AICPA SOC Service Organizations - Certrec

ITC Companies Fined $150,000 for Critical Facility Ratings Mismanagement

Summary of NERC Penalties

REGION

WHEN?

ENTITY

COMPLIANCE AREA

VIOLATION

REASON

PENALTY AMOUNT

ReliabilityFirst and Midwest Reliability Organization (MRO)

Quarter 1 - February 2024

ITC Companies (METC, ITC Transmission, and ITC Midwest)

NERC's Regulations

FAC-008-1 R1, FAC-008-5 R6, and FAC-009-1 R1

ITC Companies self-reported violations related to inaccurate Facility Ratings for 15 circuits, due to documentation and communication failures. These failures involved not properly documenting pole replacements or misplacements that affected ratings, not communicating rating changes, and wrongly associating ratings with different lines. These inaccuracies were due to a lack of alignment with their Facility Rating methodology, impacting transmission clearances.

$150,000

METC submitted a Self-Report to ReliabilityFirst on behalf of the ITC Companies (METC, ITC Transmission, and ITC Midwest), pursuant to an existing multi-region registered entity (MRRE) agreement, stating that, as Transmission Owners, they were in violation of FAC-008-1 R1 (upon further analysis, this violation rests under FAC-009-1 R1). On June 21, 2022, ITC Transmission (ITCT) submitted a Self-Report stating that the ITC Companies were in violation of FAC-008-5 R6. This Self-Report was consolidated into this item because of the factual similarity and overlapping issues. The entity identified 15 circuits (14 in the initial Self-Report, and two in the second Self-Report but one of those circuits was overlapping with the initial Self-Report) for which the Facility Rating was inconsistent with its Facility Rating Methodology in noncompliance with FAC-009-1 R1. The ITC Companies found that 15 Facility Ratings impacting transmission clearances were not properly recorded and published. The entity has a total of just more than 800 applicable Facilities; thus, the failure rate here was approximately 1.8 percent. The affected Facility Ratings included three that impacted ITC Midwest (ITCM) and 12 that impacted ITCT (9) and METC (3).
 

Of the 15 circuits impacted, five were 120 kV, four were 138 kV, three were 161 kV, and three were 345 kV. The oldest incorrect rating dates back to March 24, 2010, and the final issue was remediated on May 11, 2022. In 13 of the 15 instances, the duration was five years or greater. The derate changes required ranged from 2.3 percent to 100 percent, with only two between 81-100 percent. Following is a breakdown of the derate percentages for summer ratings: eight were 0-20 percent; three were 21-40 percent; two were 41-60 percent; and two were 81-100 percent. There were derates required for winter ratings as well, but they were generally lower than the companion summer rates.

For three circuits, the correct summer rating was exceeded at varying times throughout the violation duration:

  • For the Macomb-Stephens circuit (120 kV), the correct summer rating was exceeded for a material period between the start of 2015 and the end of 2020.
  • For the Dickinson-Triboji circuit (161 kV), the summer correct rating was exceeded for approximately one and a half total days between the start of 2014 and the end of 2019.
  • For the BGS-Denmark #1 circuit (161 kV), the correct summer rating was exceeded for a material period between May of 2014 and October of 2021.

Cause
The root cause involves a number of different documentation and communication based failures including: (1) replacement of poles (e.g., shift from wood to steel poles) or other structure or item placement (e.g., misplacement of rock or waste pile under span) which lowered the minimum ratings without being identified and documented (most common); (2) a failure to communicate ratings changes to the individuals responsible for maintaining the central Facility Ratings data; and (3) properly communicating Facility Ratings for lines, but incorrectly associating the ratings with a different line resulting in errant ratings publications.

The violation began on March 24, 2010, the date the ITC Companies started utilizing a Facility Rating that did not align with their Facility Ratings Methodology. The violation ended on May 11, 2022, the date the ITC Companies remediated the final inaccurate Facility Rating.

Disposition

When assessing the penalty for the violation at issue in this Agreement, the Regions considered whether the facts of this violation constitute repetitive infractions. ITC Holdings had relevant previous FAC-009/FAC-008 noncompliance; however, ReliabilityFirst determined that the previous noncompliance did not constitute a basis for repetitive infractions and, therefore, did not establish a basis for aggravation.

The ITC Companies were highly cooperative throughout the entire enforcement process. Throughout the enforcement process, the ITC Companies voluntarily provided the Regions with an abundance of information regarding the violations in a manner that was detailed, thorough, organized, and prompt. Therefore, the Regions awarded cooperation credit to encourage this behavior by the ITC Companies and other Registered Entities in the future.

Effective oversight of the reliability of the BES depends on robust self-reporting by Registered Entities. ITC Companies identified and reported the violations at issue in this Agreement because of the effective execution of its compliance program and the installation of internal controls that yielded identification of the issues before the occurrence of any harm. Based on the above, ReliabilityFirst granted self-reporting credit.

ReliabilityFirst reviewed the entity’s internal compliance program (ICP) and considered it to be a mitigating factor in the penalty determination. ReliabilityFirst audited multiple ITC Companies in 2022 following the Self-Reports, which are the basis of this Agreement. At this audit, included in scope were FAC-003 and FAC-008. The auditors documented multiple positive observations about their programs for FAC-008 and FAC-003 including: (1) an elevated number of inspections per year to identify vegetation growth and (2) the entities standardized what transmission equipment can be installed because using common components results in fewer Facility Ratings changes. Based on the foregoing, ReliabilityFirst is granting credit for the entity’s ICP relating to FAC-008 and FAC-003.

Based upon the foregoing, ITC Holdings shall pay a monetary penalty of $150,000 to ReliabilityFirst. ReliabilityFirst shall divide that penalty amount in two parts based on the relative net energy for load (NEL) for each Region and shall distribute a NEL based proportional allocation to MRO. Of the total penalty remitted, ReliabilityFirst shall distribute $51,000 to Midwest Reliability Organization (MRO).

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 200 generating facilities establish and maintain NERC Compliance Programs. We manage the entire NERC compliance program for 80+ registered entities in the US, Canada, and Mexico 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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