Sunday, October 18, 2009

FERC Hammers Florida Power & Light Co with $25M Civil Penalty
- $5M to go above and beyond current regulatory requirements

On Oct 8th, Florida Power & Light (FPL) agreed to pay a $25 million penalty after blunders by a field engineer led to a service outage affecting nearly a million customers - i.e. 2008 Florida Blackout.

This marks the first settlement resulting from a reliability investigation by the Federal Energy Regulatory Commission (FERC) enforcing a 2005 law establishing electric reliability standards. This fine won't be going to customers. Instead FPL, facing a potential of $1B+ in fines, agreed to pay $10M to the United States Treasury, $10M to the North American Electric Reliability Corp. (NERC). The remaining $5 million is to go towards measures beyond current reliability requirements in a regulatorily approved manner- otherwise, whatever remains of the last $5M will be evenly split between US Treasury and NERC.

  • "Today's settlement demonstrates the high priority the commission places on electric reliability,'' said Norman Bay, director of the commission's Office of Enforcement. ``The message to the industry is clear: Compliance with the standards is critical.''
Holly smokes! This civil settlement clearly marks the end of wrist slaps for reliability violations with a whole new level of realizable penalty levels. It's also worth emphasizing that NERC CIPs cyber security focus represents just one of fourteen reliability groupings in current NERC Reliability Standards. The process reaching this settlement clarifies how FERC will increasingly be taking a very active role in industry reliability investigations going forward. Industry compliance programs will need to be reviewed and appropriately bolstered to help ensure sufficient program measures are defined and being maintained. The settlement also speaks to the need for continuous improvement efforts by industry aiming well beyond meeting today's reliability requirements- i.e. increasing regulatory margin. Increasingly akin to commercial nuclear regulatory challenges and supporting programs- with heavy doses of auditable evidence required.


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