FERC offers NERC option of hearing over contested audit findings

FERC’s Office of Enforcement on May 4 offered NERC the option of a hearing before the commission over contested findings and recommendations contained in an “economy and efficiency” audit of NERC (Docket No. FA-11-21-000).

The audit contained findings and recommendations addressing “NERC’s budget formulation, administration, and execution with a focus on the costs and resources used to achieve program objectives,” according to the office’s report. The audit covered the period from Aug. 23, 2006 to March 14, 2012.

FERC issued a draft of the audit report on March 23, outlining 11 areas where it found NERC’s financial performance could be improved. Those areas ranged from NERC’s contributions to employee retirement plans and inadequate policies and procedures governing employee entertainment expenses, to inadequate staffing of NERC’s critical infrastructure protection (CIP) program and inadequate review of the budgets of NERC’s regional entities (RE).

FERC audit staff made 42 recommendations for improving processes and procedures in the 11 identified areas.

NERC responded to the draft report on April 23. While it did not object to the audit find regarding its retirement plan, it did object to ten audit findings related to its “activities, budget process, time reporting and accounting system, employee compensation, Board of Trustees’ (BOT) compensation and expenses, standard for determining the reasonableness of expenses, its CIP program, its role as the [electric information sharing and analysis center], employee entertainment expenses, and oversight of the REs’ budgets,” according to FERC’s May 4 notice.

NERC responded with what it called “constructive changes, factual corrections and a proposal to support, in modified form,” approximately three-fourths of the 42 recommendations contained in the report. FERC audit staff accepted 13 of NERC’s modifications; 25 recommendations remain contested.

Shortly before the close of business May 4, NERC issued a statement expressing its disappointment at the unwillingness of the office to work toward resolution of contested items “as is the norm, and instead, opted to initiate litigation on portions of the audit findings and recommendations.”

FERC sent the 171-page document, dated May 4, to NERC President and CEO Gerry Cauley and posted it to its web site but did not otherwise publicize its release.  “We didn’t actively put it out there, but NERC actively responded,” a FERC spokesperson told TransmissionHub May 4.

Further, the FERC spokesperson pointed out that the office did take NERC’s input into consideration and reached agreement on a number of points contained in the audit.

NERC has 30 days to notify FERC as to whether it requests commission review of the contested issues. If it does so, the commission will assign the proceeding for either a paper or trial type hearing. If it does not request commission review, NERC “may be deemed to have acquiesced to the audit findings and recommendations,” in which case the commission may dispose of the matter on the basis of the audit staff’s recommendations, according to the office’s report.

This article, originally published May 4, was updated May 7 to include additional information provided by FERC staff.