FERC approves second Southwest blackout penalty


A California irrigation district has agreed to pay a $12 million penalty to settle its role in a 2011 power outage affecting over 5 million people in California, Arizona, and Mexico.

The September 8, 2011 outage started when a 500-kilovolt transmission line owned by Arizona Public Service Company tripped out of service, causing cascading power outages through automatic load shedding as other equipment quickly overloaded.  In the end, the outage deprived customers of 7,835 megawatts of peak demand and over 30,000 megawatt-hours of energy.

Swiftly on the heels of the outage, the Federal Energy Regulatory Commission and electric reliability organization NERC launched an investigation into what had happened -- and whether any laws or regulations had been violated.  That investigation focused on APS and five other entities believed to have been involved: the California Independent System Operator, the Imperial Irrigation District, Southern California Edison, the Western Area Power Administration, and the Western Electricity Coordinating Council Reliability Coordinator.  Last month, the Commission approved a $3.25 million settlement with APS.

Today, the Commission issued an order approving a stipulation and consent agreement resolving  Imperial Irrigation District's role in the blackout.  Imperial Irrigation District is a not-for-profit, publicly owned, vertically integrated utility and political subdivision of the State of California.  The sixth largest utility in California, Imperial Irrigation District Electricity provides electric power to more than 145,000 customers in the Imperial Valley and parts of Riverside and San Diego counties.

Through their investigation, Commission enforcement staff and NERC found Imperial Irrigation District violated 10 requirements of four Reliability Standards on transmission operations and transmission planning, including a failure to coordinate its operations planning with neighboring systems.  The Commission noted that these violations were serious deficiencies that undermined reliable operation of the Bulk Power System.

Through that stipulation, Imperial Irrigation District agreed to pay a civil penalty of $12 million.  Of this amount, at least $1.5 million will go to the U.S. Treasury and another $1.5 million will go to NERC, and at least another $9 million will be invested in reliability enhancement measures that go beyond mitigation of the violations and the requirements of the mandatory Reliability Standards.  These reliability enhancements will include construction of one or more utility-scale battery energy storage facilities within IID’s transmission operations area, with the money spent by December 31, 2016.

Two of the six entities known to be targeted by the Commission's investigation have now settled their alleged violations by agreeing to pay penalties.  Perhaps more significantly, APS and Imperial Irrigation District represent two of the three vertically integrated utilities implicated.  Will the FERC/NERC investigation lead to further settlements soon?  What impact will the Imperial Irrigation District settlement and penalty agreement have?

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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