INPOWERD Leadership Briefing: Compliance Risks Facing Registered Entities: Why Exposure is Rising and What Leaders Must Prioritize

By Earl Shockley, President and CEO, INPOWERD LLC
Trust • Accountability • Service

The NERC compliance landscape has evolved into one of the most complex regulatory environments in the critical infrastructure sector. What once revolved around procedural adherence and technical documentation has transformed into an enterprise-wide discipline shaped by expanding operational interdependencies, cybersecurity threats, rapidly changing standards, and heightened audit scrutiny.

Anyone who has lived inside the NERC compliance ecosystem knows this truth: the regulatory target is always moving. Sometimes it shifts subtly, sometimes dramatically, and sometimes the shift isn’t visible until you’re already pulling the trigger. The real challenge isn’t just meeting the letter of a requirement; it’s understanding the landscape well enough to anticipate what’s coming next and when to pivot.  

Below is a candid look at some key compliance challenges executives face today and why these challenges are far more cultural and systemic than technical.

Initial Observations

After four decades in the industry and almost a decade as a regulator, I’ve observed the same patterns unfold across organizations large, medium, and small. While each Registered Entity’s journey is unique, the obstacles they encounter are remarkably consistent.  

Registered Entities are not struggling due to a lack of intent or effort. Instead, they are struggling because the regulatory and technical environments have outpaced traditional organizational structures. Tasks such as interpreting standards, maintaining evidence, coordinating across departments, keeping pace with regulatory change, and building a culture of compliance are often treated as workload challenges. In my experience, compliance struggles arise from symptoms of organizational fragmentation, weak governance models, undefined accountability and leadership approaches that have not kept pace with an increasingly complex regulatory and operating environment. As experienced boomers retire, resource challenges are having a measurable impact on effective execution. Simply put, these are no longer “compliance team problems”; they are leadership and organizational design problems. And these organizational problems are becoming more transparent to regulators.

The Compliance Risk Landscape Is Becoming More Transparent on Compliance Culture

The Electric Reliability Organization (ERO) is sharpening its analytic tools. In mid-2025, NERC published its “ERO Enterprise Enforcement Cause Code User Guide,” formalizing a structured taxonomy to capture root causes of noncompliance such as “deficient documentation, ineffective internal controls, communications breakdowns, resource planning failures and human performance errors”, specifically to identify systemic trends. As of mid-2025, roughly 1,800 dispositions (cases of noncompliance) have been assigned a cause code. Among these, over 40% trace back to two leading cause categories: ineffective preventive controls and deficient organizational policy/procedures.  

With new visibility into root causes, compliance is no longer a technical or back-office function; it is a strategic discipline that reflects organizational strategic alignment, cultural maturity, and resilience. Leaders must recognize that a siloed compliance model, where a single group or department is accountable for meeting the full breadth of NERC expectations, is no longer viable. The most successful organizations elevate compliance as a shared enterprise responsibility tied directly to operational risk, cybersecurity posture, and organizational culture.

Implication for leaders: NERC compliance is no longer just a checklist of liability that resides in the compliance department. It is a persistent, measurable enterprise risk that leaders must prioritize, take ownership of, and monitor.  

Evolving Compliance Pressures for 2026

The current regulatory evolution leads us to structural vulnerability. As the grid resource mix, demand profile, and asset type shift (more IBRs, large data-center loads, variable renewables), organizational risk increases.

• In May 2025, NERC implemented updated registration criteria for many inverter-based resources (IBRs). Under the new rules, non-BES IBR owners with aggregate nameplate capacity ≥ 20 MVA delivering to ≥ 60 kV must register with NERC, meaning that many resources previously outside NERC’s regulatory scope now become subject to full compliance obligations.  

• These changes also coincide with renewed emphasis on strict standards for facility ratings, relay protection coordination (e.g., FAC-008, PRC-027 and PRC-029), and cybersecurity/asset documentation under revised CIP standards.  

• According to the latest 2025 State of Reliability (SOR) published in June 2025, NERC flagged several emerging systemic risks:

• Rapid growth in large loads such as data centers whose load profiles are volatile and may stress the grid.  

• Growing concerns around integration of inverter-based resources (IBRs) and their behavior under stress (e.g., voltage, disturbances), especially where models or real-world performance diverges.  

New asset categories foster a new compliance burden. The expanded registration threshold for IBRs and tighter facility-rating significantly broadens the scope of what must be modeled, tracked, documented, and audited. Integration of large loads places a greater burden on transmission planners. Compliance programs must evolve beyond just “paper compliance”; they need to integrate deeply with engineering, operations, planning, and risk management.

Additional macro trends challenging Compliance Programs:

• Standards are increasing in complexity as the grid becomes more interconnected and technologically diverse. Ambiguity in interpretation is now a material risk.

• Cybersecurity threats are escalating forcing more dynamic and stringent CIP standards—and demanding tighter integration between compliance, IT, cybersecurity, and operations.

• Regulatory change is accelerating requiring organizations to adapt faster than their legacy processes were designed to support.

• Human performance and culture have emerged as leading indicators of reliability risk. Nearly all violations trace back to gaps in communication, training, or decision-making.

• Resource constraints continue to widen the gap between what compliance requires and what organizations have the capacity to execute.

These developments show that compliance risk is expanding not just because of enforcement, but because the technical and operational footprint of entities themselves is changing fast.

Implication for leaders: The complexity isn’t theoretical; noncompliance consistently clusters around the same “hard” standards (e.g., CIP, FAC, PRC MOD and VAR). If you’re not deliberately over-investing in those areas, the statistics say you are likely to show up in the trend lines sooner or later.

Closing Perspective

Compliance excellence is not achieved through checklists, paperwork, or heroic last-minute audit preparation efforts. It is achieved through leadership clarity, intentional culture, and disciplined systems and processes that anticipate risk rather than react to it (risk management rather than crisis management).

Organizations that excel in these areas don’t just “avoid violations.” They reduce enterprise and operational risk, build credibility with regulators, strengthen their reliability posture, and position themselves for long-term success in an increasingly dynamic and interconnected grid. Compliance excellence is not optional; it is a strategic necessity.  

Fundamentally, NERC compliance today is a measure of how well an organization can:

• Interpret complex requirements with consistency and accuracy

• Capture and preserve the evidence needed to prove performance

• Integrate cybersecurity and operational processes cohesively

• Adapt quickly to emerging risks and regulatory expectations

• Empower employees with clarity, accountability, and awareness

• Sustain readiness without sacrificing operational reliability

Leadership Takeaways – Strategic Imperatives for 2026

To thrive in an increasingly complex regulatory environment, senior leaders must:

• Elevate compliance to a strategic enterprise risk, embed it as a core value.

• Strengthen cross-functional governance and accountability.

• Consider culture as your most powerful internal control, build it where compliance is understood, valued, and practices consistency.

• Build adaptive compliance programs; compliance must evolve alongside the grid: it needs to be agile, integrated, and forward-looking, not static or reactive.

• Treat resourcing as a risk-based investment proportional to risk, not a discretionary cost center resource.

• Anticipate growth driven compliance burdens, treat IBR growth, data-center interconnections, and shifting load profiles as inherent compliance cost/risk, and budget accordingly.

• Aim beyond passing an audit to build a measurable control environment.

‍