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NERC IDC Transition
Third Party Liability
Background: The NERC Interchange Distribution Calculator (IDC) and the associated feeder
applications (System Data Exchange (SDX), Book of Flowgates (BOF), Distribution Factors Viewer
(NFV)) are to be transitioned to the industry on March 31, 2013. An association of the Eastern RC
organizations (Association) is slated to take over management of these tools and be responsible for
payments to OATI (who will continue to provide the service) as of that date. Under the present
arrangement, NERC has a contract with OATI to provide the IDC service on behalf of the industry. NERC
has provided a hold harmless and indemnification to OATI for any liability related to IDC operations.
NERC, as the ERO, is the compliance authority and it is highly unlikely that any third party who believed
that they were harmed by the actions of NERC would sue. To date, there have been no claims against
NERC or OATI due to operations of the IDC.
Issue: When the IDC is transitioned to the Association, the NERC contract will be replaced with a
Master Services Agreement between OATI and the Association. The members of the Association are a
mixture of ISO/RTOs and individual companies that provide RC services on behalf of their clients. The
shield of liability protection that exists in the present NERC contract will not exist for the members of the
Association. Despite the fact that there have been no claims due to IDC operations, the Association
members are exposed to potential claims from third parties. For example, if a market participant’s
transaction is curtailed wrongly in the IDC through actions of an Association member(s) or OATI and a
substantial opportunity is missed, the market participant could concievably sue the Association for the lost
opportunity cost and other damages.
Proposal: In order to provide protection from third party claims against the Association and OATI, the
Association members are requesting that JESS approve the insertion of a limit of liability statement within
the Tagging Specification that would require tag producers to provide a “click through” acknowledgement
that they have read and agree to the limit of liability provision before they are permitted to enter tags to
the system. The proposed statement for the acknowledgement is as follows:
The NERC Tag submitter agrees to hold harmless, all present and future members of the IDC Association
(“IDC Members”) and OATI and its directors, officers, trustees, employees and agents from any and all
losses or opportunity costs, damages, liabilities, obligations, claims, demands, suits, proceedings,
recoveries, settlements, costs and expenses, court costs, attorneys’ fees, causes of action, judgments or
other obligations (“Loss”) brought or obtained by any third party in connection with the operation of the
Interchange Distribution Calculator. OATI and IDC Members expressly disclaim any obligation or any
warranty of any kind, whether express or implied, as to any information or other matters whatsoever arising
from the Interchange Distribution Calculator Software. In no event shall OATI or the IDC Members be
liable for any damages of any kind, including, but not limited to, direct, indirect, general, special, incidental
or consequential damages arising out of any use of the Interchange Distribution Calculator Software.
Agree
Do Not Agree
On a parallel track, the Association is pursuing the issuance of a letter order by FERC that would extend
to the Association the protections now enjoyed by NERC in the discharge of its obligations relative to the
operations of the IDC.