Cost-Effective-Analysis-Process-CEAP-for-NERC-ERO-Standards

 

Status:
The Standards Committee in October 2012 approved the Cost Effective Analysis Process (CEAP) document for a “pilot” along with an Implementation Whitepaper. Two standard projects in various stages of development will be chosen to pilot the CEAP. One will pilot the Cost Impact Analysis and the other project, the CEA or Cost Effectiveness Analysis. A CEAP team, comprised of NERC Standards Committee and Standards Committee Process Subcommittee members along with industry and NERC staff, will complete CEAP reports and provide them to the Standards Committee for their review.

Purpose/Industry Need:
In response to concerns expressed by stakeholders and regulators in both the US and Canada, NERC has developed a draft Cost Effective Analysis Process “CEAP”. The NERC CEAP will introduce the concept of cost consideration and effectiveness into the development of new and revised standards and to afford the industry with opportunities to offer alternative methods to achieve the reliability objective of draft standards which may result in less implementation costs and resource expenditures. The draft NERC CEAP was developed from the Northeast Power Coordinating Council “NPCC” regional CEAP. NPCC developed the first regional CEAP in response to concerns raised by its regional Board of Directors regarding the need for standards development to consider potential cost impacts.

The draft NERC CEAP introduces cost consideration to the standards development process in two phases. These two phases will be performed during the comment periods and both involve posing some additional voluntary questions to industry. The first phase of the CEAP will be implemented during the SAR stage to determine cost impact and identify “order of magnitude” or potentially egregious costs, to determine if a proposed standard will meet or exceed an adequate level of reliability, and what potential risks are being mitigated. This information will be used as a “gateway” to determine if a project should move forward to the standard development and drafting stage or be remanded back to the requestor. The second phase will be done later in the standard development process and afford the industry the opportunity to offer more cost efficient solutions that may be equally effective to achieving the reliability intent of the draft standard. This second step will result in a report that will be respectful of any market sensitive information. This report will be posted at the time the standard is balloted. The report will present the data collected in a manner which will provide the industry with representative cost implementation and effectiveness information to allow a more informed choice during balloting. Some entities are unsure of implementation costs currently and this effort will result in an opportunity to sharing information and promote consensus and alleviate concerns over cost and effectiveness.

The application of both phases of the NERC CEAP will be to all new NERC standards and only the second, cost effectiveness phase, is envisioned to be applied to revised, urgent action or expedited standards. Existing standards being revised have already been deemed to be required to meet an adequate level of reliability, therefore a cost impact assessment Phase One of the CEAP, at the SAR phase is likely unnecessary.

All comments should be forwarded to sarcomm@nerc.com.