By Beth Davis
Solar reliability audits are intense and time-consuming. The energy facility operator bears the burden of demonstrating compliance with reliability standards that are continually evolving to keep up with technological and regulatory changes. Even so, with the fast-paced growth of solar energy development, some solar facility operators have yet to experience a reliability audit. Understanding the audit process and having the right strategy can ease the burden and help ensure that you are well-prepared.
Preparing for the Audit:
Compliance Program
Perhaps the best preparation for a reliability audit is an effective compliance program. An internal compliance program helps identify applicable requirements and controls risks that would otherwise trigger violations and penalties. The Federal Energy Regulatory Commission (FERC) has indicated it will seek little or no monetary penalties where a facility: self-reports violations; promptly submits and completes mitigation plans; cooperates significantly with the agency; has no aggravating factors; has little or no expected or actual risk to the bulk-power system; and, most importantly, has a strong culture of compliance. An attitude of cooperation on compliance between management and staff produces optimal results.
Understanding the Audit Process
At least every three years, a facility may be audited for compliance with the North American Electric Reliability Corporation (NERC) standards. Monitoring the regional website may provide advanced notice of a scheduled audit for your facility, supplying valuable preparation time. NERC or the regional entity also conduct spot checks of select standards at any time, which are typically done off-site. For off-site audits, some regions allow you to have a representative in the room throughout the audit, while others only allow you to be present upon their request. Whenever possible, try to attend the audit in person.
Notice of the Audit
Your regional entity must provide at least 60 days advance written notice of an audit. You must provide a completed Pre-Audit Questionnaire, Reliability Standard Audit Worksheet (RSAW), evidence of compliance and executive certification in advance of the audit. Most regions require pre-submittal of records up to 30 days in advance of the audit. Time is a significant challenge even if you are not required to submit records so far in advance.
Practical Considerations:
Data Retention
Data retention standards vary depending on the requirement. According to the Compliance Monitoring and Enforcement Program (CMEP) statements from both NERC and regional entity CMEPs: “If a Reliability Standard does not require retention of data for the full period of the Compliance Audit, the Compliance Audit will be applicable to the data retention period specified in the Reliability Standard.” (NERC CMEP, section 4, pp. 10-11.) Major categories in reliability standards vary from “current” to “90 days” to “full audit period.” However, auditors are not always sensitive to the various requirements. Be respectful but firm when disagreements arise. Since FERC approves the CMEPs, those data retention provisions do apply.
Dealing with the Record Gap
Since the audit period traditionally runs through the date the audit begins, a gap in records will typically exist between document submission and the audit date. Even if you are not required to submit records 30 days in advance, it may be impossible to pull and submit all records the day before an audit. Be prepared for auditors to ask about compliance during this gap.
Consider requesting that the auditor and region revise the audit timeline to properly account for the practicalities of document preparation. Ask them to send the audit notice letter 90 days in advance of the audit. Additionally, you may ask that the date of the notice letter be the end of the audit period – this will make your preparation less stressful while also avoiding a gap for the auditor.
Preparing Evidence
Through preparing the audit packages, you are compiling your evidence of compliance. The burden is on the facility to demonstrate compliance, so not providing evidence will result in violations. RSAWs are required documents developed to facilitate compliance audits. You may access a complete set of RSAWs here.
Your identified Subject Matter Experts (SMEs) should prepare initial drafts of the RSAWs with citations to documents demonstrating compliance. Together, counsel and the compliance team should scrutinize the draft RSAWs and supporting evidence for responsiveness, adequacy and appropriateness. All evidence should logically relate to the requirement and demonstrate the point. When complete, the RSAWs will be used by the auditors to assess compliance.
Consider highlighting key sections of the final package to point auditors to the appropriate information. Alternatively, create a master file with hyperlinks and bookmarks, or embed documents in the file linking back to specific RSAW questions.
Corroborating Evidence
Corroborating evidence will help you come through an audit with a positive record. Multiple layers of evidence give the auditors comfort in the strength of your position and protects you in case an auditor rejects some of your evidence. In evaluating the strength of your evidence, also consider the importance of metadata. Regulators evaluate metadata to determine whether a document is genuine and not simply prepared in anticipation of an audit.
During the Audit
During the audit, have appropriate personnel on call for the entire duration and be careful that you understand questions from the auditors. Answer only the questions asked, ask that any requests for documentation be confirmed in writing to avoid any misunderstanding, and consider if the questions have an impact on reliability. SMEs should be prepared to respond directly to questions related to the standard and identify supporting evidence, complete with responsive documents, page numbers and sections.
After the Audit
After the audit, the auditors will present a draft summary of the findings. Senior management should attend this meeting as it will build relationships and demonstrate your commitment to reliability. You may find that you disagree with the auditors’ interpretations or that you inadvertently omitted certain evidence necessary to demonstrate compliance. If you have not already provided that information, at or immediately after this meeting is the time to provide evidence in an effort to avoid a violation prior to the auditors issuing a final report. Regardless of the outcome of the audit, this is the time to go back to your facility, consider the lessons learned from the audit and modify your processes and procedures accordingly.
Elizabeth B. (Beth) Davis is a partner in Burr & Forman’s Environmental and Health Care Practices and a member of the firm’s Diversity Committee. She is also a former Assistant Regional Counsel with the U.S. Environmental Protection Agency in Region 4. Beth focuses her practice on regulatory compliance, permitting, enforcement defense and litigation.
