public Release - January 31, 2011

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39 Attachment e Texas RE s Verification of Mitigation Plan Completion for PRC R1 dated April 16, 2010

40 April 16, 2010 Richard E. Biggerstaff Manager NERC Compliance 511 W. Ohio Suite 600 Midland, Texas, Cap Rock Energy Corporation NERC ID#: NCR10340 Violation Number(s): TRE Re: Texas Regional Entity (Texas RE) Mitigation Plan Verification of Completion Richard E. Biggerstaff: As a result of Texas RE s findings in response to a self certification by Cap Rock Energy Corporation dated August 31, 2009, it was determined that Cap Rock Energy Corporation did not have a written under frequency load shedding ( UFLS ) equipment identification, maintenance and testing schedule in place from June 19, 2009 to August 28, This constitutes an Alleged Violation of NERC Reliability Standard PRC-008-0, R1. On September 16, 2009, Cap Rock Energy Corporation certified that the mitigation plan for violation TRE (PRC-008-0, R1) was completed as of August 28, Texas RE confirmed this by reviewing the revised equipment maintenance procedures submitted by Cap Rock Energy Corporation as evidence. The revised procedure identifies the UFLS equipment and provides the basis for its maintenance and testing schedule. Cap Rock Energy Corporation also submitted its relay test results conducted on August 31, 2009 for its UFLS equipment, which showed that the under frequency load shedding scheme worked properly. Based on evidence presented by Cap Rock Energy Corporation and reviewed by Texas RE, this letter confirms the above mentioned mitigation plans are complete. If you have any questions, please feel free to contact Shivaz Chopra at (512) or via at Shivaz.Chopra@TexasRE.org. Respectfully submitted, Rashida Caraway Texas Regional Entity Manager, Compliance Enforcement (512) Rashida.Caraway@TexasRE.org 2700 Via Fortuna, Suite 225 TRE LIMITED Austin, Texas Tel: (512) Fax: (512) For Public Release - January 31, 2011

41 Attachment f Notice of Filing

42 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Stanton Wind Energy, LLC Docket No. NP NOTICE OF FILING January 31, 2011 Take notice that on January 31, 2011, the North American Electric Reliability Corporation (NERC) filed a Notice of Penalty regarding Stanton Wind Energy, LLC in the Texas Reliability Entity, Inc. region. Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission s Rules of Practice and Procedure (18 CFR , ). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant. The Commission encourages electronic submission of protests and interventions in lieu of paper using the efiling link at Persons unable to file electronically should submit an original and 14 copies of the protest or intervention to the Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C This filing is accessible on-line at using the elibrary link and is available for review in the Commission s Public Reference Room in Washington, D.C. There is an esubscription link on the web site that enables subscribers to receive notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please FERCOnlineSupport@ferc.gov, or call (866) (toll free). For TTY, call (202) Comment Date: [BLANK] Kimberly D. Bose, Secretary For Public Release - January 31, 2011