On November 24, 2014, FERC approved a settlement with Western Area Power Administration – Desert Southwest Region  (Western-DSW) related to its involvement in the blackout in the southwestern U.S. on September  8, 2011.  This blackout left more than 5 million people in Southern California, Arizona, and Baja California, Mexico without power for up to 12 hours.  According to FERC’s press release on the Western-DSW settlement, this is the fourth settlement arising out of this blackout.

We have reported on two prior settlements, one involving Arizona Public Service Company on July  7, 2014 and one involving Imperial Irrigation District. A third settlement involved Southern California Edison Company and was approved on October 21, 2014. Two other investigations involving the California Independent System Operator and Western Electric Coordinating Council  remain outstanding.

The settlement with Western-DSW is unique in that it involves no monetary penalty.  This is in keeping with the DC Circuit’s recent decision in Southwestern Power Administration et al. v. FERC, 763 F3d 27 (DC Cir 2014) (SWPA). As we previously reported, the Court in SWPA held that FERC could not impose monetary penalties on a federal power marketing administration for Reliability Standards violations. This is in marked contrast to the $650,000 monetary civil penalty assessed against Southern California Edison Company and the $2,000,000 monetary civil penalty assessed against Arizona Public Service Company.  Similarly, the settlement with Imperial Irrigation District involved a monetary civil penalty of $3,000,000. FERC reached this settlement with Imperial Irrigation District three weeks before the SWPA decision was issued, and it is not clear whether that decision, which was based on federal sovereign immunity precedent, would extend to state public power entities like Imperial Irrigation District. As with the other three settlements, the Western-DSW settlement provided for investment in significant reliability improvements, but unlike the other three settlements, the Western-DSW settlement does not identify a monetary value for Western-DSW’s reliability improvements.

The Western-DSW settlement involved four alleged violations involving three Reliability Standards. These alleged violations arose out of a fault on a major transmission line owned and operated by Arizona Public Service Company and Western-DSW’s inability to handle the resulting increased flows on parallel transmission paths in which Western-DSW owns and operates transmission facilities. These increased flows resulted in voltage deviations and overloads on Western-DSW’s system which in turn required load shedding. After its investigation, FERC and NERC staffs found that Western-DSW had violated the following requirements:

• TOP-004-2 R1, because Western-DSW did not operate its system within established system operating limits

• TOP-004-2 R2, because Western-DSW did not operate its system to prevent severe low voltage conditions and loss of load that resulted from the loss of the Arizona Public Service Company line

• TOP-008-1 R2, because Western-DSW did not operate its system to prevent system operating limit violations by identifying and studying the contingency related to the loss of the Arizona Public Service Company line

• VAR-001-1 R9 because Western-DSW did not maintain sufficient reactive resources to support its voltage in the event of a contingency related to the loss of the Arizona Public Service Company line

While stipulating to the facts surrounding the September 8, 2011 event, Western-DSW noted in the settlement that it neither admits nor denies that it violated any Reliability Standards.

Although as noted above the settlement does not identify any monetary penalties, the “Remedies and Sanctions” section of the settlement describes at length several reliability improvements instituted by Western-DSW. To improve its operations within established system operating limits, Western-DSW committed to perform seasonal, next-day and real time studies to verify its system operating limits and interconnection reliability operating limits, to coordinate with its neighboring transmission systems and with its reliability coordinator on any areas of concern related to those limits, and to establish alarms, procedures and trainings related to real-time study of these limits. Western-DSW also committed to similar efforts associated with monitoring real-time voltage and reactive power support, and it joined with other facility owners to install a total of 90 MVar of reactive support. As with the other settlements arising out of the September 8, 2011 Southwest Blackout, the Western-DSW settlement included reliability improvements that do not appear directly related to the underlying alleged violations; these improvements addressed areas such as: situational awareness, long term planning, enhancing operational studies to predict system performance within appropriate phase angle limits.

Although the settlement makes clear that many of the reliability improvements committed to by Western-DSW are complete, the settlement provides that Western–DSW will submit status two semi-annual reports to FERC and NERC staffs regarding its mitigation activities and its ongoing compliance with the Reliability Standards.