2005/63 (a)

BACKGROUNDER

August 14, 2003, Power Outage

On August 14, 2003, the largest power outage in North American history affected an area with an estimated 50 million people and 61,800 megawatts (MW) of electric load in Ontario and the states of Ohio, Michigan, Pennsylvania, New York, Vermont, Massachusetts, Connecticut and New Jersey.

In Canada, gross domestic product was down 0.7 percent that August, there was a net loss of 18.9 million work hours, and manufacturing shipments in Ontario were down C$2.3 billion. Estimates of the total cost resulting from the power outage in the United States range between US$4 billion and US$10 billion.

On August 15, 2003, the Prime Minister of Canada and the President of the United States directed that a joint Canada–U.S. Power System Outage Task Force be established to investigate the causes of the power outage and ways to reduce the possibility of future outages. They named the Canadian Minister of Natural Resources and the U.S. Secretary of Energy to co-chair the joint Task Force.

The Canadian Task Force members include the Minister of Public Safety and Emergency Preparedness, the Chairman of the National Energy Board, and the President and CEO of the Canadian Nuclear Safety Commission, and the U.S. members include the Secretary of Homeland Security, the Chairman of the Federal Energy Regulatory Commission (FERC) and the Chairman of the Nuclear Regulatory Commission.

The mandate of the joint Task Force was to (a) investigate the outage to determine its causes and why it was not contained, and (b) develop recommendations to reduce the possibility and scope of future outages.

The Task Force created three working groups to assist in both phases of its work: the Electric System Working Group, the Nuclear Working Group and the Security Working Group. The working groups were made up of representatives of the affected states and Ontario, federal employees and contractors working for the U.S. and Canadian government agencies represented on the Task Force. The working groups and a team of electricity experts from the North American Electricity Reliability Council (NERC) and the electricity industry carried out the investigation of the power outage.

The Task Force published an Interim Report on November 19, 2003, summarizing the facts that the bi-national investigation found regarding the causes of the power outage. Public meetings were organized and held in Cleveland, New York City and Toronto, and technical conferences were held in Philadelphia and Toronto in December 2003 and January 2004, respectively.

Following the release of the interim report, the NERC Board of Trustees approved a series of actions designed to improve the reliability of the North American bulk power system. The full text of the NERC Board of Trustees' statement is available from NERC and is annexed to the final report of the Task Force.

In April 2004, the co-chairs of the Task Force submitted the document entitled Final Report on the August 14, 2003 Blackout in the United States and Canada: Causes and Recommendations to the Prime Minister of Canada and the President of the United States. The final report identified the causes of the power outage and included 46 recommendations on actions for government and industry, many of which include several elements.

The Task Force investigation included a review of previous major North American power outages. This review found that the causes of the August 14, 2003, power outage were strikingly similar to those of earlier outages. This finding reinforced the need to monitor the effective implementation of the Task Force's recommendations. As a result, the governments of the United States and Canada extended the Task Force's mandate in order to underscore the two governments' commitment to ensuring that the recommendations are acted upon.

On the first anniversary of the power outage — August 14, 2004 — the Task Force released a report entitled The August 14, 2003 Blackout One Year Later: Actions Taken in the United States and Canada to Reduce Blackout Risk. It summarized the actions taken by governments, the reliability organizations and the bulk power industry to reduce the risk of future outages.

Copies of these reports are available at http://www.nrcan-rncan.gc.ca/inter/poweroutage2003_e.html.

The Task Force is currently drafting its "wrap-up" report, entitled The U.S.–Canada Power System Outage Task Force Status Report on Implementation of Task Force Recommendations. This report will provide an assessment of the actions taken on the recommendations, as outlined in the final report on the August 14, 2003, power outage. This report is expected to be released in the fall of 2005.

Progress

Much progress has been made on the Task Force recommendations through a number of actions that have been taken to date. The following is a description of the actions taken.

Mandatory Reliability Standards: In July 2004, the Canadian Council of Energy Ministers (CEM) endorsed the Task Force recommendations, including the implementation of mandatory electric reliability standards. They established a Federal/Provincial/Territorial Assistant Deputy Minister Electricity Working Group to work with the appropriate U.S. authorities to complete a framework to ensure that identical or compatible reliability standards apply in both countries, and that the means are in place to enforce them in all interconnected jurisdictions. Ministers also directed officials to report to the CEM on the status of this framework in November 2004, May 2005 and September 2005.

In the United States, the Energy Policy Act of 2005 was enacted in August 2005. The reliability language of the bill has remained largely unchanged and will set the framework for the establishment of mandatory electric reliability standards in the United States. This is a significant and fundamental step in improving reliability.

Full implementation of mandatory reliability standards in the United States will require the U.S. FERC to issue regulations for the certification of the Electric Reliability Organization (ERO), review applications from parties seeking certification, and certify one ERO. After certification, the ERO is to submit proposed reliability standards to FERC for review and, if appropriate, approval.

Bilateral Group: The Bilateral Electric Reliability Oversight Group (Bilateral Group) was officially established on June 30, 2005, when the various agencies signed terms of reference. The Bilateral Group will have ongoing responsibilities to consult on the establishment of an international reliability framework, monitor its operation and consult on other reliability policy and regulatory issues that may arise. The Bilateral Group prepared "Principles for a Reliability Organization that can Function on an International Basis," the purpose of which is to aid in the establishment of an ERO that can function effectively in the United States and Canada. The FERC and regulatory authorities in Canada will take the principles into account when an ERO is established.

Competition and Reliability Study: Natural Resources Canada (NRCan) and the U.S. Department of Energy have co-sponsored a joint study on the relationships among industry restructuring, competition in power markets and grid reliability.

"Version 0" Standards: In order to make improvements in reliability standards and accelerate the process for standards development, NERC undertook an expedited process to translate its existing body of standards and guidelines into a new, complete set of "Version 0" standards. The NERC Board of Trustees, at its February 2005 meeting, adopted the Version 0 reliability standards, which had been approved by industry stakeholders by a 95.5 percent vote, effective April 1, 2005. A copy of these standards is available at http://www.nerc.com/standards.

NERC Readiness Audit Program: After the power outage, NERC's Readiness Audit Program was initiated to ensure that companies and organizations with major responsibilities for real-time grid management have the training, equipment, procedures and other tools needed to maintain safe operations under unusual or adverse conditions. Many audits were completed in the first year, including 61 control operators and 6 reliability coordinators. NERC has posted the final audit reports and made them available to interested federal, state and provincial regulators. Fifty-five entities are scheduled for audits in 2005. Copies of the final audit reports are available at http://www.nerc.com/~rap.

NERC Guidelines for Reporting and Disclosure: These guidelines specify that all confirmed violations of NERC standards are to be made public, including the identities of the violators.

Eastern Interconnection Phaser Project: This project will validate the usefulness of collecting data from a multi-state network of sensors called "phaser measurement units" to provide grid operators and regional reliability coordinators with real-time early warning of potentially dangerous grid situations.

Establishment of mechanism for tracking recommendations: Departments and agencies supporting the Task Force, as well as NERC, will continue to monitor recommendations that are still in progress or will be ongoing activities.

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