FRCC Settlement and Hearing Process

1. FRCC Settlement and Hearing Process FRCC 2008 Compliance Workshop

2. Settlement Process • Settlement Negotiations may occur at any time. • including prior to issuance of a notice of Alleged Violation and up to a notice of penalty is filed at FERC. • Settlement negotiations are confidential. • until it is approved by NERC. • Registered Entity must designate an individual authorized to negotiate on its behalf. • Settlements must provide for waiver of the Registered Entity’s right to further hearings and appeal.

3. Settlement Process • FRCC will issue letter (settlement agreement) setting forth terms, including all penalties, sanctions and mitigation requirements. • FRCC will report terms of settlement to NERC. • Does not have to include admission of guilt. • NERC will review for consistency with other settlements for similar violations. • NERC will approve or reject and if rejected, based on NERC’s concerns, FRCC will attempt to negotiate a revised settlement agreement.

4. Settlement Process • NERC will report approved Settlement to FERC. • NERC will publicly post the violation settled, resulting penalty or sanction and a copy or description of the settlement terms. • Registered Entity may provide a statement to NERC to accompany the report when posted.

5. Questions on Settlement Process

6. Hearing Process • NERC requires, through its Rules of Procedure, that FRCC establish and maintain a fair, independent, and non-discriminatory process for hearing contested violations and penalties or sanctions levied. • The hearing process must allow a Registered Entity to contest both findings of compliance violations and penalties and sanctions that are levied.

7. Hearing Process • FRCC’s Hearing Body is the Board of Directors Compliance Committee (BCC). • The BCC consists of one member of each of the 6 sectors of FRCC who shall be a member of the FRCC Board of Directors. • The BCC may elect to use a Hearing Officer to preside over hearing. • Actions are subject to authority of BCC.

8. Hearing Process • If a Registered Entity does not contest or respond to a notice of allegedviolation in 30 days, they shall be deemed to have accepted the determination of violation and penalty (if applicable). • To contest, a written statement explaining their position, signed by an officer (or equivalent) must be submitted. • FRCC will schedule a conference with the Registered Entity within 10 business days to try and seek resolution of the issues.

9. Hearing Process • If the Registered Entity and the FRCC are unable to resolve the issue within 40 days, the Registered Entity may request a Hearing. • The hearing request shall state if the Registered Entity desires the shortened or full hearing procedure. • FRCC Compliance Staff must agree with request for shortened procedure within 5 days. • If no hearing request is made within 10 business days, the violation will become a Confirmed Violation when filed by NERC with FERC.

10. Hearing Process • When a request for hearing is received, the FRCC shall issue a notice of hearing within 7 business days. • Notice will indentify the Hearing Officer (if known), and the date and time for a prehearing conference. • The Registered Entity may object to any member of the BCC or the Hearing Officer on grounds of a conflict of interest. • Objection shall be filed within 15 days of notification.

11. Shortened Hearing Process • Pre-hearing conference within 7 business days • Staff position filed within 21 business days • Registered Entity response filed within 14 business days • Staff reply comments files within 7 business days • Hearing Officer Initial Opinion within 21 business days

12. Shortened Hearing Process Does not include: • Evidentiary Hearing • No Witness Testimony • No filed briefs, except “brief on exception” to Hearing Officer initial opinion Objective of BCC is to issue final order within 90 days of the notice of hearing.

13. Full Hearing Process • Much longer time frame. • Includes availability to seek interlocutory review on any ruling of the Hearing Officer with the BCC. • Participants will file written appearances identifying names of individuals authorized to represent them. • Provides ability to combine hearings of more than one Registered Entity that receive Notice of Alleged Violation for the same event or transaction.

14. Full Hearing Process • Prehearing Procedure • Time limits are waived • Prehearing Conference to identify issues and develop schedule • Ability to issue Summary Disposition, Status Hearing and Motions • Ability to inspect and copy Staff documents • Availability of other discovery procedures • Submission of Testimony & Evidence

15. Full Hearing Process • Evidentiary Hearing Procedure • Purpose is to admit evidence into the record. • Opening and closing statements allowed on exception basis. • Evidence offered in form of an exhibit. • Compliance Staff first, Registered Entity second. • Witness shall attend in person. • Each participant has right to cross-examination. • Stipulations of fact allowed, but must be in writing. • Hearing Officer will designate time to close record.

16. Full Hearing Process • Post-Evidentiary Hearing Procedure • Participants may file initial and reply briefs. • Post-hearing pleadings allowed, but no new evidence permitted. • Hearing Officer issue Initial Opinion. • Participants may file exceptions to the Initial Opinion. • BCC may elect to hear oral argument. • BCC Final Order

17. NERC Appeals • When all FRCC hearing options have been exhausted, the Registered Entity may appeal the Final Order of the BCC to NERC.

18. Questions on Hearing Process