NERC ID:
Registered Entity Name
NCR00740
Consumers Energy Company
Reliability
Standards
Audit Scope:
Compliance Operations (FERC Order 693)
Audit Report
Compliance
Monitoring
Process:
Compliance Audit
Distribution:
Public Version. Confidential Information Has
Been Removed, Including Privileged and Critical
Energy Infrastructure Information.
Lead Region:
ReliabilityFirst (RF)
Dates of Review:
From December 08, 2014 to December 12, 2014
Date of Report:
December 12, 2014
Possible
Violations
Identified:
0
Jurisdiction:
United States
Confidential Information Has Been Removed, Including Privileged and Critical Energy Infrastructure Information.
Table of Contents
Contents
I.
Executive Summary ............................................................................................................................. 1
II.
Compliance Process ........................................................................................................................ 2
Objectives .................................................................................................................................................. 2
Scope.......................................................................................................................................................... 2
Confidentiality and Conflict of Interest...................................................................................................... 3
Methodology.............................................................................................................................................. 4
Company Profile......................................................................................................................................... 4
Participants ................................................................................................................................................ 5
III.
Compliance Findings ....................................................................................................................... 6
IV.
Compliance Culture ......................................................................................................................... 6
Confidential Information Has Been Removed, Including Privileged and Critical Energy Infrastructure Information.
I.
Executive Summary
ReliabilityFirst (RF) conducted an Operations & Planning compliance engagement of
Consumers Energy Company (CEC), NCR00740, from December 08, 2014 to
December 12, 2014.
At the time of the compliance engagement, CEC was registered for the functions of BA,
DP, GO, GOP, LSE, PSE, and RP.
Consumers Energy is a member of a Coordinated Functional Registration (CFR),
JRO00001, which is applicable to the BA function. CEC has been registered for the BA
function under this CFR since January 6, 2009.
Consumers Energy's Reliability Coordinator is MISO, and its Transmission Operator is
METC.
The compliance team evaluated CEC for compliance with 23 requirements in the 2014
NERC Compliance Monitoring and Enforcement Program (CMEP) and the
ReliabilityFirst CMEP Implementation Plan.
The compliance team assessed
compliance with the NERC Reliability Standards applicable for the period of February 5,
2011 to December 12, 2014. The compliance team reviewed and evaluated all evidence
provided by CEC and assessed compliance with the Reliability Standards applicable to
CEC, at this time. Based on the results of this compliance engagement, no Possible
Violations or Open Enforcement Actions were identified for the standards and applicable
requirements in the scope of the engagement.
The findings included in this report are the same as the findings presented to CEC
during the exit briefing.
There were no open mitigation plans; therefore, none were reviewed by the
compliance team.
The team lead certifies that the compliance team adhered to all applicable requirements
of the NERC Rules of Procedure (ROP) and the CMEP with the following exceptions:
ReliabilityFirst Management and the Audit Team determined an on-site visit was not
required due to the limited audit scope and having performed an on-site visit three (3)
Date of Consumers Energy Company Compliance Audit: From December 08, 2014 to December 12, 2014
Date of Report: December 12, 2014
1
Confidential Information Has Been Removed, Including Privileged and Critical Energy Infrastructure Information.
years ago.
II.
Compliance Process
The compliance process steps are detailed in the NERC Rules of Procedure, the NERC
CMEP, and the ReliabilityFirst CMEP Implementation Plan. The CMEP generally
conforms to the United States Government Auditing Standards and other generally
accepted audit practices.
Objectives
All registered entities are subject to compliance assessments with all reliability
standards applicable to the functions for which the registered entity is registered in
the Region performing the assessment. The objectives are to:
 Review compliance with the requirements of Reliability Standards applicable
to CEC based on the functions that CEC is registered to perform;
 Validate compliance with applicable Reliability Standards from the NERC
2014 Implementation Plan list of actively monitored standards and additional
NERC Reliability Standards selected by ReliabilityFirst;
 Validate evidence of self‐reported violations and previous self‐certifications;
 Observe and document CEC‘s compliance program and culture;
 Review the status of open mitigation plans.
Scope
The scope of the compliance engagement included the NERC Reliability Standards
from the ReliabilityFirst CMEP Implementation Plan. In addition, the scope of the audit
included a review of mitigation plans or remedial action directives that were open
during the compliance engagement. The standards and requirements in the scope
for this compliance engagement are illustrated in the Table below:
Date of Consumers Energy Company Compliance Audit: From December 08, 2014 to December 12, 2014
Date of Report: December 12, 2014
2
Confidential Information Has Been Removed, Including Privileged and Critical Energy Infrastructure Information.
Scope
Reliability Standard
COM-001-1.1
Requirement
R1, R1.1, R1.2, R1.3, R1.4, R2, R3, R5
COM-002-2
R1, R1.1, R2
EOP-002-3.1
R1
EOP-003-2
R3, R8
EOP-004-2
R1, R2, R3
EOP-008-1
R5, R6, R7
IRO-001-1.1
R8
IRO-005-3.1a
R5
PRC-001-1.1
R1
TOP-002-2.1b
R4, R5, R6, R7, R10
The compliance team did not expand the scope of the compliance engagement
beyond what was stated in the notification letter.
Confidentiality and Conflict of Interest
Confidentiality and conflict of interest of the compliance team are governed under the
ReliabilityFirst Delegation Agreement with NERC, and Section 1500 of the NERC
Rules of Procedure. CEC was informed of ReliabilityFirst’s obligations and
responsibilities under the agreement and procedures. The work history for each
compliance team member was provided to CEC, which was given an opportunity to
object to a compliance team member’s participation on the basis of a possible conflict
of interest or the existence of other circumstances that could interfere with a
compliance team member’s impartial performance of duties. CEC did not submit any
objections by the stated 15‐day objection due date and accepted the compliance
team member participants without objection. There were no denials or access
limitations placed upon this compliance team by CEC.
Date of Consumers Energy Company Compliance Audit: From December 08, 2014 to December 12, 2014
Date of Report: December 12, 2014
3
Confidential Information Has Been Removed, Including Privileged and Critical Energy Infrastructure Information.
Methodology
The compliance team reviewed the evidence submitted by CEC and assessed
compliance with requirements of the applicable Reliability Standards. ReliabilityFirst
provided CEC with a Request for Information (RFI) prior to commencement of the
compliance engagement. Additional evidence could be submitted until the agreed‐
upon deadline prior to the exit briefing. After that date, only data or information that
was relevant to the content of the report or its finding could be submitted with the
agreement of the team lead.
The compliance team reviewed documentation provided by CEC, requested
additional evidence and sought clarification from subject matter experts during the
compliance engagement. Evidence submitted in the form of policies, procedures,
emails, logs, studies, data sheets, etc., were validated, substantiated, and cross‐
checked for accuracy, as appropriate. Where sampling is applicable to a
requirement, the sample set was determined by a statistical methodology, along with
the compliance team’s professional judgment.
Findings were based on the compliance team's professional judgment, knowledge of
the bulk electric system (BES), the NERC Reliability Standards, the facts, and
documentation that were reviewed. All findings were developed based upon the
consensus of the compliance team.
Company Profile
Consumers Energy provides electric service to 1.8 million customers and serves 275
cities and villages in 61 counties. Principal cities served are Battle Creek, Bay City,
Cadillac, Flint, Grand Rapids, Jackson, Kalamazoo, Midland, Muskegon and
Saginaw. Consumers Energy is the principal subsidiary of Jackson-based CMS
Energy Corporation.
The Company operates 12 coal-fired and two oil-fired generating plants, 13
hydroelectric plants, a pumped storage generating plant, and several combustionturbine plants that produce electricity when needed during peak demand periods. The
utility also purchases power from several sources, such as the Palisades nuclear
plant, and the gas-fired Midland Cogeneration Venture, the nation's first conversion
of an idled nuclear plant.
Date of Consumers Energy Company Compliance Audit: From December 08, 2014 to December 12, 2014
Date of Report: December 12, 2014
4
Confidential Information Has Been Removed, Including Privileged and Critical Energy Infrastructure Information.
Participants
Following is a list of all personnel from the ReliabilityFirst compliance team and CEC
directly involved during the meetings and interviews:
ReliabilityFirst Team
Role
Audit Team Lead
Entity
ReliabilityFirst
Scribe
ReliabilityFirst
Registered Entity Participants
Role
Entity
Primary Compliance Contact
Consumers Energy Company –
Transmission & Regulatory Strategies
Alternate Compliance Contact
Consumers Energy Company –
Transmission & Regulatory Strategies
Compliance Assurance Manager
Consumers Energy Company – Energy
Supply
Compliance Assurance Manager
Consumers Energy Company – Energy
Delivery
Executive Management Committee
Representative
Consumers Energy – Energy Delivery
Executive Management Committee
Representative
Consumers Energy – Energy Supply
Subject Matter Expert
Consumers Energy – Energy Supply
Subject Matter Expert
Consumers Energy – Corporate Security
Attorney
Consumers Energy – Legal
Attorney
Consumers Energy – Legal
Date of Consumers Energy Company Compliance Audit: From December 08, 2014 to December 12, 2014
Date of Report: December 12, 2014
5
Confidential Information Has Been Removed, Including Privileged and Critical Energy Infrastructure Information.
III.
Compliance Findings
Based on the results of this compliance engagement, no Possible Violations or Open
Enforcement Actions were identified for the standards and applicable requirements in
the scope of this engagement.
IV.
Compliance Culture
The compliance team performed an assessment of CEC‘s compliance culture in
conjunction with the review process. The assessment was accomplished through a
review of responses to the Internal Compliance Survey questionnaire and additional
information that was gathered during interviews and observations.
Consumers Energy provided timely responses to evidence requests and provided
subject matter experts when requested by the audit team.
Consumers Energy has submitted self-certifications in a timely manner, self-reported
violations and has worked with enforcement and completed all mitigation plans. In the
past three years, CEC has not been involved with a compliance investigation or an event
analysis.
The following information was obtained from the pre-audit survey provided by
Consumers Energy:
CMS Energy's Code of Conduct and Guide to Ethical Business Behavior handbook is
the backbone of the Company's compliance program and requires every employee and
officer conduct business with integrity. The company has a well-documented
compliance function which emphasizes decentralized accountability and centralized
oversight.
The regulatory compliance program utilizes the principles of the Treadway
Commission’s Committee of Sponsoring Organizations (COSO) composed of five
elements: control environment, risk assessment, information and communication,
control activities, and monitoring.
Date of Consumers Energy Company Compliance Audit: From December 08, 2014 to December 12, 2014
Date of Report: December 12, 2014
6
Confidential Information Has Been Removed, Including Privileged and Critical Energy Infrastructure Information.
The Chief Compliance Officer (CCO) provides oversight for the company's regulatory
compliance requirements. This position is responsible for the timely and accurate
preparation and submittal of certain reports to government agencies. Actual reporting
and operational compliance with all applicable regulations and policies are the
responsibility of the executives leading the Consumers and CMS Enterprises business
units. Quarterly compliance status reports are provided to the CCO, who meets with
these executives, their staffs, and regulatory compliance subject matter experts,
periodically, to review compliance, raise new issues and take appropriate actions.
The CCO reports directly to the CEO and also has a dotted-line reporting responsibility
to the Audit Committee of the Board of Directors. The CCO reports annually to the Audit
Committee and full Board of Directors on the status of compliance. As needed, the CCO
has a private executive session with the Audit Committee.
Consumers Energy conducts self-assessments by Compliance Assurance Managers
and Accountable Authorities. Self-assessment findings and the status of corrective
actions are reported on a quarterly bases to senior management and the CCO at the
Consumers Energy Compliance Review Committee.
Date of Consumers Energy Company Compliance Audit: From December 08, 2014 to December 12, 2014
Date of Report: December 12, 2014
7