Federal entities, such as power marketing administrations (PMAs) like the Southwestern Power Administration (SWPA), may be assessed monetary penalties for violating the North American Electric Reliability Corporation’s (NERC) Reliability Standards, according to the Federal Energy Regulatory Commission (FERC). In a July 19, 2012 order, FERC affirmed a $19,500 penalty against SWPA, finding that SWPA and other PMAs are not exempt from penalties under the mandatory and enforceable Reliability Standards. Although the penalty against SWPA is relatively modest, the long-term implications for the PMAs, other federal entities and the wholesale customers who purchase power from them remain unclear.

- Background -

FERC previously had determined that federal entities that use, own or operate the bulk-power system must comply with the Reliability Standards and are subject to FERC’s jurisdiction to enforce the Reliability Standards. (See Sutherland’s December 20, 2010 Legal Alert.) But because NERC had not previously imposed any monetary penalties, FERC skirted the issue of whether federal entities could be assessed monetary penalties.