AICPA SOC Service Organizations - Certrec

Complete Programmatic Failure Due to Widespread Problem with Broad River’s Compliance Program Results in $435,000 Penalty

Summary of NERC Penalties











1/7/16 –


Broad River

Broad River

- Lack of transparency and reporting

- Passive acceptance of the improper compliance activities served to aggravate the penalty

Transmission Operator (TOP) Standard



SERC determined that Broad River was in violation of TOP-003-3 R5 because it failed to report unit unavailability in accordance with its BA and Transmission Operator’s (TOP) data specifications requirements. The plant manager knowingly allowed inaccurate information regarding the availability of unit 5 to be reported in the Daily Executive Status Report and provided incorrect information to the BA when unit 5 actually became unavailable. SERC later determined that the violation extended back to the enforceable period of TOP-002-2.1b R3, because Broad River failed to consistently coordinate its current-day and next-day operations with its BA/Transmission Service Provider (TSP) by failing to provide proper notification when a unit was unavailable. Furthermore, SERC determined that there was no TOP-002/TOP-003 compliance procedure, and operators were not aware of a documented procedure to follow when a unit failed. SERC confirmed that there were a total of 112 instances, 60 of which occurred from January 7, 2016, through March 27, 2017, when TOP-002-2.1b R3 was mandatory and enforceable, and the remaining 52 instances occurred when TOP-003-3 R5 was mandatory and enforceable. The cause of this violation was a complete programmatic failure that stemmed from a widespread problem with Broad River’s compliance program, including the presence of vertical organizational silos in the form of lack of or broken communication between the third-party plant and asset manager and senior management, and between plant management and those responsible for compliance.

Broad River is an entity with five gas turbine generators that produce 850 MW dual-fuel, located in Gaffney, South Carolina.

From October 19, 2016, to January 1, 2020, IHI Power Services Corporation provided asset management, operations, and maintenance services to Broad River via a contractual agreement. Tateswood Energy Company, LLC, executed an Asset Management Agreement with Broad River, which has been in effect as of December 1, 2019. Plant Operations and Maintenance services are currently provided by NAES Corporation via a contractual agreement. Broad River operated under two long-term tolling agreements (Purchase Power Agreements (PPAs)) with a public utility and Balancing Authority (BA). Pursuant to the terms of the PPAs, Broad River was paid by the Balancing Authority (BA) partially based on unit availability.

Basis for Penalty

According to the Settlement Agreement, SERC has assessed a penalty of $435,000, and associated non-monetary sanctions. Specifically, SERC imposed a non-monetary sanction requiring Broad River’s compliance department to provide Broad River senior management and SERC with quarterly reports concerning compliance with TOP-003-4 R5 until SERC has received four consecutive quarterly reports from Broad River and determines that such reporting is no longer necessary for the referenced violation. In reaching this determination, SERC considered the following factors:

  • The violation posed a serious and substantial risk to the reliability of the BPS.
  • Broad River’s agents’ conduct, plant and asset managers’ initial lack of transparency and reporting that impeded SERC’s investigation, and senior management’s passive acceptance of the improper compliance activities served to aggravate the penalty.
  • Broad River self-reported the violation; however, SERC did not give mitigating credit because Broad River’s agents misrepresented and withheld materials facts surrounding the nature and extent of the violation in the Self-Report.
  • Broad River agreed to settle the violation.
  • There were no other mitigating or aggravating factors or extenuating circumstances that would affect the assessed penalty.

Key Takeaways

  • The vertical silos established by the third-party plant manager and asset manager resulted in a lack of adequate oversight and engagement from senior management, which SERC deemed to be the equivalent of senior management’s passive acceptance of the plant’s compliance practices. This contributed to (1) a culture of compliance that prioritized the PPAs over NERC Reliability Standards compliance and the reliability and security of the Bulk-Power System (BPS); (2) a lack of sufficient documented operating procedures and controls consistent with NERC Reliability Standard compliance; and (3) a lack of robust training for those responsible for compliance.
  • SERC determined that the Broad River plant and asset manager attempted to withhold the full extent and nature of the Alleged Violation from SERC. The first instance (the July 16, 2018, incident) that was identified in this Alleged Violation was self-reported to SERC after an anonymous employee (whistleblower) reported the incident through the IHI corporate compliance hotline.
  • Additionally, months into SERC’s investigation into this matter, three separate anonymous complaints were made to the NERC Compliance Hotline, which alerted SERC of Broad River’s plant and asset manager’s attempt to withhold information as well as the existence of additional unreported instances where units tripped and were not declared as unavailable to the BA. 
  • SERC’s investigation further confirmed that Broad River’s plant and asset manager had been misrepresenting facts concerning the July 16, 2018, instance. Additionally, SERC determined that Broad River’s plant and asset manager attempted to withhold the full extent of the Alleged Violation, which involved over 100 additional unreported instances that had existed since January 2016. By the time the whistleblower made the initial call to the IHI corporate compliance hotline, the Alleged Violation had existed for more than two years. 
  • As a result of Broad River’s plant and asset manager’s failure to perform a proper internal investigation to report all known related incidents, Broad River impeded SERC’s ability to effectively investigate the Alleged Violation. Broad River’s actions resulted in multiple follow-ups for purposes of evidence clarification, the need for on-site interviews with Broad River personnel, and additional data and information requests to complete SERC’s investigation. The significant time it has taken to fully investigate this Alleged Violation could have been avoided had Broad River’s agents been fully forthcoming at the outset and not impeded SERC’s investigation.
  • Violation is indicative of a complete compliance program failure. That, coupled with Broad River’s agents’ conduct of knowingly violating the Standard Requirement, the plant and asset manager’s initial lack of transparency that impeded SERC’s investigation, as well as senior management’s failure to instill a strong culture of compliance, caused SERC to award no mitigating credit for Broad River’s compliance program that existed at the time of the Alleged Violation.

About Certrec:
Certrec is a leading provider of regulatory compliance solutions for the energy industry with the mission of helping ensure a stable, reliable, bulk electric supply. Since 1988, Certrec’s SaaS applications and consulting expertise have helped hundreds of power-generating facilities manage their regulatory compliance and reduce their risks.

Certrec’s engineers and business teams bring a cumulative 1,500 years of working experience in regulatory areas of compliance, engineering, and operations, including nuclear, fossil, solar, wind facilities, and other Registered Entities generation and transmission.

Certrec has helped more than 120 generating facilities establish and maintain NERC Compliance Programs. We manage the entire NERC compliance program for 60+ registered entities in the US and Canada that trust us to decrease their regulatory and reputational risk. Certrec is ISO/IEC 27001:2013 certified and has successfully completed annual SOC 2 Type 2 examinations.

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