On August 8, 2005, in response to a recommendation in the U.S.–Canada Power Outage Task Force report, the Energy Policy Act (EPA 2005) made reliability standards mandatory and noncompliance subject to penalties in the U.S., under the authority of the Federal Energy Regulatory Commission (FERC).

First mandatory reliability standards

The law empowers FERC to give the North American Electric Reliability Corporation (NERC) the role of Electric Reliability Organization, which is responsible for developing reliability standards and having them adopted by its Board of Trustees. NERC must then submit the standards for approval to FERC, which determines the effective dates.

In March 2007, FERC approved the first set of 83 mandatory reliability standards in the U.S. They went into effect on June 4 and noncompliance became subject to sanctions as of June 18, 2007.

During this period, NERC set up a registry of entities subject to the reliability standards. This registry is administered by the Regional Reliability Councils – in the northeastern U.S., the NPCC.

Noncompliance sanctions

NERC has also prepared guidelines for the sanctions applicable in cases of noncompliance. Fines can be as high as a million dollars a day per event, depending on the seriousness of the violation and the circumstances in which it occurred.

Cases of noncompliance can be self-reported by the entity itself or identified and reported by auditors during a compliance audit or spot check. After studying the noncompliance, the Regional Reliability Council and NERC submit their recommendations to FERC, which determines the penalty, if any.