Washington (Platts)--5Nov2012/252 pm EST/1952 GMT

The US Federal Energy Regulatory Commission on Friday approved North American Electric Reliability Corp.'s proposed $52.25 million budget for fiscal year 2013, down 1.6% from the FY-12 budget.

FERC also directed NERC to develop criteria by February 1 that would determine whether each NERC activity is eligible to be funded under the Federal Power Act.

In approving NERC's FY-13 budget, FERC also accepted NERC's business plan for the coming year, which would include efforts to revise the standards development process and improve NERC's internal financial and operational controls.

Article continues below...

Request a free trial of: Inside FERC
	Inside FERC is the authoritative guide to gas pipeline regulation and the agency's role in reshaping the electric utility industry and has covered the Federal Energy Regulatory Commission for more than 25 years.

"We find that NERC's 2013 budget is reasonable," FERC said. NERC's fiscal year follows the calendar year.

FERC also approved the budgets the eight NERC regional entities that have authority to monitor compliance with the mandatory reliability standards.

The Friday order also addressed two of a handful of issues pending under FERC's audit of NERC's financial performance.

FERC enforcement staff earlier this year found problems with NERC's budget process, including retirement plans, employee compensation, oversight of regional entities' budgets, methods for reporting and tracking employee expenses and time, and standards for determining whether expenses were reasonable.

Enforcement staff also suggested NERC create a way to determine whether its activities fall under its FPA statutory responsibilities as the FERC-designated electric reliability organization, or ERO. Activities that do not fall under the FPA would need to be funded through other means, such as federal grants.

FERC agreed that NERC needed criteria to determine its statutory activities. In response to the FERC enforcement audit, NERC proposed to develop such criteria and asked to have until March 1 to file a proposal with FERC.

But FERC on Friday ordered NERC to file that proposal a month sooner, by February 1. "A slightly more expedited timeline" would allow FERC to rule on the proposed criteria in time for NERC to apply the criteria in developing its 2014 budget proposal, FERC said.

All other issues raised regarding the NERC audit "will be addressed in a future order," FERC said.

NERC and FERC operate under an unusual regulatory structure that the Energy Policy Act of 2005 created under the FPA.

The FPA divides the responsibility for mandatory electricity reliability standards between FERC and its designated ERO, which NERC became in July 2006. The ERO is tasked with proposing new or revised standards, ensuring the rules are obeyed and determining penalties for violations. NERC also advises the industry on reliability problems and performs reliability assessments. The commission can approve or remand a proposed standard and/or direct the ERO to come up with a new or modified requirement to address a specific concern. However, FERC cannot itself propose standards.

--Esther Whieldon, esther_whieldon@platts.com
--Edited by Katharine Fraser, katharine_fraser@platts.com