1 1 Joint Meeting of the 2 Nuclear Regulatory Commission 3 And the 4 Federal Energy Regulatory Commission 5 6 7 Tuesday April 8 2008 8 10 04 a m 9 FERC Headquarters 10 888 First Street NE 11 Commissioner's Meeting Room 12 Washington D C 20426 13 14 15 16 17 Agency Participants Nuclear Regulatory Commission Commissioners' Offices 18 Chairman Dale E Klein 19 William Orders Assistant to Chairman 20 Jerome Murphy Assistant to Chairman 21 22 Commissioner Gregory B Jaczko 23 Josh Batkin Assistant to Commissioner Jaczko 24 Thomas Hipschman Assistant to Commissioner 25 Jaczko 2 1 Commissioner Peter B Lyons 2 Doug Doe Assistant to Commissioner Lyons 3 Allen Howe Assistant to Commissioner Lyons 4 5 Commissioner Kristine L Svinicki 6 David Pelton Assistant to Commissioner 7 Svinicki 8 9 NRC Speakers 10 Michael Mayfield Director Division of 11 Engineering Office of New Reactors 12 Patrick Hiland Director Division of 13 Engineering Office of Nuclear Reactor 14 Regulation 15 Scott Morris Deputy Director Reactor Security 16 Office of Nuclear Security and Incident 17 Response 18 19 20 Federal Energy Regulatory Commission Commissioners' Offices 21 Chairman Joseph T Kelliher 22 Leonard Tao Assistant to Chairman Kelliher 23 24 25 3 1 Commissioner Suedeen Kelly 2 Elisabeth Blaug Assistant to Commissioner 3 Kelly 4 Kevin Huyler Assistant to Commissioner Kelly 5 Aileen Roder Assistant to Commissioner Kelly 6 7 Commissioner Philip Moeller 8 Jugnasa Gadani Assistant to Commissioner 9 Moeller 10 Jason Stanek Assistant to Commissioner Moeller 11 Robert Ivanauskas Assistant to Commissioner 12 Moeller 13 14 Commissioner Jon Wellinghoff 15 16 FERC Speakers 17 David E Andrejcak Acting Director Division of 18 Bulk-Power System Analysis Office of Electric 19 Reliability 20 L Keith O'Neal Acting Director Division of 21 Reliability Standards Office of Electric 22 Reliability 23 Regis F Binder Acting Director Division of 24 Logistics and Security Office of Electric 25 Reliability 4 1 P R O C E E D I N G S 2 10 04 a m 3 CHAIRMAN KELLIHER Good morning This meeting 4 is called to order I don't know if both of us have to 5 gavel it for it to officially begin but let's cover our 6 bases 7 Laughter 8 CHAIRMAN KELLIHER 9 I want to welcome our colleagues from the U S Nuclear Regulatory Commission to 10 this joint meeting with the Federal Energy Regulatory 11 Commission 12 This is the third joint meeting of the two 13 Agencies since the August 14 2003 blackout reflecting the 14 continuing commitment of the Agencies to work together to 15 address issues of common concern 16 I want to offer a special welcome to 17 Commissioner Svinicki to this meeting and congratulate you 18 on your confirmation 19 patience that nominees have to show from time to time but I 20 just want to reassure you that my nomination my first 21 nomination took 750 days so you should fee comforted by 22 the contrast 23 Now you showed the necessary I also want to congratulate Commissioner Jaczko 24 for his successful renomination and reconfirmation and I 25 think reconfirmation is a good thing Jon and I experienced 5 1 that last December so congratulations to you 2 Now FERC and the NRC are different agencies with 3 different statutory responsibilities 4 task is protecting public health and safety and FERC has a 5 number of different statutory missions but the one that's 6 most relevant to the meeting today is our regulatory role 7 over the reliability of the bulk power system as provided 8 by the Energy Policy Act of 2005 9 The NRC's primary And that mission at FERC is discharged by the 10 Office of Electric Reliability headed by Joe McClelland on 11 the left 12 opportunity to say that 13 Joe is doing an excellent job Let me take the And it's really been a major new mission for the 14 Commission 15 growth missions of the Commission and we're spending a 16 great deal of our attention in those areas 17 That and enforcement are really the two And we discharge our new duty by establishing 18 reliability standards proposed by the Electric Reliability 19 Organization to govern the bulk power system by directing 20 changes to approved standards to improve them over time 21 and by ensuring effective enforcement of approved 22 reliability standards 23 Now our reliability mission and the NRC mission 24 to protect public health and safety are entwined One 25 well-established risk to the reliable operation of bulk 6 1 power system is the sudden shutdown of large nuclear power 2 plants 3 By the same token the loss of offsite power 4 caused by a grid failure is a major concern to the safe 5 operation of commercial nuclear power plants and that 6 relationship was demonstrated by the recent Florida 7 blackouts 8 9 FERC also has infrastructure and economic regulatory missions that are related to the work of the NRC 10 If our country is going to build large numbers of nuclear 11 power plants we will need a bulk power system that can move 12 that power to where it is most needed 13 And it's also important for FERC to understand 14 the timing of nuclear power plant additions Widespread 15 cancellations of coal plants have created a situation where 16 the United States may rely largely on natural gas generation 17 for incremental electricity supply until additional 18 nuclear plants are operational 19 Some have called natural gas a bridge fuel to 20 that point where we have large wind generation and large 21 nuclear generation coming online but as Commissioner 22 Moeller has said that could be a very long bridge 23 24 25 So the timing of nuclear plant licensing and construction is of particular importance to FERC So I welcome our colleagues from the NRC and 7 1 look forward to this meeting 2 NRC CHAIRMAN KLEIN Commissioner Klein Thank you Chairman 3 Kelliher 4 meeting at our headquarters so it's a pleasure for us to be 5 at your headquarters for this joint meeting 6 It's a pleasure to be here We hosted the last Obviously I'm joined by Commissioners Jaczko and 7 Lyons and our newest Commissioner Svinicki She has come 8 with a great amount of experience that she's had both as a 9 member of the Wisconsin Public Utility Commission 10 Department of Energy and also at the Senate where she's 11 worked for a number of years with energy policies and 12 then most recently for the Armed Services Committee where 13 I had spent a bit of time with my former position before 14 coming over to the NRC 15 So we're glad to have her with us We still have 16 one position unfilled 17 particular time in our history in November of years 18 divisible by four and so we will wait to see what happens 19 with our fifth Commissioner 20 As we all know we're approaching a It's a pleasure for us to be here Obviously as 21 Chairman Kelliher indicated there is a lot of joint 22 interaction between our two Agencies 23 us at the NRC with license renewals with power-up rates 24 and with the other radioactive materials that we regulate 25 for medical applications and industrial uses It's a busy time for 8 1 2 3 It's certainly on the power side it's very busy with the new applications that are coming in We currently have nine applications inhouse for 4 14 reactors so we're very busy in that regard 5 one of our most important activities is for the safe 6 operation of the existing fleet and so that's one issue 7 that we clearly focus on and certainly impacts the 8 activities with FERC 9 However As Chairman Kelliher indicated a lot of 10 activities started with the August 03 Blackout 11 obviously impacted several or our plants 12 Memorandum of Agreement that was signed in September of 04 13 so we have a lot of common interactions 14 That We had a And so we look forward to a very productive 15 meeting today and I'd like to thank you again for your 16 hospitality 17 CHAIRMAN KELLIHER Thank you 18 COMMISSIONER MOELLER With that -- yes I just want to point out 19 that one of the unknown successes of government regulation 20 is the way these two Agencies dealt with the nuclear 21 industry over the last 15 years 22 With FERC bringing on wholesale power 23 competition and the safety regulation of the NRC we've gone 24 from capacity factors 15 years ago of roughly 70 percent 25 to capacity factors of over 90 percent now That's the 9 1 equivalent of adding about 25 reactors to this country's 2 grid and that's power we need 3 So in the face of competition the nuclear 4 industry stepped up 5 ever and again long before any of us arrived these 6 Agencies worked at that and it is again a success that's 7 largely unknown and I hope our predecessors realize the 8 good job they did 9 10 It's now run better and safer than Thank you CHAIRMAN KELLIHER Thank you very well said Any other comments from our colleagues on both sides 11 No response 12 CHAIRMAN KELLIHER No Why don't we turn to 13 Panel I 14 from left to right with Dave Nevius Vice President of the 15 North American Electric Reliability Organization 16 Panel I is already here so we're going to start MR NEVIUS Thank you Mr Chairman for the 17 invitation to address this joint meeting of the 18 Commissions 19 sessions and I'm glad to be back 20 21 22 Welcome We've been involved in several of these I'm going to talk today about regional planning processes for the new reactors that have been proposed Proposals to build new nuclear units in the 1100 23 megawatt to 1600 megawatt range or even larger in some 24 cases for initial service in the next ten years or so 25 means that coordinated wide-area studies of the 10 1 transmission grid must be initiated and must be initiated 2 soon 3 These are not plug-and-play sized units so such 4 studies involving the generation developers transmission 5 providers and regional planning coordinators are required 6 to ensure that adequate transmission outlet capacity and 7 reliable offsite power supply is available for all these 8 units 9 One of NERC's concerns regarding transmission is 10 that it has lagged behind both demand growth and the 11 addition of generating capacity for a number of years 12 current grid in the United States comprising over 160 000 13 miles of transmission operating at 230 KV and higher saw 14 about 2 000 miles of new lines added between 2006 and 2007 15 While plans have been announced for the addition The 16 of another 15 000 miles over the next ten years this is 17 still only at half the rate of growth in projected 18 electricity demand so transmission still lags behind other 19 increases 20 Not surprisingly this lag in transmission 21 development has led to grid congestion and reliability 22 concerns in several areas including the Northeast and the 23 Southwest 24 25 The transmission planning horizon is driven in large measure by the current resource planning horizon 11 1 which is generally about three to five years 2 is that it often takes much longer to plan site and build 3 major new transmission than it does generation 4 The problem In many cases even after the need for new lines 5 is agreed upon obstacles are encountered in the siting 6 process that may take many years to resolve 7 reason planning for transmission needed for large new 8 nuclear units must be initiated as soon as possible to 9 avoid having transmission become an impediment to bringing 10 11 For this new units into service on schedule In addition to the siting issues the question of 12 who pays for the required transmission expansion can 13 sometimes also present issues that must be resolved 14 As both Commissions know over 30 units 15 totalling more than 40 000 megawatts have been proposed or 16 announced for initial service in the 2015 to 2018 timeframe 17 Significant investment in transmission is vital 18 to support these units including their larger safety loads 19 following reactor trips to ensure that they are reliably 20 integrated into the bulk power system 21 Because of long lead times for major 22 transmission development and siting transmission planning 23 must be initiated sufficiently far enough in advance to 24 ensure that transmission will be ready to accommodate these 25 units when they are licensed and ready for operation 12 1 Many of the new plant designs have advanced 2 features that reduce somewhat the offsite power 3 requirements for accident mitigation and subsequently the 4 bulk power system support that's required 5 However a stable bulk power grid is still 6 required to prevent plant trips 7 transmission facilities and system improvements will ensure 8 that these new generators are interconnected with the bulk 9 power system in a reliable manner and that their offsite 10 11 Construction of required power requirements are met In addition to new transmission lines the 12 reliable integration of these units may require new 13 switching stations transformers and even the upgrading or 14 replacement of existing circuit breakers to handle the 15 higher short-circuit currents imposed on the system by these 16 larger units 17 In one case 35 circuit breakers will have to be 18 replaced to accommodate the higher short-circuit currents 19 with the plan to make these and other system reinforcements 20 spanning seven years 21 Interconnection feasibility and system impact 22 studies are currently underway for the integration of most 23 of the proposed units so that's the good news 24 25 In addition to these individual system studies the Eastern Interconnection Reliability Assessment Group 13 1 which covers the six regional Councils in the Eastern 2 Interconnection are preparing a ten-plus-year system model 3 including stability data which will allow the entire 4 Eastern Interconnection to be studied for the combined 5 effects of all these units 6 It's one thing to study it on an individual 7 system basis but when you put them altogether you need to 8 look at how the interactions take place 9 And accurate modeling of the generator 10 characteristics is a must for these studies so there will 11 be some data needed on these new units to do that properly 12 Again the issue of how costs of the needed 13 upgrades are allocated can be a major issue especially 14 when reinforcements may be required in one area or one 15 state to mitigate a system limit in another state 16 that interconnected nature of the grid that needs to be 17 appreciated 18 This is The good news is that two-thirds of the proposed 19 plant additions are at existing sites and that generally 20 means that required transmission additions will not be as 21 extensive as they would be at a green field site 22 I should say a word about the National Interest 23 Electricity Transmission Corridors The designations 24 announced by DOE on October 5th became effective with DOE's 25 denial in February of several requests for rehearing The 14 1 FERC has issued a rule I understand on how it plans to 2 proceed upon receiving requests for it to exercise its 3 backstop siting authority for transmission 4 So far we've not heard of any transmission 5 additions needed for the integration of nuclear plants that 6 are running into siting problems in either of these two 7 NIETC areas 8 9 Finally for our part NERC will continue to monitor the integration of new generation into the grid and 10 encourage coordinated efforts by plant developers 11 transmission planners and planning coordinators and report 12 on the status of these efforts in our 2008 long-term 13 reliability assessment that will be coming out this Fall 14 NERC will also continue to emphasize the 15 interconnected nature of the grid and the importance of 16 having a robust and flexible system that will provide 17 economic environmental and reliability benefits for all 18 Thank you 19 the panel 20 I look forward to your questions at the end of CHAIRMAN KELLIHER Great thank you very much 21 I'd like to now recognize Michael Mayfield the Director of 22 the Division of Engineering of the Office of New Reactors at 23 the NRC 24 25 MR MAYFIELD The last time we were with the Joint Commissions we presented a slide that showed parallel 15 1 regulatory paths 2 and it's my first slide 3 I should be -- I guess it's in your book Thank you It shows the parallel regulatory paths Our goal 4 in presenting that chart was to raise awareness both with 5 the Joint Commissions as well as with the industry to the 6 awareness of the parallel review processes and the need for 7 early and frequent communication and coordination 8 9 Coming out of that meeting the NRC Staff was directed to hold a public meeting to facilitate discussion 10 on that subject 11 NERC NEI the vendors the Independent System Operators and 12 a number of new reactor applicants attended 13 people in the meeting representing 30 organizations 14 The meeting was held on May 30th FERC We had 50 There were seven actions identified NEI took 15 the lead on three of them My colleague Dave took the 16 lead on one and NRC took the lead on one 17 rested with the applicants and the current power plant 18 operators The other two 19 As we followed up on this with our colleagues in 20 preparation for this meeting we can report to you that all 21 actions have been taken and that the dialogue is 22 continuing 23 interactions in this area 24 25 We anticipate continuing our positive The next slide is the map that we've shown you pretty much each time we've briefed you We've added a few 16 1 new sites mostly in Texas and in the far West 2 These are some new additions and new 3 announcements since the last time we briefed you 4 the industry has proposed 33 new nuclear power plants at 22 5 sites 6 To date There is one site the Watts Barre site that's 7 shown as the yellow circle 8 Part 50 of the regulations as opposed to a new reactor 9 licensing under Part 52 10 That's being licensed under When you go through this you find most of the 11 proposed new units continue to be in the South and 12 Southeastern United States 13 plant types and make some assumptions about the undeclared 14 plant types you get to something on the order of 44 000 15 megawatts of electricity that would be added and as Dave 16 noted perhaps as early as 2016 some of those units would 17 start coming online 18 When you look at the declared Chairman Kelliher on the next slide you had 19 indicated interest in the timing for this 20 illustrates the licensing review schedules for the plants 21 that have been proposed and accepted 22 This chart And you will see that we are actively working on 23 this As the Chairman noted we have nine applications 24 inhouse for 14 units 25 doing the design certification reviews on the remaining We are also in parallel with that 17 1 reactor types 2 3 4 So we are quite busy with this at this point in time One of the other major changes since the last 5 time we briefed you is that we now have paper in hand as 6 opposed to proposals so we are actively engaged in 7 executing our reviews against these schedules 8 9 And the last slide in the package is simply a chart a table to make things a little easier to figure out 10 what plants are where 11 this chart and that is the plant in Idaho 12 There is one addition that's not on And since the time this chart was printed and 13 added to the package the website has been updated 14 this information is available on NRC's public website 15 concludes my remarks 16 All of That I'll pass it on to David CHAIRMAN KELLIHER Thank you very much I'd 17 like to now recognize David Andrejcak the Acting Director 18 of the Division of Public Power System Analysis the Office 19 of Electric Reliability FERC 20 MR ANDREJCAK Thank you Good morning My 21 name is David Andrejcak 22 Division of Bulk Power System Analysis in the Office of 23 Electric Reliability 24 25 I am the Acting Director of the My presentation today will cover the generator interconnection procedures for larger generators in the 18 1 regional planning process including FERC's role as a 2 backstop siting authority 3 FERC Order Number 2003 requires jurisdictional 4 public utilities to amend their open access transmission 5 tariff to include standard interconnection procedures and 6 agreements for all generators greater than 20 megawatts 7 The scope of this Order is to facilitate 8 nondiscriminatory interconnection to the grid and lay out 9 the process that ultimately leads to the development of 10 needed infrastructure for the nation's bulk power system and 11 to help preserve reliability increase power supply and 12 lower wholesale prices to the nation's customers 13 There are two types of interconnection services 14 available under Order 2003 15 request is submitted the customer must request either an 16 energy resource interconnection service or a network 17 resource interconnection service 18 At the time the interconnection During the generator interconnection process 19 three interconnection studies must be performed 20 feasibility study a system impact study and a facilities 21 study 22 A These studies are performed in sequential manner 23 and provide increasingly detailed analysis of the system 24 costs and timing needed for construction 25 The final step in the process is the execution of 19 1 the interconnection agreement that specifies terms and 2 conditions of the interconnection 3 Order 2003 states that the transmission 4 providers will receive process and analyze 5 interconnection requests in a timely manner 6 transmission provider will use reasonable efforts and 7 processing and analyzing interconnection requests from all 8 interconnection customers whether the generation facilities 9 are owned by the transmission provider its subsidiaries or 10 The others 11 The transmission provider will assign a queue 12 position based upon the date and time of receipt of the 13 valid interconnection request and the position in the queue 14 is not differentiated among types it is strictly first- 15 come first-served 16 Surges in the volume of new generation 17 development are raising concerns in the current queue 18 approach in some regions 19 These delays have been observed in areas of the 20 country that operate Regional Transmission Organization and 21 Independent System Operators for organized markets 22 In response to this FERC held a technical 23 conference in December 2007 on interconnection queuing 24 practices 25 conference the Commission states that there are reforms In the Order that followed the technical 20 1 that can be implemented to expedite the queue management 2 system 3 These reforms may include An increase in staff 4 perform interconnection studies for clusters of new 5 generation increase the requirements for getting and 6 keeping a queue position combine the feasibility and system 7 impact studies and consider other approaches to prioritize 8 queue processing that provide protection against 9 discrimination comparable to the first-come first-served 10 11 approach that are more efficient Along with the generation interconnection 12 process FERC monitors and participates in the regional 13 planning processes 14 encouraged utilities to engage in joint planning with other 15 utilities and customers to allow affected customers to 16 participate in the facilities studies to the extent 17 practicable 18 In Order Number 888 the Commission However in the past decade industry trends 19 indicated a decline in transmission investment relative to 20 load growth 21 demand has declined across the country 22 Transmission capacity per megawatt of peak This is reflected in the amount of transmission 23 service interruptions or curtailments and rising congestion 24 costs in organized markets 25 In order to address FERC's and the industry's 21 1 concerns the Commission issued Order 890 in February of 2 2007 3 transmission provider would be required to amend their 4 existing tariffs for coordinated and regional planning 5 process that complies with the nine planning principles as 6 defined in Order 890 7 Order 890 states that each public utility To address the needs of long-term transmission 8 and generation projects industry trends are indicating 9 longer planning horizons Planning horizons are usually for 10 a ten-year outlook but some entities have begun to look as 11 far as 15 years to accommodate the interconnection studies 12 of the nuclear units and other long-term projects 13 FERC's role in backstop siting authority will be 14 an important addition to the process 15 federal siting of electric transmission facilities under 16 certain circumstances and authorizes the Commission to 17 issue permits to construct or modify electric transmission 18 facilities in a Department of Energy-designated national 19 interest electric transmission corridor 20 This provides for In addition FERC Order Number 689 determined 21 that the proposed facilities must meet the following five 22 specific statutory criteria 23 interest second it is used for interstate commerce third 24 it significantly reduces congestion fourth it enhances 25 energy independence and fifth it maximizes the use of First it is in the public 22 1 existing facilities 2 The more transparent and coordinated regional 3 planning process will further these priorities as well as 4 support the DOE's and FERC's responsibilities under the 5 Energy Policy Act of 2005 6 In conclusion I would like to summarize by 7 stating that the Office of Electric Reliability is actively 8 monitoring new generation connection of new nuclear and 9 other fuel types also Staff is monitoring and 10 participating in the regional planning processes and closely 11 working with the Office of Energy Projects to provide 12 technical assistance where backstop siting may be requested 13 14 At this time our panel would be happy to answer any of your questions 15 CHAIRMAN KELLIHER Great thank you very much 16 Now are numbers are large and our time is somewhat short 17 so I think if we go with three minutes -- I'll defer to my 18 colleagues at the NRC who are more expert in numbers -- but 19 if we go at three-minute rounds I think that should keep us 20 pretty much on time 21 timing 22 live by the same limits 23 So Joe can you be the bad cop on Cut me off viciously if I extend so that I'll Let me just ask -- and Dave I just want to say 24 that I'm not going to ask you questions and that's because 25 you're ours and we can ask you questions whenever we like 23 1 Laughter 2 CHAIRMAN KELLIHER So don't have your feelings 3 hurt But I really had a question on the length of 4 construction 5 to construct a nuclear power plant 6 assume construction starts at the end of the hearing 7 8 What is a rule of thumb on how long it takes MR MAYFIELD On your chart -- I There is a possibility that within the regulations they can begin to do some work early 9 CHAIRMAN KELLIHER 10 MR MAYFIELD Okay But there is a definition of the 11 beginning of construction and that comes a bit later 12 the timeframe is obviously dependent on the specific design 13 and the vendors doing the construction 14 15 There have been plants built in Asia in five years or less 16 CHAIRMAN KELLIHER 17 MR MAYFIELD 18 But Okay So that's probably the short end of the spectrum 19 CHAIRMAN KELLIHER But a lot of the hearings 20 seem to be ending in 2011 and if you add five years to that 21 -- 22 23 MR MAYFIELD work done early 24 25 But there would presumably be some CHAIRMAN KELLIHER helpful All right okay well that's Now there have been some projections that the 24 1 U S might add 125 more nuclear plants at least I've read 2 that in the trade press 3 Is that -- that is hard to believe given the 4 lack of construction for a such a long period of time 5 seems almost like a sedentary person just running a 6 marathon and -- 7 MR MAYFIELD 8 CHAIRMAN KELLIHER 9 MR MAYFIELD 10 It We're starting --- doesn't run enough We're starting to feel that way with just what's on the table today 11 CHAIRMAN KELLIHER 12 30 units that are on the table not 125 13 MR MAYFIELD 14 CHAIRMAN KELLIHER Okay and we're talking about Yes Okay And then just another 15 question about the grid 16 were to assume that every proposed plant is built is the 17 grid robust enough to accommodate those increases 18 19 20 MR MAYFIELD Is the grid robust enough If you I'd have to turn that one over to my grid colleagues MR NEVIUS With the additions that will be 21 needed yes it will be but the key is can those additions 22 be defined and made in sufficient time to reliably integrate 23 the plants into the system 24 25 So I think it's important -- and we're starting to see signs that it's taking hold that this message of 25 1 getting started with these studies the interconnect 2 studies the feasibility studies and the more detailed 3 studies that Mr Andrejcak spoke of as part of this 4 generation interconnection process do move ahead smartly 5 because you never know when you might run into a siting 6 issue with a line on a new right-of-way 7 CHAIRMAN KELLIHER Okay And my last question 8 goes to the nature of the applicants Most of them seem to 9 be vertically-integrated utilities and these would be rate- 10 based facilities but are some affiliates of vertically- 11 integrated companies 12 13 14 MR MAYFIELD I don't know the answer to that sir CHAIRMAN KELLIHER Okay but to the extent -- 15 David to the extent that some of these projects are 16 vertically-integrated utilities or their affiliates are 17 they building in their service territory where they are also 18 the transmission provider 19 MR NEVIUS In most cases yes but because of 20 the interconnected nature of the grid you could have 21 situations where a reinforcement may be needed outside of 22 that utility's service territory in order to strengthen the 23 grid sufficiently to be able to accommodate the new plant 24 25 CHAIRMAN KELLIHER Chairman Klein Okay thank you very much 26 1 NRC CHAIRMAN KLEIN Well thank you Joe In a 2 similar way we have access to Mike a lot so I will not ask 3 him questions 4 Laughter 5 NRC CHAIRMAN KLEIN 6 for David at NERC 7 asked about the grid 8 9 But I did have a question It's related to the question that you It's my understanding that there are certain sectors of the grid already that are pretty well taxed and 10 at some times plants seem to have to compete to get onto 11 that grid system 12 Clearly we have a map of where these plants are 13 going to be located but on your Slide 2 you talked about 14 transmission lags demand and capacity growth at some times 15 so I guess for our question for the plants that we have 16 already underway have you looked at that transmission 17 system to ensure that there will be the capacity available 18 MR NEVIUS That's what the impact studies the 19 initial impact studies are designed to do to look at is 20 the grid adequate as is or are there reinforcements 21 needed 22 For example in Texas the five or six units that 23 are proposed to be added in Texas four of them are at 24 existing sites one I believe at a green field -- or two 25 at a green field site 27 1 They found that they have had to not only 2 reinforce an existing right-of-way add additional circuits 3 or upgrade those circuits but add a few miles on new 4 rights-of-way 5 needed to reliably integrated these size plants into the 6 system 7 So there are additions that are going to be So those studies are taking place now My 8 reference to the interconnection-wide study is to look at 9 the entire grid 10 Texas is looking at -- or ERCOT is looking at Texas 11 We need to look at all six regions and all the 12 plants in the Southwest and Northeast that are being added 13 and there are 20-some that are in that interconnection to 14 see how they might interact and what additional transmission 15 is needed to make sure the grid is robust enough to handle 16 all of them at the same time 17 18 So those studies are underway and there are more to come 19 20 NRC CHAIRMAN KLEIN If you have to have a new transmission line how long does it take to do that 21 MR NEVIUS It's not as predictable as 22 constructing a nuclear power plant although you can run 23 into delays as well 24 25 There have been projects that have taken 20 years The 500 KV loop around Washington D C was planned 28 1 to be added in 1974 I remember that I was doing planning 2 studies at the time and it took 20 years before the final 3 section of that -- yes I'm old -- the final section of that 4 -- 5 Laughter 6 MR NEVIUS 7 -- was finally added 20 years later 8 There are proposals now on the table to bring new 9 lines into the Northeast and already opposition is lined up 10 against some of those major projects some 765 and some 500 11 KV projects so it can take a long time 12 That's why it's important to get started to 13 define the need early and to address any siting issues 14 early on so they can be resolved 15 NRC CHAIRMAN KLEIN 16 CHAIRMAN KELLIHER 17 COMMISSIONER KELLY 18 19 Thank you Commissioner Kelly Thank you and thanks to the Staff from the NRC for coming today and joining us David and Michael I had some questions about 20 FERC's policies in light of your testimony 21 focused us on the importance of ensuring that the process 22 for approving constructing and interconnecting nuclear 23 power plants proceeds without any undue barriers 24 25 You have And it makes me think about our own regulatory processes and whether we should look at our current 29 1 processes to see whether they should be updated improved 2 to achieve this objective 3 Some of the things that you mentioned in your 4 testimony were the difficulty of getting transmission 5 sited 6 pays for transmission upgrades 7 Mr Nevius you talked about the concern about who None of you mentioned our queue process but I 8 was wondering if that has become an issue in the siting of 9 nuclear power plants or Mr Mayfield in connection with 10 your timelines for processing the applications 11 new planning provision in place to mandate regional 12 planning among all utilities under our jurisdiction 13 We have a Do we appropriately take reliability into account 14 in that planning process Any thoughts that either of you 15 have on areas that we should focus on under our 16 jurisdiction and ask ourselves whether we should be doing 17 anything to improve our processes 18 MR MAYFIELD Commissioner the reason we showed 19 the parallel process chart was to try and focus some 20 attention not so much with the two Commissions or even with 21 NERC but with the industry the applicants that are 22 proposing new nuclear power plants to try to heighten some 23 consideration with them of the outreach they needed to do 24 with the transmission system operators 25 We weren't hearing a lot of dialogue It's not a 30 1 regulatory responsibility for us but you hear things in 2 many discussions and we weren't hearing as much dialogue 3 about that as we thought we should be hearing 4 started pushing on this and have -- I think we've been 5 reasonably well satisfied that the industry is paying 6 attention from what we hear but again we don't have 7 specific regulatory responsibilities so it's hard for us to 8 judge whether it's really going to be effective or not or 9 if there are issues with FERC's regulatory process 10 11 So we have And that's something that I'd have to turn to David for 12 COMMISSIONER KELLY Thank you for using your 13 bully pulpit and for pointing it out to us so that we can 14 use ours 15 Thanks MR NEVIUS As far as I can see there are no 16 issues with the processes themselves 17 defined process for generation interconnection and going 18 through the various stages the impact study the more 19 detailed interconnection feasibility and then finally the 20 facilities determination and as Mr Mayfield said I think 21 the industry both on the nuclear developer side and the 22 transmission planning side has taken heed of the need to 23 move ahead 24 25 FERC has a well- These are long-lead-time plants and some of the transmission will be long-lead-time transmission so I think 31 1 we're seeing a real increase in attention and using the 2 processes so I don't think it's a problem with the process 3 I think it's just getting into the process and using it 4 5 COMMISSIONER KELLY attention being paid to reliability 6 CHAIRMAN KELLIHER 7 MR NEVIUS 8 Laughter 9 COMMISSIONER KELLY 10 And do you see then enough Short answer Yes That was the right short answer 11 CHAIRMAN KELLIHER Thank you Let me now 12 recognize Commissioner Jaczko 13 Joe can you give Greg a 30-second and zero-second warning 14 Thank you 15 16 17 You can't see the clock so NRC COMMISSIONER JACZKO Hopefully I won't use all of my minutes I guess my question is we had recently an event 18 that Chairman Kelliher referenced in Florida with the 19 blackout and I'm wondering to what extent there have been 20 lessons from that that can be applied to how we develop and 21 plan transmission for the future 22 In particular my focus there is the reaction 23 that we had two nuclear units properly respond in that 24 event and shut down which of course then took away 25 several thousand megawatts to the grid 32 1 2 So I'm looking at Dave but is there anybody else who might want to comment on that 3 MR NEVIUS We're into the analysis of that 4 event now and just yesterday I sent a letter to the NRC 5 inviting their staff to participate in that analysis and to 6 share with us any observations or findings that they have 7 from the perspective of the plant 8 9 This is under the terms of our Memorandum of Agreement between NERC and the NRC I was going to mention 10 that in the next presentation but we will develop lessons 11 learned the root causes for this event share those 12 throughout the industry 13 In some cases it may lead to additional 14 standards or revisions or clarifications of existing 15 standards 16 awareness of the industry to those issues that resulted in 17 the particular event 18 19 20 21 22 23 24 25 In other cases it may simply be raising the So we've done that We do that with all major events working with our regional organizations NRC COMMISSIONER JACZKO Thank you I appreciate that MR HILAND If I could add we plan to accept that invitation NRC COMMISSIONER JACZKO we could facilitate that here Okay good I'm glad And again Mr Nevius this 33 1 is probably a question for you 2 You raise a lot of -- your first slide I think 3 talked about transmission issues 4 question Commissioner Wellinghoff and I were discussing even 5 before we started 6 I guess this is a In the end who is ultimately responsible for 7 addressing these issues in your mind Is this a variety of 8 different agencies 9 role or is it ultimately the private sector that should be Is there someone who has this ultimate 10 responsible for dealing with them 11 MR NEVIUS I think it's a combination 12 Commissioner of the transmission planning authorities and 13 the regulatory agencies in this case the FERC especially 14 with your new Order on regional planning to address these 15 issues 16 There have been obstacles and impediments that 17 have made it difficult to develop transmission 18 report done for the Secretary of Energy several years ago 19 on this issue 20 There was a Former Commissioner Moeller Betsy Moeller 21 chaired that Subcommittee on Transmission Grid Solutions 22 There are a number of very very excellent recommendations 23 that were in that report which haven't really come to 24 fruition 25 So I think we need to continue to work on that 34 1 I think the FERC is in an excellent position to push on some 2 of those recommendations 3 NRC COMMISSIONER JACZKO 4 CHAIRMAN KELLIHER 5 Thank you Thank you excellent timing Commissioner Moeller our Commissioner Moeller 6 COMMISSIONER MOELLER Thank you Mr Chairman 7 I also want to send greetings to our newest joint colleague 8 Commissioner Svinicki along with Pete and Senate colleagues 9 together 10 It's good to have you here I occasionally hear people talk about how France 11 does nuclear and why can't we do it And they don't 12 realize that France does it their way which is one reactor 13 design very definitive decisions on waste and we have more 14 of a system where we allow reactor designs to compete 15 And a question for Mr Mayfield and if you're 16 not the appropriate person please guide me to who is but 17 can you give me the two minute and 15-second version of the 18 different technologies that are on your chart the AP-1000 19 I think 20 between the various different reactor designs that have been 21 proposed What are kind of the very quick differences 22 MR MAYFIELD 23 Laughter 24 MR MAYFIELD 25 Two minutes and 15 seconds Okay the AP-1000 and the ESPWR are basically passive safety system designs The ABWR is an 35 1 advanced version of the boiling water reactor 2 has been built in Asia in a couple of places 3 That plant The EPR and the USAPWR look very similar to the 4 pressurized water reactors that are in operation in this 5 country and around the world today 6 The emphasis in the United States today is on 7 standardization within a particular design type 8 people that are going to build AP-1000s all of those AP- 9 1000s are going to look and operate very similarly 10 So the So the standardization that the French in your 11 example have they have three or four versions of their 12 plants but within a particular type they are very similar 13 So for the AP-1000 the AP-1000s that are built they will 14 be very similar and similarly with the EPRs and so on 15 So there's a strong push towards 16 standardization within a particular design type but to go 17 a lot further than that I think we're going to use up a lot 18 more than your 52 seconds and my knowledge 19 Laughter 20 COMMISSIONER MOELLER 21 CHAIRMAN KELLIHER 22 23 Thank you Great thank you I'd like to now recognize Commissioner Lyons NRC COMMISSIONER LYONS Thank you Joe David 24 I appreciated your invitation to the NRC to participate in 25 the lessons learned review in Florida I think that's very 36 1 positive and I'm very glad we have already accepted and 2 we'll look forward to that 3 I did also have a question for you On the 4 National Interest Corridors I'm curious whether that 5 legislation has really been exercised yet whether you can 6 comment on if it is likely to assist some of the siting 7 issues that the country is going to be facing 8 9 MR NEVIUS I guess the answer to the first question is no it hasn't been exercised yet and the FERC 10 has just issued a rule describing the process it will 11 follow if and when it gets a request 12 application from an entity that has been unsuccessful in 13 getting a transmission line sited in one of these corridors 14 or zones -- the Northeast and the Southwest -- before 15 anything begins to happen 16 But it has to get an I think it has to have a year in which the party 17 has tried to get the line sited through state siting 18 processes before they can come to the FERC so no it 19 hasn't been exercised yet 20 NRC COMMISSIONER LYONS Okay thank you Well 21 I certainly hope it will prove to be successful and also 22 help with some of the issues associated with siting the 23 nuclear plants 24 25 The only other thing that I was going to mention was more in the nature of a comment but again to 37 1 David 2 ISO and certainly came away extremely impressed with that 3 organization 4 I had the opportunity recently to visit the Midwest And I don't know in detail how that fits within 5 the overall NERC structure but I gather it's at least one 6 key part of it 7 And certainly I was very favorably impressed with 8 the operation the coordination and the backup capabilities 9 that they had were of particular interest And it even 10 struck me that there may be some benefits from having some 11 of our staff talk with some of the staff in the different 12 ISOs from the standpoint of software reliability and 13 maintaining operations in spite of whatever crises may 14 occur but I'm certainly very very complimentary of what I 15 saw at that site 16 MR NEVIUS There is an organization of all of 17 these RTOs and ISOs called the ISO RTO Council that 18 includes all of the operating RTOs and ISOs 19 probably be appropriate to ask that organization 20 Gordon Van Wylie from ISO New England is the current Chair 21 of that Council and you may want to ask for an opportunity 22 to visit with all of them 23 NRC COMMISSIONER LYONS It would I think I think there at least 24 is the potential for benefits because we certainly maintain 25 regional offices from the perspective of maintaining 38 1 continuity of operations 2 and I assume all of them have given great attention to 3 continuity of operations and there may be some 4 commonalities there 5 6 It was clear that at least MISO CHAIRMAN KELLIHER Thank you very much Commissioner Spitzer 7 COMMISSIONER SPITZER Thank you Mr Chairman 8 We had similar circumstances in some respects 35 or 40 9 years ago with the construction of nuclear facilities 10 There have been some elements of law that have changed 11 other circumstances are similar 12 Some of the utilities report to me difficulties 13 in negotiating with vendors and I've been told and surmise 14 that some of this is a consequence of some of the cost 15 overruns in the '70s that created issues with state 16 regulators in terms of passing through those costs 17 I was wondering if you had a reaction to what 18 lessons could have been learned from the last construction 19 cycle and whether that had any extrapolation to the 20 relationship between the utilities and the vendors 21 MR MAYFIELD I wouldn't venture off on the part 22 about the relationship between the utilities and the 23 vendors 24 as much as you do Commissioner 25 That's just not something where -- I hear stories I think that the NRC our Commission went back 39 1 and looked at the Part 50 licensing process and when we 2 created Part 52 when the Commission created Part 52 they 3 looked at what were the obstacles in the licensing process 4 and how could those be addressed to assure that the public 5 had an adequate opportunity to participate in the licensing 6 process and yet keep the process manageable for both the 7 staff as well as the applicants 8 9 I think that in Part 52 that's on the books today we've done a very good job of that I suppose it 10 remains to be seen once we have plants up and running how 11 effective it truly was but I believe we've made giant 12 strides forward compared to the Part 50 licensing process 13 from the first wave of plants 14 How that translates into business cases and 15 interactions with state regulatory authorities and rate- 16 setting authorities I can't really venture down that path 17 COMMISSIONER SPITZER And Commissioner Moeller 18 alluded to the process in France They obviously have the 19 unitary form of government and we have the additional 20 complexity of the states 21 Maybe if they could describe their competing 22 state interests how do you handle informing the states 23 about the progress of the various applications particularly 24 since an application in one jurisdiction may have an impact 25 on an application in another 40 1 MR MAYFIELD There is continual outreach with 2 all of the interested stakeholders which includes the 3 states 4 regular outreach Our process is very open and public and there is 5 My colleague that's the Director of the Division 6 of New Reactor Licensing has recently been in Kansas 7 dealing with testifying to state regulators there 8 9 10 So we have a fairly active outreach program to make sure that all stakeholders are informed of where we are what's going on and how it's moving forward 11 12 13 CHAIRMAN KELLIHER Thank you Commissioner Svinicki COMMISSIONER SVINICKI Thank you Chairman 14 Kelliher and Commissioner Moeller thank you so much and 15 my fellow Commissioners as well for a warm welcome 16 17 18 It's always so encouraging in a new position to encounter familiar faces so thank you very much for that I don't have any questions I would like to 19 thank the panelists for their presentations and as someone 20 who is just immersing myself more completely in these 21 issues I'd like to commend both staffs for the obvious work 22 that's gone on 23 The 2003 blackout was an unfortunate catalyst for 24 these interactions but I can't help but think that a closer 25 coordination between the two Commissions and between the two 41 1 staffs and an early look at all of these issues I think 2 augers well for electricity consumers in America and I'm 3 just encouraged by this activity and hope that we can 4 continue this interaction 5 6 Thank you CHAIRMAN KELLIHER Thank you very much Commissioner Wellinghoff 7 COMMISSIONER WELLINGHOFF Thank you Mr 8 Chairman 9 some time to ask questions of our NRC colleagues and 10 I am looking forward to this opportunity to have appreciate them being here today 11 Mr Mayfield I have a question with respect to 12 your licensing process and with respect to something that 13 the Commission has recently been going through with respect 14 to other energy infrastructure projects 15 And the question is do you look at the issue of 16 need with respect to these projects 17 MR MAYFIELD There is a regulatory guide that 18 deals with -- one aspect of it deals with the need for 19 power and it's actually part of the environmental review 20 COMMISSIONER WELLINGHOFF And do you in any way 21 look at competing projects in a region and how they may 22 interact 23 MR MAYFIELD That's part of the economic 24 analysis that goes to the need for power and to tell you 25 more sir goes beyond the area that I know much about 42 1 other than I know that that's in there because we've had 2 some dialogue on how you assess the need for power as well 3 as you know is there an interaction with the grid 4 COMMISSIONER WELLINGHOFF Drilling down into the 5 technology questions a little further Mr Nevius and 6 perhaps Mr Mayfield you may have a comment on this but 7 Mr Nevius in your presentation you indicated that 8 advanced features in the newer plants may reduce the need 9 for offsite power 10 I'd like to understand a little better the 11 current need for offsite power by existing plants and how 12 that may change with these advanced features and what those 13 advanced features may be 14 MR NEVIUS I think I would probably defer to 15 Mr Mayfield about some of the design features and he 16 already talked about some of the five or so different 17 standardized designs 18 19 20 But my understanding is that there are some different characteristics MR MAYFIELD In the passive designs the safety 21 systems don't require electric-driven pumps for example so 22 there is a lessened emphasis on the need for a reliable 23 source of offsite power 24 25 The current units and for the non-passive designs they derive their source of energy for safety 43 1 systems from the grid 2 then the turbine trips and they disconnect the output 3 breakers but the feed back into the station comes from the 4 grid 5 So once there's an interruption So there is a need for a reliable source of 6 offsite power 7 need is less and the reliability is lessened but we still 8 insist on their being a source of reliable offsite power 9 In general for the passive systems the COMMISSIONER WELLINGHOFF 10 systems are the new 11 systems in existence currently 12 MR NEVIUS 13 COMMISSIONER WELLINGHOFF 14 15 And the passive In other words there's no passive That is correct Thank you Mr Chairman CHAIRMAN KELLIHER Great thanks Jon Why 16 don't we now turn to Panel II and why don't we start with 17 Dave Nevius who is still the Vice President of the North 18 American Electric Reliability Council and then we'll 19 continue from that point on 20 MR NEVIUS 21 Laughter 22 MR NEVIUS 23 Thank you for that confirmation I turn my phone off so I'm never really sure but I hope I still am 24 Laughter 25 MR NEVIUS Thank you In October of 2004 at the request 44 1 of the Nuclear Energy Institute's Grid Reliability Task 2 Force NERC began developing a standard to ensure that the 3 transmission system has the capacity and capability to 4 support the safe operation of nuclear power plant safety 5 systems and that the necessary agreements would be developed 6 and put into place 7 The need for this standard stems from several 8 incidents that led to degraded grid conditions that caused 9 nuclear power plants to exceed their tech spec limits 10 In most cases this was the result of grid 11 operators simply not fully understanding the plant's 12 requirements for offsite power quality and reliability 13 mainly voltage support for critical safety systems 14 The new NERC standard requires plant grid 15 interface agreements to be developed and implemented that 16 specify requirements for communications and coordination 17 between the plant operators and the grid operators 18 These agreements are to reflect the nuclear plant 19 interface requirements specified in the licenses for the 20 plants 21 The NERC board approved the new standard in May 22 of 2007 23 November and just last month the FERC issued a NOPR with 24 comments due by April 28th 25 We subsequently submitted it to the FERC in The standard is intended to take effect in the 45 1 United States approximately 15 months following the FERC 2 approval 3 In the meantime NERC will continue to address 4 this important coordination issue through its three-year 5 cycle of readiness evaluations of transmission operators 6 Let me also mention something about some other 7 key standards that are of interest and importance to nuclear 8 power plants 9 performance and control standards transmission planning These include Grid frequency and voltage 10 requirements which we've already spoken of reporting on 11 system operating limits so that we know that the system 12 remains within its safe reliability limits emergency system 13 restoration which is a critical element from the 14 perspective of the nuclear plants and then accurate 15 modeling and monitoring of internal plant loads and 16 requirements so that the system operator knows what the 17 loads are that are being placed on the system by the nuclear 18 power plant especially by the safety systems 19 One final point that's not covered in the slides 20 that I submitted relates to the Memorandum of Agreement 21 that I referred to earlier between the NRC and NERC 22 signed that on behalf of NERC a couple of years ago as did 23 Louis 24 NERC 25 I Rayes the Executive Director of Operations for the Under the terms of that MOA and its appendices 46 1 as I mentioned I've invited the NRC Staff to participate 2 with us and with the Florida Reliability Coordinating 3 Council in the analysis of the February 26th system 4 disturbance in Florida that led to the tripping of the two 5 Turkey Point nuclear units 6 The product of this analysis will be the 7 findings on root causes of the disturbance and lessons 8 learned that will be shared throughout the industry 9 may be some lessons that would be shared throughout the 10 nuclear industry as well as among transmission operators 11 12 13 There I'll stop there and I anxiously await further questions Thank you CHAIRMAN KELLIHER Thank you very much I'd 14 like to now turn to Mr Patrick Hiland the Director of the 15 Division of Engineering Office of Nuclear Reactor 16 Regulation at the NRC 17 MR HILAND 18 Chairman Klein and Commissioners 19 some slides in your reference book 20 at the end of my discussion that I will articulate so 21 everyone could understand the descriptions 22 Good morning Chairman Kelliher and I too have provided I do have some graphics I'm going to talk about the progress since we 23 last met in January of 2007 the reliability standards 24 activities that we have participated in as well as the 25 nuclear power plant uprate the progress that the NRC has 47 1 made over the past several decades and just give you a 2 brief description of our license renewal program and its 3 status 4 When I spoke last year to this combined 5 Commission I talked about a tool that we use which is a 6 Generic Letter 7 our inspection program we had submitted this Generic 8 Letter and at the time we had not yet received all the 9 responses and had not drawn conclusions 10 Based on feedback that we had received from What the Generic Letter was intended to address 11 was our perception that there was some lack of detailed 12 training from the operators in the plants and transmission 13 network operators 14 That Generic Letter was sent out with a list of 15 about ten questions 16 respond to those questions and in August of this past year 17 we've completed our evaluation 18 Each licensee was responsible to We've concluded that no safety or compliance 19 issues were identified 20 validate the grid contingency analysis that our licensees 21 have in place 22 We did identify the need to We have been working with NERC to identify a 23 method that we could actually get real live data that is 24 when a nuclear plant were to trip offline and the offsite 25 power grid stabilizes what is that value and is that what 48 1 they actually calculated and is that what they actually 2 planned on 3 We continue to monitor the grid reliability on a 4 daily basis 5 staff goes to and briefs our senior management on the status 6 of the grid across the country based on accessing the 7 individual transmission safety operators or ISOs to draw 8 that data in 9 Each morning we have a 7 45 meeting that our If there is a stressed grid condition we utilize 10 our stakeholders and the regional offices and our resident 11 inspectors at each individual site to alert them to those 12 stress conditions so they can monitor the plant operations 13 that day and see what maintenance activities they're doing 14 and if there's any added risk that the plant might be taking 15 and aren't aware of the grid conditions 16 Our involvement with the reliability standards 17 activities 18 review of those standards 19 standards revision process as well as we looked at the 20 numbers 21 We continue to work with both FERC and NERC in We provided comments on the There's about 200 reliability standards and we 22 selected ten and I would call those the critical ten to our 23 industry to the nuclear power plants 24 25 We went through those standards and provided comments Those were in the generation and load balancing 49 1 the emergency preparedness and operations modeling data and 2 analysis transmission operation transmission planning and 3 voltage and reactive loads 4 More recently the new standard on nuclear plant 5 interface coordination which assures reliable offsite 6 power is open for public comment as you are aware but we 7 have met with both FERC and NERC staffs to provide our 8 comments 9 Regarding the uprated nuclear plants the NRC has 10 had in place a process whereby for the past three decades 11 since 1977 where a plant can apply to increase its power 12 output 13 three percent up to as much as 20 percent 14 Those increases typically would run from two to Over the past -- since 1977 5 200 megawatts have 15 been added to the grid and looking forward to what could 16 possibly be added over the next several years would be an 17 additional 2900 megawatts 18 19 20 The power uprate applications must include a grid impact study from our licensees Now I'll go to some of the graphical displays and 21 try to articulate them 22 it should follow Slide No 5 -- is a picture of the United 23 States that is color-coded with the FERC or the NERC 24 regions and it shows a couple of clouded areas 25 The first graph that I have -- and This is provided by the Department of Energy to 50 1 show the high congestion areas 2 Northeast right through the Washington D C area is 3 clouded yellow as well as on the West Coast and the State 4 of California are areas that currently are critical 5 congestion areas 6 Obviously you know the If you'd turn to the next page this is again 7 the same map of the United States but in this one the red 8 dots depict the power plants that have had an uprate 9 you see the plants are in the Southeast some in the As 10 Midwest but again that power increase you would look at 11 that as that would add to the congestion 12 The following slide is just a graphical 13 depiction of what I stated as far as the power uprates 14 red is depicting the 5200 megawatts that were added by this 15 process and then the yellow was what we projected out to a 16 total of about 8 000 megawatts added in this process 17 The And then the last slide -- and this is one that I 18 like to show when I get the opportunity -- this slide 19 depicts the NRC's license renewal process and the impact 20 that it's had on the nation's energy from the nuclear cycle 21 The blue areas are about half of the graph and is 22 what the nuclear generating capacity is in gigawatts for 23 the total life of those plants 24 shaded in white are what we've already licensed for renewal 25 beyond the 40 years The added areas that are A nuclear plant gets a 40-year 51 1 license to begin with 2 The white area depicts the energy received from 3 those plants that have applied for and received a 20-year 4 life extension and then the red part of that graph are our 5 projections if the plants that are available to apply for a 6 life extension all receive that 7 So the total area under that curve is the total 8 energy provided by the nuclear cycle 9 that one 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I just like to show It shows something really good 52 1 And that is all I have 2 CHAIRMAN KELLIHER I would now like to turn to 3 Keith O'Neal the Acting Director of the Division of 4 Reliability Standards in the Office of Electric Reliability 5 MR O'NEAL Thank you Mr Chairman 6 It is my pleasure to be here today to offer some 7 insights on FERC's role in the Reliability Standard 8 development process 9 Acting Director of the Division of Reliability Standards 10 11 My name is Keith O'Neal I am the within the Office of Electric Reliability My Division is charged with the responsibility of 12 monitoring the development of new or modified reliability 13 standards that apply to the Continental United States 14 We are also charged with reviewing Reliability 15 Standards interpretations of Reliability Standards and 16 filings proposed for Commission approval by the Electric 17 Reliability Organization or the ERO 18 Upon receipt of the proposed standards the 19 Commission can either approve the standards or remand them 20 back to the ERO 21 Commission they become mandatory and enforceable for the 22 users owners and operators of the bulk power system 23 If the standards are approved by the In many cases the Commission has approved 24 proposed standards and at the same time directed further 25 improvements 53 1 A review of the proposed Reliability Standards 2 must consider the Commission's criteria for good reliability 3 standards and ensure that approved standards are just 4 reasonable not unduly discriminatory and in the public 5 interest 6 We recognize that nuclear power plants represent 7 a large source of electrical power generation and are 8 important to the reliable operation of the bulk power 9 system 10 Accordingly the ERO has filed with FERC for its 11 approval nuclear plant interface coordination reliability 12 standard NUC-001 13 the Nuclear Standard 14 For simplicity I will simply call this In response to this filing the Commission 15 established Docket RM08-3 and issued a Notice of Proposed 16 Rulemaking or NOPR on March 20th 2008 to seek public 17 comment on the Commission's proposed approval of the 18 standard 19 I will provide an update on the status of this 20 docket and a quick overview of some of the areas for which 21 the Commission is requesting comments 22 Before I do so a brief word about how 23 reliability standards are processed at FERC Commission 24 review of reliability standards has typically been processed 25 through the rulemaking or NOPR process to allow for 54 1 stakeholder and international input 2 In this type of process the Commission can ask 3 for comments on specific issues and actions that it proposes 4 to take assuring a thorough record upon which to base a 5 reasoned decision 6 After due consideration of all comments the 7 Commission issues a final rule 8 days from the issuance of the final rule to request a 9 rehearing 10 Stakeholders are allowed 30 Barring major rehearing requests the final rule 11 becomes effective mandatory and enforceable after the 12 rehearing period has expired 13 For the Nuclear Standard the public will have 30 14 days from the issuance of the NOPR--that is until April 15 28th--to respond to the Commission's proposals 16 rule will be issued after consideration of all comments and 17 any rehearing requests 18 A final The Nuclear Standard as Mr Nevius mentioned 19 earlier primarily concerns the agreements made for 20 communication and coordination between the nuclear power 21 plant and the transmission entities that provide 22 interconnection and backup power supply services to the 23 plant 24 The issues the Commission requests comment on in 25 the NOPR focus on three primary areas associated with these 55 1 agreements 2 and coordination 3 Namely applicability scope of the agreements The nuclear plant requires--excuse me the 4 Nuclear Standard requires the nuclear power plant operator 5 to identify the entities responsible for providing services 6 necessary for the plant to meet its NRC requirements such 7 as maintaining adequate offsite power supplies and 8 planning and operating an electric grid to respect 9 transmission operating limits 10 This may include entities that provide off-site 11 power supplies to nuclear power plants at voltages below 100 12 kv who are not normally considered large enough to be part 13 of the bulk power system and thus would not be required to 14 be registered with NERC and subject to mandatory reliability 15 standards 16 The nuclear plant and the entity are required to 17 execute a nuclear power interface requirement agreement 18 NPIR specifically listing the requirements of the nuclear 19 power plant and the offsite power provider 20 It is the Commission's understanding that 21 disputes regarding the terms of the agreements including 22 whether an entity should even have to execute such an 23 agreement would be addressed through the NERC registration 24 process 25 The second area that the NOPR seeks comment on is 56 1 the scope of the agreements 2 requires a three-year review process the Commission would 3 like to know how the standard addresses interim changes 4 While a Nuclear Standard Is it feasible or necessary for instance for 5 the agreements to incorporate a provision for amendments to 6 accommodate electric system changes or review nuclear plant 7 licensing requirements as needed 8 9 The third area is coordination The Standard makes it clear that coordination between a nuclear power 10 plant and the transmission entities supplying the offsite 11 power to the plant is required but it is not clear when the 12 required coordination among transmission entities is 13 providing services to a nuclear power plant 14 Since the transmission grid is interconnected 15 the actions of all transmission entities providing services 16 to a nuclear power plant effect one another highlighting 17 the need for coordination among these transmission entities 18 In the NOPR the Commission proposes to accept 19 the operation and maintenance coordination provisions 20 proposed in the Nuclear Standard as applicable to all 21 transmission entities that provide interconnection or 22 offsite power supply services to a nuclear power plant 23 The Commission seeks comments on these and other 24 areas in the NOPR in order to make a reasoned final ruling 25 Thank you again for allowing me to participate in 57 1 this forum and we would be happy to accept and answer any 2 questions that the Commissioners may have 3 CHAIRMAN KELLIHER Thank you very much 4 Now we have hardly any time on this panel so I 5 am just going to make a comment 6 us and I think we have 11 minutes 7 minute then-- 8 Laughter 9 CHAIRMAN KELLIHER I think there are nine of So I guess give me one --so I am just going to make 10 a comment 11 colleagues how different FERC's role is in reliability than 12 when it comes to economic regulation 13 That is really just to emphasize to our In our role with economic regulation we are 14 charged with regulating wholesale power sales transmission 15 but we actually do not really have authority over generation 16 facilities 17 really the generation facility itself 18 We regulate wholesale power sales but not But reliability is different We are regulating 19 users owners and operators It is a different legal 20 universe and is much broader So we actually even if 21 hypothetically nuclear plants were not owned by companies 22 that also owned transmission we would be setting 23 reliability standards for nuclear plants because they fall 24 within that much broader universe 25 But we also want to be very careful that we do 58 1 not interfere with your nuclear safety operation 2 is one reason why when we adopt reliability standards we do 3 it by rulemaking because rulemaking isn't subject to ex 4 parte 5 not in 10 or 11 minutes but we can really have informal 6 discussions so that nothing we do impairs your regulation 7 So that We can have informal discussions all day long and Just one other comment I really want to 8 reiterate what Phil said that we have seen very significant 9 improvements in nuclear plant performance 10 11 I think it is a combination of things I think it is improvements in NRC safety 12 regulation but I think it is the incentive that was 13 established by our forebears 40 years ago 25 years ago 14 wholesale competition gives nuclear plant owners a great 15 incentive to improve operation 16 So I think it is a combination of that incentive 17 the profit incentive to operate the nuclear plants better 18 as well as improvements in nuclear safety operation but I 19 think it has had a good outcome for consumers 20 So I am sorry that might have been more than a 21 minute but--I am sorry we are so short on time 22 the way the panels are operating and our mutual time 23 commitments 24 So why don't I turn to Chairman Klein 25 NRC CHAIRMAN KLEIN Thanks Chairman It is just 59 1 I just have a real quick question This may be a 2 David answer but I will direct it to Pat 3 you talked about power upgrade must include a grid impact 4 study So the question is 5 study Who is responsible for evaluating that 6 MR HILAND On your slide 5 Who does that grid impact The applicant or the licensee in 7 my experience they have to ask their Independent Operator 8 the ISO to validate the grid impact study 9 ones that we have seen the ISOs will subcontract that work 10 Typically the out but they fall into a queue 11 And as we have heard before it does not matter 12 what type of plant you have there is a queue that you must 13 sit in before the ISO goes back and validates that 14 what we are looking for is not only the capacity of the grid 15 to carry that additional power but also the capability to 16 continue to provide off-site power if that nuclear unit were 17 to trip And 18 There are two answers that we are looking for 19 And the ISO is the only one that can produce that answer 20 NRC CHAIRMAN KLEIN Thanks 21 CHAIRMAN KELLIHER Thank you 22 Commissioner Kelly 23 COMMISSIONER KELLY I had a question for any of 24 the panelists about advanced technology and how it is 25 deployed in the nuclear industry 60 1 As advanced technology moves from the labs to the 2 possibility of commercialization do you find that the 3 nuclear industry implements that 4 is it through the utilities perhaps wishing to achieve 5 efficiency measures 6 see their technology employed 7 NRC standards are forcing the acquisition of advanced 8 technology 9 And if you do find that Is it through the vendors who look to MR HILAND Or do you find that NERC and I think the answer is all the 10 above All the above Currently and you may have read in 11 the press and certainly the public in this room are aware 12 there's Digital I C 13 Control and the transition of that technology into the 14 nuclear industry is coming forward but it is 20 years 15 behind the times in some cases in that the micro processors 16 or the computers that people use to operate a lot of other 17 industries are being introduced now and we do have a major 18 application that we just received a couple of months ago 19 from the Duke Energy Company to convert their analogue 20 systems over to a digital instrumentation and control The Digital Instrumentation and 21 So I think the answer is 22 COMMISSIONER KELLY 23 MR MAYFIELD All the above Thank you Commissioner I think I would echo 24 that What we are seeing with the new plants is all of the 25 Digital I C systems make use of modern digital technology 61 1 What is interesting is that it is not cutting- 2 edge in the sense of the latest and greatest coming out of 3 California 4 we have a pretty good feel for the reliability of it 5 are not putting in the next widget that you six months down 6 the road find out just is not quite right 7 It is rather tried-and-true technology So We So it is pretty well developed and mature 8 technology and yet it is significantly ahead of where the 9 current operating fleet and their analogue technology 10 resides 11 COMMISSIONER KELLY 12 CHAIRMAN KELLIHER 13 14 Thank you Thank you Commissioner Jaczko NRC COMMISSIONER JACZKO I would just follow up 15 on the point that the Chairman made about the Grid Impact 16 Study and comment about a situation we had recently I think 17 with one of the plants that we received an application for 18 for a power upgrade 19 power upgrade but I think because of their lack of planning 20 on what they would need to do to get the grid impact study 21 they were actually reduced--actually had to reduce the size 22 of that power upgrade because that lower power increase was 23 able to get in the queue faster I guess I should say 24 25 They came in wanting a much larger So they wound up requesting about a 5 percent power upgrade rather than something on the order of a 16 or 62 1 17 percent power upgrade I believe was the ultimate number 2 because that upgrade would have taken them I guess right now 3 about 10 years or so to get through the queue to get that 4 information 5 So I think we still have some work to do 6 probably if nothing else than to communicate with our 7 licensees our expectations and that they need to begin 8 interfacing with these organizations in a different way 9 It is very reminiscent to me of the situation 10 we had with Seabrook where Seabrook came in with a power 11 upgrade and hadn't received that hadn't properly 12 communicated I think with their system operator and as a 13 result were often asked to reduce power to comply with some 14 reliability requirements 15 So I think these meetings are a very good 16 opportunity for us to communicate these issues and I think 17 it just continues to reinforce them 18 licensees still have a little ways to go to understand that 19 they need to be more involved I think in some of these 20 broader issues of reliability and understand the 21 requirements that are out there that they need to comply 22 with as well as our approval process I think that our 23 So there wasn't really a question in there 24 CHAIRMAN KELLIHER 25 Commissioner Spitzer Thank you very much 63 1 2 COMMISSIONER SPITZER This is really more of a comment-- 3 CHAIRMAN KELLIHER What I out of order 4 Commissioner Moeller I'm sorry 5 Moeller I'm sorry 6 I've lost track Laughter 8 CHAIRMAN KELLIHER Moeller 10 11 I'm sorry Commissioner There are so many Commissioners here 7 9 Thank you Mr Chairman Let's go with Commissioner Sorry Marc COMMISSIONER SPITZER I'm Pavlovian when I am recognized 12 Laughter 13 CHAIRMAN KELLIHER 14 COMMISSIONER SPITZER I apologize Really--and this is more 15 of a comment--the traditional safety regime of U S NRC 16 dovetails in with the reliability function that is new 17 had the opportunity to interface with NRC as an Arizona 18 Commissioner 19 Switchyard one particular event and then there were 20 ongoing issues and I wanted to really notably compliment 21 you all 22 I There were some episodes with the Hassayampa There was a fairly strong contingent that came 23 There was a public hearing in Phoenix This was the type 24 of--these events and series of events could have 25 unchecked undermined the public's faith and confidence in 64 1 the regulatory system as well as the operation of the 2 facility 3 Commissioners and the staff that the public hearing in fact 4 reinforced the public's confidence through the vigilance of 5 the U S NRC 6 It is really a compliment to the U S NRC the Maybe just very briefly if you could describe in 7 general how you respond to episodes such as that and how 8 you handle them from a process point of view 9 MR HILAND We have an Event Assessment Program 10 ongoing where we look at on a daily basis--any time an 11 event gets called into our Operations Center licensees are 12 required to call in events that occur at their plant based 13 on significance 14 There is a hierarchy there When we look at 15 those we have to make a determination how do we respond 16 we respond with just our resident inspector 17 you earlier at each of our nuclear plants we have at least 18 one and in most cases two on-site resident inspectors to 19 give us that first-hand information I mentioned to 20 Those evaluations determine whether or not we 21 conduct a special inspection or an augmented inspection 22 team 23 or Integrated Inspection Team 24 25 Do And then the worst case would be what we call an IIT Each one of those has a higher level of participation from the Washington corporate office of the 65 1 Nuclear Regulatory Commission down to the regional office 2 and then at the site 3 In the case--and I believe you are referring to 4 the--I have a former regional administration I have to be 5 careful about regional administrator here 6 familiar with that case 7 corporate office 8 9 I'm not as That was before I moved into the But that is how we do it On an event by itself we look at it As it goes up in significance it will get higher level senior 10 management involvement in the decision making 11 make a decision to go out to a site we go out and do that 12 at a regional basis 13 MR MAYFIELD Then once we I guess the only thing I would add 14 is typically when we have to field those teams they do not 15 rely solely on the regional inspectors and their level of 16 expertise 17 And for the event in Arizona there were specific experts 18 out of headquarters that supported the region in that 19 activity 20 They will reach to headquarters for specifics So we can bring a fair bit of technical weight to 21 bear quickly when we need to 22 CHAIRMAN KELLIHER 23 Commissioner Lyons 24 25 Thank you very much NRC COMMISSIONER LYONS Kelliher Thank you Chairman I don't really have a question I just wanted to 66 1 perhaps make the comment that I think the folks of this last 2 panel on reliability standards really is an outstanding 3 example of the cooperation between the staff of the two 4 agencies 5 I would like to think that that cooperation is 6 facilitated perhaps by the meeting of the Commissions as 7 well 8 Standard its impact on the safety of the nuclear power 9 plants the efforts that Pat described from the standpoint 10 of grid monitoring that has gone on all those I think are 11 outstanding examples of the staffs working together very 12 very well The progress that has been made on the new NERC 13 So just my compliments and thank you 14 CHAIRMAN KELLIHER 15 Thank you Commissioner Moeller--and I abjectly and publicly apologize 16 Laughter 17 COMMISSIONER MOELLER 18 A brief comments which is that I think most of Accepted Thank you 19 you know that in the 2005 Energy Act Congress gave this 20 agency new enforcement powers very broadened and so we are 21 implementing those now in a way where we have a limited body 22 of evidence 23 However you as Commissioners and staff at the 24 NRC have really had a major enforcement program I think from 25 your inception So we would like to learn more about your 67 1 enforcement I think you have four categories 2 undertake it 3 for today's discussion but in general we want--at least I 4 want to know a lot more and look forward to that 5 discussion What the pros and the cons are of it 6 CHAIRMAN KELLIHER 7 Commissioner Svinicki 8 NRC COMMISSIONER SVINICKI 9 How you Not Thank you I thank the panelists and I have no questions 10 CHAIRMAN KELLIHER Thank you 11 Commissioner Wellinghoff 12 COMMISSIONER WELLINGHOFF Thank you Mr 13 Chairman 14 Reliability Monitoring Center and I have to by way of 15 disclosure say it was paid because I heard the Senator 16 yesterday and Joe and the brownies he and his son had 17 made and it was more than ample payment but Mr Hiland 18 talked about the continued monitoring that NRC must do with 19 respect to the grid and I want to encourage them and hope 20 that there will be continued cooperation between NRC and the 21 FERC especially with respect to a Reliability Monitoring 22 Center which is really going to become state of the art 23 I would like to put in a paid plug for the FERC It will be the place in the United States to 24 determine what is going on in the grid in real time 25 understand they are going to tour it today So I I think it is a 68 1 real credit to Joe and his team and what they have done 2 there and I was so impressed with it yesterday that it will 3 be a resource for everybody 4 CHAIRMAN KELLIHER Thank you very much 5 Well why don't we turn to the third panel I 6 would like to now recognize Scott Morris the Deputy 7 Director Division of Security Policy Office of Nuclear 8 Security and Incident Response at the NRC 9 MR MORRIS Thank you Mr Chairman Regis and 10 I sort of choreographed it so that he would go first so I 11 want to defer to Regis 12 word I just-- Not that I want to have the last 13 Laughter 14 MR BINDER 15 CHAIRMAN KELLIHER Alphabetical order Let me introduce Regis then 16 Regis Binder is the Acting Director of the Division of 17 Logistics and Security Office of Electric Reliability 18 19 20 MR BINDER Thank you Chairmen Kelliher and Klein and Commissioners On January 18th 2008 the Federal Energy 21 Regulatory Commission issued Order No 706 22 eight proposed critical infrastructure protection or CIP 23 reliability standards 24 25 That approved These eight standards address the cyber security of the Nation's bulk power system and include approximately 69 1 160 requirements and subrequirements 2 The CIP Reliability Standards represent a 3 significant effort by the electric industry that culminated 4 in their filing by the North American Electric Reliability 5 Corporation in its role as the electric reliability 6 organization for Commission approval under Section 2 15 of 7 the Federal Power Act 8 9 Order No 706 established the first mandatory and enforceable reliability standards for the cyber security of 10 the electric industry 11 develop modifications to the eight standards to develop 12 guidance to industry on several topics and to develop 13 mechanisms that provide additional oversight of how 14 responsible entities are complying with the CIP reliability 15 standards 16 The Order also directed the ERO to I should point out that several requests for 17 clarification or rehearing of certain aspects of the Order 18 have been filed with the Commission 19 consideration 20 21 22 And those are under The main areas addressed by the CIP Standards are Identification of critical cyber assets to be 23 protected management involvement 24 required through a cyber security policy 25 This is primarily Security of sensitive information This includes 70 1 such information as floor plans of computing centers and 2 security configuration 3 Personnel risk 4 Physical security of cyber assets 5 Change control 6 This includes testing of significant changes to software and hardware 7 Access control This includes both electronic 8 and physical access to critical cyber assets and revoking 9 authorized access when no longer needed 10 Establishing an electronic security perimeter 11 This involves controlling and monitoring all access points 12 crossing the electronic security perimeter as well as 13 performing annual vulnerability assessments 14 Incident response plans and recovery plans 15 Recovery plans include procedures to use stored information 16 to successfully restore critical cyber assets as well as 17 annual exercises 18 Order No 706 directed multiple technical 19 modifications such as shortening the time period for 20 reviewing access logs 21 changes 22 It also directed several structural These include additional oversight in two areas 23 First the list of critical assets developed by a 24 responsible entity must be reviewed by another entity with a 25 wide-area perspective to be sure that no critical assets 71 1 have been missed 2 Second any exceptions to the CIP standards such 3 as for safety reasons claimed by a responsible entity must 4 be reviewed and approved by a regional oversight 5 The second structural change is additional 6 reporting to the Commission required on two topics 7 ERO must report annually on exceptions to the CIP standards 8 that are claimed by responsible entities including their 9 effect on bulk power system reliability 10 The This important for the Commission's monitoring of 11 compliance activities and for determining if additional 12 modifications to the reliability standards are necessary 13 In addition the Commission directed the ERO to 14 consult with the federal entities that are subject to both 15 the CIP standards and the Cyber Security Standards developed 16 by the National Institute of Standards and Technology or 17 NIST and we required the ERO to report to the Commission on 18 the effectiveness and implementation issues of the NIST 19 standards 20 The third structural change is a framework for 21 controlling exceptions to the CIP standards that is based on 22 the principle that no responsible entity can exempt itself 23 from a CIP standards requirements 24 that operating and safety considerations may necessitate an 25 exception Also the recognition Also up-front reporting of claimed exceptions 72 1 to regional entities 2 of exceptions during an audit process 3 of claimed exceptions to the Commission 4 Detailed regional review and approval And annual reports This concludes my comments and I will be glad to 5 answer questions after the panel is over 6 CHAIRMAN KELLIHER 7 MR MORRIS Yes Thank you Mr Morris Good morning Chairman 8 Kelliher Chairman Klein and Commissioners I appreciate 9 the opportunity to discuss in a very broad sense where the 10 NRC is with respect to cyber security at nuclear power 11 plants and to provide some perspective on how what Regis 12 referred to in the implementation of the CIP standards and 13 what we are doing at the NRC and how they relate 14 On the first slide I just want to briefly cover 15 the essence of our mission 16 think the reason for mentioning it here will become clear in 17 a moment 18 This is no surprise but I Fundamentally our mission is to license and 19 regulate the Nation's civilian use of special materials and 20 to ensure the adequate protection of public health and 21 safety and also to promote the common defense and security 22 and protect the environment 23 I highlight nuclear safety and security because 24 those are the two principal things upon which we focus 25 Obviously electric--or power continuity and electric 73 1 reliability are important but it is not clearly part of our 2 mission and that is why our interaction with FERC is 3 important 4 With respect to our instrumentation and control 5 systems at the nuclear power facilities the way that our 6 mission translates to these INC systems is that our focus is 7 on safety systems security systems--and what I mean by that 8 are any systems that are employed to ensure that the site 9 itself is protected from threats and also any systems that 10 are required for effective emergency response or 11 preparedness 12 On the next slide I highlight how that manifests 13 itself how our nuclear safety mission is manifested with 14 respect to those three categories of INC 15 Then specifically with safety systems our design 16 requirements are very well established and understood 17 are based in large part on IEEE standards and others 18 are basically designed on three--the three measures you see 19 there 20 high degree of reliability 21 They They redundancy diversity and independence to ensure a We do not--while our requirements are very strict 22 in that regard our review of those systems at the site is 23 limited to a reasonable assurance standard 24 do not do independent design verifications but rather we do 25 enough of a review to give ourselves and the public That means we 74 1 reasonable assurance that they will do what they are 2 intended to do 3 We verify the implementation of those 4 requirements in the field through inspections and 5 enforcement in addition to our licensing work back in 6 headquarters 7 From a nuclear security perspective on the next 8 slide we operate in a slightly different paradigm 9 case of nuclear security we have prescribed what we refer to 10 as a design-basis threat which is simply a set of adversary 11 characteristics that we require our licensees to be able to 12 defend against with high assurance 13 In the We are concerned about radiological sabotage 14 clearly 15 are not publicly available information but generally 16 speaking and in our regulatory requirements we do offer a 17 general sense of what it is comprised of 18 The design-basis threat characteristics themselves I want to point out that we are applying nuclear 19 security not to just safety systems but also as I mentioned 20 earlier the security systems and the emergency response 21 systems 22 If you look at risk security risk is the product 23 of threat versus vulnerability I think we would all agree 24 that the threat is fairly high 25 other hand at least before 9 11 and even today in large The vulnerability on the 75 1 measure is fairly low principally because of the existing 2 design requirements for safety reasons that I mentioned 3 earlier but also because as has also been mentioned the 4 technology and use at many of these facilities for safety 5 and safety systems is generally not susceptible 6 words it is analogue or it is solid-state logic modules 7 things that do not have software applications running on 8 them 9 That is changing In other And if you will go to the next 10 slide where I speak about post-9 11 requirements the agency 11 did quite a bit in security post-9 11 12 digital INC we recognize that the retrofits of some of 13 these older analogue and solid-state logic systems are 14 increasing 15 systems but even--but now as Mr Hiland pointed out we 16 are receiving applications for safety-related systems that 17 are moving toward digital technology 18 And with respect to They are being used more and more in non-safety In addition all of the new reactors are going to 19 employ digital systems And so the need to have more robust 20 security requirements to address cyber attacks is evident 21 And as such in 2002 we issued an order to all the power 22 reactor licensees mandating an initial action to at least 23 identify what things that they had on their sites that were 24 potentially subject to cyber attack 25 with another order in 2003 in which we supplemented the That was followed up 76 1 existing design-basis threat to include cyber attacks 2 we have codified that in our regulations early last year in 3 the design-basis threat through a notice and comment public 4 rulemaking and it explicitly included external cyber attack 5 in the list of adversary characteristics for which power 6 plants have to be able to defend against with high 7 assurance 8 9 And Finally we have in 2006 proposed a new set of programmatic cyber security requirements or standards in 10 10 CFR 73 54 11 thousands of comments on that rulemaking of which the cyber 12 piece was just a small part of 13 go final in the early 2009 timeframe 14 That is an ongoing rulemaking We have received We anticipate that rule to But it is important to point out that there is 15 fairly good alignment between what we are proposing in that 16 set of rules and with what Regis just referred to in the CIP 17 standards 18 Quickly onto the next slide since I am almost 19 out of time the Nuclear Energy Institute did not sit idly 20 by--or the Nuclear Energy Power Generation facilities in the 21 industry as represented by NEI did not sit idly by 22 were very aggressive to develop their own set of standards 23 in part based on work that we had already done in part 24 based upon looking at what NERC had done and in trying to 25 be compatible with the CIPs and they developed what is They 77 1 referred to as an NEI-404 document which is a comprehensive 2 cyber security program guideline 3 Internally all of the industry generator power 4 reactor facilities have committed to implement an NEI-404 5 program by May of this year 6 On to the last slide as part of our ongoing 7 review and dialogue between the staffs and between the 8 industry and us and others one potential regulatory issue 9 did surface in this arena 10 And this goes back to my initial slide 11 The NRC's cyber security requirements are not 12 going to extend to power continuity systems 13 extend directly to what is not directly associated with 14 reactor safety security or emergency response 15 They do not The NEI-404 document does go beyond what our 16 existing and planned requirements will be and does include 17 all systems and digital assets on their site which would 18 include power or continuity systems but it is important to 19 point out that the NEI document is not a compulsory 20 document 21 implement for things that are beyond our regulatory and 22 statutory purview 23 It is not something that we require them to As a result and when you look at the CIP 24 standards that were issued there is a discrete statement in 25 each of the seven or eight standards where it specifically 78 1 exempts facilities regulated by the United States Nuclear 2 Regulatory Commission from compliance with those CIP 3 Standards 4 So there is an issue there in the sense that our 5 regulations for cyber security go up to a certain point and 6 end 7 covered by NEI-404 but not mandated by us and is exempted 8 currently by the FERC CIPs 9 figure out what is the optimal way to bridge that Then there is this power continuity piece which is So we are interacting to try to If in 10 fact we determine that there needs to be enforceable 11 regulatory standards in place how best to pursue that 12 13 That ends my comments and we would be happy to answer any questions 14 CHAIRMAN KELLIHER 15 MR MORRIS 16 CHAIRMAN KELLIHER Great Thank you very much I'm sorry I ran two minutes over I think we could have two- or 17 three-minute rounds if that is the will of the group 18 because I do not think I need 10 minutes for concluding 19 remarks 20 So why don't we say three-minute rounds and if 21 we can come in a little under so much the better I just 22 really had a couple of comments--I am not sure I have 23 questions in this area--but this is an area where it is very 24 important for the two agencies to work together because we 25 understand the relationship of reliable grid operations with 79 1 nuclear plant safety and the nature of the threat is very 2 different than what FERC is accustomed to 3 I think the cyber threat is different It 4 used to be perception of the 5 brilliant teenage boy who likes to 6 coat in the basement of his home but the cyber threat 7 really is quite different and more organized perhaps than 8 that 9 A cyber threat was some wear a black trench cyber threat to the grid is an indirect 10 attack at least at 11 true 12 security agency nuclear plants and the reverse is In your agency you are much more of a national 13 We were talking briefly that agencies have 14 personalities and you were established in 1946 and 15 entrusted with the secret of the atom bomb 16 bit of a security personality that you have had ever since So you have a 17 You used to have the death penalty 18 thought FERC was given strong penalty authority two years 19 ago but-- 20 Laughter 21 CHAIRMAN KELLIHER --you used to have the death 22 penalty for violating the Atomic Energy Act 23 day really did not compare too well with that 24 Laughter 25 CHAIRMAN KELLIHER People So our $500 a So I think it is important 80 1 for us to--we have studied how you have approached security 2 and particularly physical security and how you have set a 3 design-basis threat and how do you get licensees to comply 4 with that 5 And does that translate to us It does not translate perfectly because of the 6 universe that are subject to reliability standards is much 7 less homogeneous than the universe of commercial nuclear 8 plant licensees but we have studied how you have done 9 things because we recognize you are a security agency more 10 so than we are and we want to see what best practices you 11 have that we can adopt 12 I think this is an area where we do have a common 13 threat and so some kind of common defense is important 14 I am glad our staffs are working in concert 15 So So that is a statement and not even a statement 16 in the form of a question 17 statement It is just an out-and-out 18 So with that let me turn to Chairman Klein 19 NRC CHAIRMAN KLEIN Thanks I should point out 20 that the current Commission has been very limited in its use 21 of the death penalty 22 Laughter 23 NRC CHAIRMAN KLEIN 24 25 So we use it only rarely although sometimes we would like to use it more often Laughter 81 1 NRC CHAIRMAN KLEIN I guess I have a question in 2 that area for Regis 3 we deal with on security we have to handle on obviously a 4 secure way 5 people get ahold of it 6 In terms of a lot of the issues that We don't want to pass information so the bad How do you handle that information within FERC 7 Do you have special categorizations to safeguard 8 information Is it Secret 9 internally 10 MR BINDER How do you handle that We do work with a variety of levels 11 of sensitivity 12 although I do not believe FERC has actually classified 13 information itself or declared information to be 14 classified but we do work with information that has been 15 classified by other agencies 16 We do work with classified information FERC has tools for handling sensitive and 17 confidential information We use a tool called Critical -- 18 CEI Critical Energy Information Infrastructure 19 Information 20 dissemination of information but still share it with 21 entities that need it and we can interact with them It is a means by which we can control the 22 That involves disclosure agreements-- 23 nondisclosure agreements and it is used quite a bit at the 24 Commission especially for commercially sensitive 25 information and we are starting to use it more so for 82 1 sensitive security information now 2 NRC CHAIRMAN KLEIN Thanks 3 CHAIRMAN KELLIHER 4 COMMISSIONER KELLY 5 David Nevius you are not a speaker on this third Commissioner Kelly Thank you Joe 6 panel but certainly you are qualified to speak and so I 7 would like to ask you in your work to date on developing 8 Cyber Security Standards if you have any comments that you 9 would like to pass on to us here at FERC or at the NRC about 10 issues you see arising things we should be considering or 11 actions we might want to contemplate 12 13 14 15 16 MR NEVIUS I don't have anything to add to what has already been mentioned by Regis Binder and Scott Morris COMMISSIONER KELLY Well thank you for your cooperation with our staff in developing these standards CHAIRMAN KELLIHER I just want to pick up on 17 Commissioner Kelly's comments We should feel free to ask 18 any of the panelists not just the last two their views 19 Commissioner Jaczko 20 NRC COMMISSIONER JACZKO I guess I do not have a 21 question at this point but I would certainly echo I think 22 the importance of and reinforce I think the good 23 communication that has gone on so far in particular in this 24 area with our staffs to try and address this potential issue 25 with the power continuity systems And I do think it is 83 1 certainly important to resolve that and ensure that we do 2 have good coverage in this area 3 So I certainly encourage the continued 4 cooperation and if there is anything that we can do to help 5 facilitate that please let us know 6 I would also just briefly comment that I 7 appreciate the comments about enforcement that Commissioner 8 Moeller had made 9 challenging aspect of the things that we do Enforcement is probably the most We focus a lot 10 of our time on the regulations and the regulations that we 11 write but ultimately they are only as good as our ability 12 to enforce them 13 So I certainly if there is anything else that we 14 can do to help and share our experiences on enforcement we 15 would be happy to do that 16 staff to you as well And I certainly would extend the 17 So those are the comments I had 18 CHAIRMAN KELLIHER 19 Thank you Thank you Commissioner Moeller 20 COMMISSIONER MOELLER Thank you Mr Chairman 21 A brief question for Mr Morris I brought this 22 up once before I think in our reliability discussions but 23 in one of your slides you talk about kind of the digital 24 retrofits 25 you a little nervous Does the increased digitalization at all make 84 1 To me I have been in plenty of nuclear plant 2 control rooms and the on off switch is kind of reassuring 3 and the dials 4 guess I would like your comments 5 MR MORRIS 6 makes me very nervous 7 have got a structure in place 8 9 You know because you can see it Does it make me nervous So I Yes it That being said however I think we I think Pat mentioned our work with the digital I C steering committee that we have commissioner internal to 10 our agency and have interacted closely with industry and 11 vendors 12 dialogue between--to register our concerns and the 13 industry's concerns about impeding the operation of these-- 14 you know the security of course is always in competition-- 15 excellent security is always in good competition with good 16 operations 17 and that has helped force a very important It is very challenging to find the balance 18 Perfect security means you can't operate 19 most efficient operations often mean very little security 20 So struggling to find that balance is a challenge 21 think we have internally got a structure to address our 22 concerns which are very real 23 You know the And I I mean you mentioned the on off switch but the 24 newer plants are going to have a lot of human machine 25 interface issues and touch screens and digital procedures 85 1 and yes lots and lots of concerns 2 think a pretty good job of getting all those concerns aired 3 and have a path of resolution on them 4 COMMISSIONER MOELLER 5 CHAIRMAN KELLIHER 6 But we have done I Thank you Thank you Commissioner Lyons 7 NRC COMMISSIONER LYONS Thank you Joe 8 I guess first I just would like to add emphasis 9 to the point that Scott you made on the need to continue 10 staff interaction on the continuity of power requirements 11 To the extent there are any holes between where 12 our jurisdiction ends and where FERC is now exercising 13 jurisdiction we need to be very sure that those are filled 14 So I very much appreciate that point and certainly look 15 forward to the staffs working together 16 I did have one question I don't honestly know 17 Mr Binder if you are the correct person to ask or not but 18 the title of your remarks was Critical Infrastructure 19 Protection 20 critical infrastructure we have had an extensive degree of 21 cooperation and collaboration with the Department of 22 Homeland Security to the extent that they have been 23 conducting so-called comprehensive reviews of--they have now 24 completed a comprehensive review of every one of our nuclear 25 power plants in the country From the NRC's perspective in the area of 86 1 I am curious if a similar process--I know that 2 DHS has categorized a number of different elements of 3 critical infrastructure 4 elements 5 I'm close-- 6 I believe there are 17 different We are--and somebody can tell me I'm wrong on 17 MR MORRIS Yes there are 17 and 1 sector of 7 course that we are interested in and you probably have it 8 too with energy--but energy being the other one 9 NRC COMMISSIONER LYONS What I was leading up to 10 was 11 critical infrastructure 12 is FERC part of a process like a comprehensive review 13 I am leading up to wondering if there is anything to be 14 shared here between our experience with the comprehensive 15 reviews at all of our sites with whatever may be going on 16 with our own Homeland Security from the perspective of 17 security of the grid 18 To what extent is the grid considered part of that And are you part--to what extent And again I am not sure if I should be 19 directing it to you or maybe even to some of the 20 Commissioners 21 CHAIRMAN KELLIHER 22 Joe or Regis 23 what we can and should say 24 25 And Well why don't we turn to I'll defer to Joe on who can answer and MR McCLELLAND We do participate in the Government Coordinating Council DOE is the sector head for 87 1 energy and we are one of the agencies that participate in 2 the GCC effort 3 Within the GCC effort DHS has identified DOE as 4 the lead for the energy sector 5 coordinated identify DHS are vetted first through the 6 sector head and then brought to the entire group for 7 dissemination and discussion 8 9 And so activities that are Reg do you have anything more specific to add in this forum 10 MR BINDER The only thing I was going to add 11 was to put the Cyber Security Standards in that framework of 12 the Government Coordinating Council which incidentally Joe 13 didn't mention but I don't know if you're aware every 14 sector 15 Sector Coordinating Council that 16 it 17 has a Government Coordinating Council and a has industry members on The thing that is--it is a little premature to 18 say exactly how the cyber security efforts fit into the DHS 19 efforts that you're familiar with because these standards 20 were just put in place but the industry is not really 21 compliant with them yet 22 comments we have asked industry to actually modify the 23 standards so that what ultimately gets implemented will be 24 somewhat different than what we know today 25 And in fact as I mentioned in my But certainly once the standards are in place 88 1 compliance monitoring and enforcement will be a huge effort 2 just as was mentioned today with other reliability 3 standards 4 probably the point at which DHS will have the most interest 5 once we are actually enforcing the standards 6 That will become the focus MR McCLELLAND And that is If I might just add one other 7 thing Commissioner the identification of the assets is a 8 requirement under the Cyber Security Standards 9 entities themselves have to identify the critical assets on 10 And the their system 11 This has been part of the Commission's NOPR or 12 the Commission's concern that since it is a self- 13 identification 14 DHS does not come in and identify the assets the entity 15 does 16 process it is a little different in that And what the Commission has proposed is to make 17 this more of a regional view 18 themselves would control the assets itself 19 shouldn't say proposed it's the final rule 20 In other words the regions Maybe I The regions would have the responsibility to 21 coordinate that identification as critical assets and have 22 a review process in place to validate those assets so they 23 don't vary from region to region and company to company 24 And there can be many many many critical assets per 25 entity 89 1 NRC COMMISSIONER LYONS I meant my question to 2 be much broader than cyber security to cover the full range 3 of extremely critical assets for which FERC has some 4 responsibility 5 6 CHAIRMAN KELLIHER You mean natural gas pipelines and such 7 NRC COMMISSIONER LYONS 8 CHAIRMAN KELLIHER 9 NRC COMMISSIONER LYONS Yes things like that Yes And I was simply 10 wondering out loud whether there is anything to be gained in 11 perhaps sharing lessons with what we've gone through with 12 DHS on the comprehensive reviews with areas--I mean I was 13 thinking of the electrical grid but certainly your 14 responsibility in natural gas is I don't know if it's large 15 or not but it is certainly another area that deserves that 16 attention 17 18 CHAIRMAN KELLIHER Right There probably are some things we can learn from that 19 MR McCLELLAND Absolutely I look forward to 20 having our staffs coordinate on that with your staff to pick 21 up the lessons learned and see how you folks have proceeded 22 and how there might be parallels in our industry 23 that is a great suggestion 24 25 CHAIRMAN KELLIHER Spitzer Thank you I think Commissioner 90 1 COMMISSIONER SPITZER Thank you Mr Chairman 2 Expanding on Commissioner Moeller's observation with regard 3 to digitalization of the control rooms of nuclear plants 4 and this is a broad question maybe calling for some 5 observations if any of you on the panel have one 6 The Smart Grid is an opportunity for efficiency 7 and for the ratepayers but obviously there are challenges 8 in this balancing between security and efficiency 9 Is the Cyber Security fix with regard to the 10 Smart Grid of the future a technological fix or a legal 11 fix or both 12 Pause 13 MR BINDER 14 Laughter 15 MR BINDER I'll take a shot I guess I didn't step backwards It 16 is very challenging from a security perspective 17 the more nodes that you have to protect the more difficult 18 it is to accomplish that protection and the more 19 vulnerabilities there are 20 Obviously I personally think that technology needs to play 21 a very significant role if that is going to be a secure 22 endeavor 23 involved there usually are but I think in my mind at 24 least--but I'm an engineer--in my mind technology has to 25 lead that Perhaps there might be some legal issues 91 1 CHAIRMAN KELLIHER Any other takes 2 No response 3 CHAIRMAN KELLIHER 4 NRC COMMISSIONER SVINICKI Commissioner Svinicki Thank you To 5 follow on that theme on technology I think the panelists 6 would agree that as we reflect on the threat environment 7 physical or cyber the threat environment is not static 8 Within the NRC we have an Office of Research and to stay on 9 top of technologies and emerging threats 10 I candidly do not know if FERC has any sort of 11 research arm or if you draw upon Department of Energy 12 Office of Electricity Reliability 13 Chairman of FERC Pat Wood reached out to the Department of 14 Energy National Laboratories years ago to begin to 15 understand the vulnerabilities and the ease of exploit of 16 those 17 I know that former But the programs that we are putting in place in 18 your view do they have the kind of agility and nimbleness 19 that we will need to stay on top of a changing threat 20 environment in cyber specifically 21 22 MR BINDER I can comment on the first part I I'll defer to Scott on the second part 23 We do very much contact and rely on the expertise 24 that is available int he Department of Energy especially in 25 the National Laboratories We also work quite a bit with 92 1 the National Institute of Standards and Technology NIST 2 and their expertise 3 Actually I talk about them like they are 4 discrete entities and they are in a way but the efforts on 5 the cyber security front at least actually have a lot of 6 overlap in them 7 Both NIST and the Department of Energy uses 8 industry experts as resources and sounding boards and the 9 most successful efforts have been sort of interactive 10 efforts and we try to participate and interact in those and 11 get the benefits of the knowledge it has gained as much as 12 we can 13 MR MORRIS 14 part of that question 15 I will take a shot at the second I think the way we have structured our existing 16 requirement in the design-basis threat rulemaking and where 17 we are headed in the proposed rulemaking for cyber security 18 it is structured in a very performance-based high-level 19 programmatic way such that it is not prescriptive about what 20 type of technology gets used or what strategies are 21 employed 22 Rather we set a standard that this bad guy 23 cannot create this problem and propose a way to address 24 that 25 to have assurance along the way and you need to have along And here are some programmatic elements that we need 93 1 the way so that we can all excuse my comment but to get 2 that warm fuzzy feeling about it 3 Again we are not going to be doing design 4 verifications 5 need to get 6 certain programmatic elements that do not tie their hands on 7 what kind of technology gets ultimately used so that 8 technology have evolve strategies can change and yet our 9 requirements can still be satisfied to keep the bad actor 10 It is going to be how much information do we What we are saying is they need to have away from the critical equipment 11 NRC COMMISSIONER SVINICKI 12 CHAIRMAN KELLIHER 13 Thank you Commissioner Wellinghoff 14 15 Thank you COMMISSIONER WELLINGHOFF Thank you Mr Chairman 16 I just want to follow up on the comment of 17 Commissioner Lyons that I think there is a lot that FERC can 18 learn from the NRC's Comprehensive Assessments of Security 19 We have done some on the cyber security side 20 I am not necessarily completely clear that our 21 reliability authority subsumes physical asset security as 22 well 23 There may be some more authority that we need 24 there as well because I think that is certainly an issue 25 that we need to look at and address and I think we have a 94 1 lot to learn from the NRC on that 2 3 CHAIRMAN KELLIHER Thank you Colleagues any more comments 4 No response 5 CHAIRMAN KELLIHER If not I am just going to 6 make some very brief concluding remarks that I think it has 7 been a very productive meeting just like the other two 8 want to thank the staffs for their hard work 9 the meeting shows that we both recognize that to really I And I think 10 effectively discharge our different statutory missions that 11 we improve our change of success by working together 12 because it is undeniable that the grid and large nuclear 13 plants are entwined 14 And if our missions are entwined and we accept 15 that is the reality then I think this kind of level of 16 cooperation is necessary 17 So I am glad we did it and thanks for coming to 18 our 19 want to turn to Chairman Klein for any comments he might 20 have 21 home team this time our court this time NRC CHAIRMAN KLEIN I just Well I would like to thank 22 FERC for their hospitality 23 Commissioners and our staff I would like to thank you for 24 having us down here 25 So on behalf of my fellow These meetings are very helpful I think to not 95 1 only lay out areas of mutual interest but also to look 2 ahead of where could we work better together in other areas 3 And we do have a lot of areas that mutually overlap 4 We have our distinct roles obviously but we 5 also have areas of mutual interest and I think these 6 meetings are helpful just to branch out 7 As Commissioner Lyons pointed out we have 8 information we can share and you have information that you 9 can share and help us be a better agency as well 10 So I thank you and your staff and your fellow 11 Commissioners for your hospitality and we will keep the 12 interchanges going 13 CHAIRMAN KELLIHER Great Thank you Well 14 with that why don't we both gavel this to a close 15 think we are going to have a group photo of all the 16 Commissioners Then I 17 So thank you very much 18 Whereupon at 12 02 p m Tuesday April 8 19 2008 the joint meeting of the Federal Energy Regulatory 20 Commission and the Nuclear Regulatory Commission 21 Commissioners was adjourned 22 23 24 25