Sanctions and Penalties

Texas Reliability Entity, Inc. (Texas RE) bases its penalty assessment on the Federal Energy Regulatory Commission (FERC) policy statement on enforcement (October 20, 2005, Docket No. PL06-1-000). In assessing a penalty for a violation, Texas RE follows the North American Reliability Corporation (NERC) Rules of Procedure, Section 400 – Compliance Enforcement and Appendix 4B – Sanction Guidelines. However, Texas RE has the discretion to reduce or increase the penalty amount.

Factors Influencing a Penalty

Texas RE always strives for consistency in determining penalties. Several factors are taken into consideration:

• Violation Risk Factor (VRF), the potential significance to the reliability of the bulk power system (according to the NERC standard’s requirement);
• Violation Severity Level (VSL), the degree to which compliance with a requirement was not achieved;
• In what timeframe the violation took place (long vs. short);
• Extenuating circumstances;
• The reliability impact of the entity or its facility; and
• System reliability at the time of the violation.

In addition, the following are considered to be negative factors:

• The violation was repeated, or the entity has a history of violations.
• The violation was intentional.
• Concealment was attempted, or the entity tried to impede discovery.
• The entity’s management knew about the violation and did not intervene and/or report.

The following would be considered to be positive factors:

• A compliance program is active and of high quality.
• The entity is cooperative.
• The entity discloses the violation and takes voluntary corrective action. Self-reporting and the early submittal of a mitigation plan are taken into consideration.

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Non-Monetary Penalties

Texas RE also has the discretion to apply a sanction, which is not bound to a monetary penalty. Sanctions must be applied with the objective of promoting reliability and compliance with the reliability standards. Examples of sanctions would include limiting the entity’s activities, functions, or operations, or placing the entity on a reliability watch list.

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Remedial Action Directives

Under certain circumstances, NERC or Texas RE may issue a remedial action directive. Some examples are:

• specifying operating or planning criteria or limits;
• requiring specific system studies;
• defining operating practices or guidelines;
• requiring confirmation of data, practices, or procedures through inspection, testing, or other methods;
• requiring specific training for personnel;
• requiring development of specific operating plans; and/or
• requiring an independent contractor for internal audit.