January 22, 2013

Preparing for Your NERC Audit – Three Important Legal Considerations

Energy Alert

As your company prepares for its upcoming NERC audit, a bit of pre-audit planning and organization will make a significant impact on obtaining NERC compliance. As you prep, consider these three important legal considerations:

1. Evidence: Make a Paper Trail

A NERC audit, whether on or off site, is in essence a paper audit of your company's past actions and its ability to catch or minimize non-compliance. Even though an electrical breaker may have been switched in a timely manner, it matters little (from an audit prospective) unless you have evidence to prove such action. In addition the quality of the evidence is vital. Similar to chain of custody standards in the law, you must establish who what when where and how. For example, is your evidence signed and dated, are revisions tracked, is storage of the evidence secure, who has access to the evidence and how is it controlled?

Evidence in the form of written procedures help demonstrate that your company can catch or minimize non-compliance; and satisfy all mandatory NERC Standards. Again are these procedures signed and dated, are revisions tracked, is there a written process as to when and how such procedures get updated, is there proof that such procedures are followed?

2. Your Internal Team: Prepare Your Staff for the Audit

Many overlook the importance of staff and management preparation prior to and after the NERC audit. Think of this as preparing a witness for deposition or trial. What your people say during the audit can help or hurt your company. The timeliness, content and adequacy of response to follow-up NERC requests for information are vital in demonstrating compliance. For example: management and all operating staff should be briefed and properly prepared on the audit process, expectations, what to say and when to refer to management or legal. It is important to be truthful. However, saying too much or too little may hurt.

3. Documentation: Demonstrate Your NERC Compliance Program in Writing

Many companies have well documented technical procedures covering all the required NERC standards. However, not having an overarching document that integrates these procedures into your corporate structure may be a sign of a less than robust NERC compliance program.

For example, does your company have a written process for determining when to self-report a potential NERC violation to NERC; are top management and your legal team involved? Do you have a  written process for keeping the Board and management informed and involved in NERC compliance activities? What is upper management's role? Is there an organizational chart showing independent access to the Board and top management for the NERC manager? Does it show independence for NERC compliance?

Consideration of these three important areas should make the NERC audit process smoother and easier for your team to manage internally. Preparation and close attention to all of your documents will ensure your company is compliant.

Contact William Roberts in Preti Flaherty's Energy Law Group for more information on the firm's NERC Pre-Audit Reliability Compliance Services. William may be reached at [email protected] or 617.226.3800.