In Order No. 743-A, issued on March 17, 2011, the Federal Energy Regulatory Commission (FERC) has affirmed its requirement that the North American Electric Reliability Corporation (NERC) revise its definition of “Bulk Electric System” (BES), which is the set of electric transmission, generation and related facilities that are necessary for the reliable operation of the interconnected electric transmission network and that are subject to the requirements of NERC’s mandatory and enforceable Reliability Standards. Although Order No. 743-A largely upholds that requirement, FERC nonetheless appears to have softened its prior approach in directing NERC to revise the definition of BES.

Order No. 743-A reaffirms Order No. 743, issued on November 18, 2010, which found that the potential for “gaps” in coverage of facilities under NERC’s current BES definition may compromise reliability. Order No. 743 had directed NERC, the FERC-approved Electric Reliability Organization for the United States electric grid, to revise the definition of BES through its Reliability Standards development process to address FERC’s “policy and technical concerns.” These concerns include inconsistency in the application of the definition of BES, lack of oversight, and exclusion of facilities that are required for the reliable operation of the interconnected transmission network. While leaving the revisionary work to NERC, FERC outlined its suggested “best” approach for modifying the definition:

-Eliminate the discretion currently afforded to Regional Entities – the regional bodies charged with front-line enforcement of the Reliability Standards – to determine which facilities within their respective regions actually fall within the definition of BES;

-Establish a bright-line threshold that would include in the definition of BES all transmission facilities operating at or above 100 kV, except radial lines serving only load with one transmission source; and

-Adopt an exemption process and corresponding criteria by which facilities may be exempted from the definition of BES by a showing that they are not necessary for operating the interconnected grid.