Indicators of change
These indicators help us track how NERC’s shift from compliance to strategic risk management is raising resilience standards, changing compliance frameworks, and reshaping regulatory priorities.
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Regulatory framework changes: Revisions to NERC’s risk elements and CMEP priorities, updates to reliability standards, and modifications to enforcement procedures.
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Risk categorization evolution: Increasing emergence of new strategic risk categories such as extreme weather, inverter-based resources, supply chain vulnerabilities, and cyber threats.
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Guidance and communications: Growth in guidance and alerts tied to modernization themes including resilience, readiness, cybersecurity, and grid transformation priorities.
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Enforcement outcomes: Rising non-compliance findings linked to readiness gaps, shifts in penalty structures, and changes in settlement patterns for strategic vs. traditional violations.
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NERC’s strategic shift reshapes compliance approach
NERC has shifted from a compliance-driven model to a strategic, risk-based approach that prioritizes resilience, modernization, and emerging risks while maintaining compliance as a cornerstone for reliability and readiness.
– The transformation: Rather than focusing solely on strict compliance, NERC now integrates strategic risk considerations into its framework. Between 2021 and 2023, emerging risks such as supply chain vulnerabilities, extreme weather events, and inverter-based resources (IBRs) were incorporated, signaling a broader shift toward anticipating and managing system-wide threats.
– Evolved enforcement approach: While most issues are still resolved without financial penalties, the value of assessed penalties is increasing. NERC continues to reinforce that reliability and infrastructure readiness are essential, with leading organizations now positioning compliance teams as strategic assets in high-priority areas such as Facility Ratings, Inverter-Based Resources, and Protection System Maintenance.
– Strategic advantage: Organizations that embrace integrated risk management, proactive assessments, and cross-functional collaboration can anticipate emerging threats more effectively and respond with greater agility.
Tracking NERC’s strategic evolution
Strategic vs. Compliance Percentages by Year
Strategic vs. compliance focus shift
– 2022 marked a turning point: NERC and regional entities began prioritizing reliability goals over compliance goals.
– Strategic risk elements increased from 17% in 2020 to 75% in 2024, while compliance risk elements declined from 83% in 2020 to 25% from 2024 onward.
– Strategic risk focus plateaus at 75% from 2024 onward, indicating stable strategic emphasis.
– The focus has shifted from simply maintaining a compliance culture to actively prioritizing reliability and implementing best practices.
| Compliance risk | Strategic risk | |
| Linked to mandatory standards, regulatory requirements, and strict operational compliance. Noncompliance typically leads to violations or penalties. | Focuses on long-term resilience, strategic system planning, and addressing emerging threats. Extends beyond basic compliance to emphasize broader, future-oriented grid reliability. |
Source: Compliance Monitoring and Enforcement Program. CMEP IP 2019-2026. CMEP Resources.
Patterns driving the evolution
NERC’s strategic transformation responds to five evolving risk patterns that traditional compliance couldn’t address.
Stable, long-term issues: Remote connectivity, supply chain and critical infrastructure interdependencies appear consistently from 2019 through 2026. These represent ongoing challenges that are not diminishing over time.
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Persistent strategic themes: Grid transformation remains a dominant priority from 2019 onward and surfaces on CMEP IP in November 2025, signalling a long-term modernization focus. Security risks evolve from broad concerns to specific physical security emphasis by 2024-2026.
Strategic evolution of priorities: Technical priorities progress from foundational compliance/reliability (protection system coordination) to advanced grid elements (IBRs, transmission planning, facility ratings). |
Weather risks intensify: Shift from isolated Extreme Events (2019–2021) to Resilience to Extreme Events (2023 onward) and Extreme Weather Response (2024–2026), suggesting a broader approach to weather-related risks.
Consolidated risk trends: Specific risks (cold weather, stability studies, IBRs) are gradually consolidated into broader categories like extreme weather and grid transformation.
NERC penalties for non-CIP reliability standards are trending upward both per violation and cumulatively, reflecting increased enforcement and a growing emphasis on integrating reliability objectives across organizations.
In a review of violations related to the Operations and Planning Standards, penalties are increasing per violation and per settlement.
While NERC and the regions continue to focus on risks to reliability, penalties submitted to FERC are increasing in the aggregate and on a per violation basis, making reliability and compliance with key reliability standards more important.
The incentive continues to be on integrating reliability objectives throughout an enterprise and leveraging compliance teams as strategic partners to an organization.
Source: NERC Filings to FERC. Enforcement Dispositions
Violations tied to Facility Ratings (FAC-008) dominate penalty trends, with occasional spikes in inverter and protection system maintenance standards, underscoring a persistent focus on accurate ratings and asset validation.
FAC-008 remains the most penalized Standard, keeping a NERC and regional entity focus on accurate Facility Ratings. Asset Management and equipment inventory validation remains important to assuring adherence to Facility Ratings Methodology.
Violations related to Inverters and Protection System Maintenance also remain frequently penalized.
Integrate reliability & strategic goals: Enable better system modeling, which informs investment.
Cross-functional coordination: Compliance requires collaboration between engineering, operations, and compliance teams—making it a strategic initiative rather than a siloed task.
High impact standard: FAC-008 violations often result in significant fines because they can directly affect bulk electric system reliability.
Source: NERC Filings to FERC. Enforcement Dispositions
