Overheated transmission lines, inadequate vegetation management, insufficient tools and lack of training were the root causes of the 2003 Northeast blackout that left 55 million people in the dark in Canada and the United States and brought international travel and financial markets to a halt. Since then, North American Electric Reliability Corporation (NERC) has been given authority by the Federal Energy Regulatory Commission (FERC) to enact and enforce rules that protect the bulk power system in the United States. These rules and standards are constantly evolving and affect everything we do in operating the grid day-to-day.

The reliability standards require us to document every process and procedure that is deemed critical to bulk electricity system reliability. We also need to demonstrate a strong culture of compliance that includes an ability to readily access these compliance documents, which are used by compliance enforcement authorities as key pieces of evidence during audits.

In 2011, NERC conducted an audit of its Critical Infrastructure Protection (CIP) standards that are designed to ensure the security of cyber assets that support critical reliability functions. Auditors from NERC, Southwest Power Pool (SPP), Reliability First and Texas Reliability Entity, Inc. participated in the audit. While they did find a few instances of noncompliance, the audit team indicated that AEP’s culture of reliability compliance had improved compared with their observations during a partial CIP audit in 2009. Efforts to address the audit’s findings and recommendations are under way. We expect to be audited this year on additional reliability standards, including a CIP audit of Electric Transmission Texas.

Noncompliance with these reliability standards can have substantial financial consequences and create reputational risks. For example, FERC fined one company $25 million for a 2008 blackout caused by a faulty substation that led to cascading outages of critical transmission lines.

AEP has an executive-level Reliability Compliance Committee (RCC), led by the Regulatory Services group. The RCC includes representatives from each of the affected business units. Its charge is to set strategic direction of AEP’s NERC Compliance Program and to make recommendations to enhance or improve processes to ensure compliance.