FERC, CFTC, and State Energy Law Developments

The Senate Energy and Natural Resources Committee on November 15 favorably advanced the nominations of Dr. Rita Baranwal (Assistant Secretary of Energy (Nuclear Energy)) and Bernard McNamee (Member, Federal Energy Regulatory Commission) to the full US Senate.

Eighteen governors, members of the Governors’ Wind & Solar Energy Coalition, issued an open letter on November 9 to the Federal Energy Regulatory Commission (FERC) to encourage the development of needed electric transmission that they claim existing federal efforts are insufficient to address.

The US Department of Homeland Security (DHS) announced the formation of the Information and Communications Technology (ICT) Supply Chain Risk Management Task Force (the Task Force) on October 30. The Task Force is a partnership between government and private sector partners created to “examine and develop consensus recommendations to identify and manage risk to the global ICT supply chain.” The announcement came at the conclusion of National Cybersecurity Awareness Month and follows other government industry initiatives, such as the Oil and Natural Gas Pipeline Cybersecurity Initiative, that have been developed to manage risks posed by increasingly global supply chains.

On October 18, the Federal Energy Regulatory Commission (FERC or Commission) issued Order No. 850, adopting a suite of reliability standards proposed by the North American Electric Reliability Corporation (NERC) to address the cybersecurity risks posed by supply chains for industrial control system assets and services in critical electric utility environments. The final rule largely adopts the proposals from the Commission’s Notice of Proposed Rulemaking (NOPR). But the Commission also directs NERC to expand the scope of the new requirements to include Electronic Access or Control Monitoring Systems (EACMS) and to evaluate the need to further expand the scope of the requirements to include Physical Access Control Systems (PACS) and Protected Cyber Assets (PCAs).

Despite fears that the Commission would shorten the implementation period for the new requirements, the Commission adopted the 18-month implementation period that was originally proposed by NERC.

American national security officials believe that spies working on behalf of an adversarial nation-state successfully carried out an attack against US companies by compromising a key hardware supply chain, according to a report issued October 4 by Bloomberg Businessweek. The report details how the attackers implemented a “seeding” attack by installing tiny, malicious microchips on motherboards—a type of computer circuit board that houses processing and other essential components—that were assembled in Chinese factories. The exploit apparently had a ripple effect, as the compromised motherboards were ultimately installed in commercial servers that are widely distributed in the United States. One official estimates that the attack affected almost 30 companies, including a major bank and government contractors, and may have enabled the attackers to communicate with or infiltrate the sabotaged servers.

The North American Electric Reliability Corporation (NERC) on September 18 requested Federal Energy Regulatory Commission (FERC) approval of a new Critical Infrastructure Protection (CIP) Reliability Standard, CIP-012-1. The proposed standard would require electric utilities with defined “Control Centers” to implement controls that protect sensitive data communicated between any applicable control centers. Driving the standard is a concern that these control centers can only perform their real-time reliability functions if they can receive and transmit sensitive operational data in a secure manner.

The Federal Energy Regulatory Commission (FERC or the Commission) issued Order No. 848 on July 19, directing the North American Electric Reliability Corporation (NERC) to augment the cyber incident reporting requirements under the Critical Infrastructure Protection (CIP) reliability standards. The directive adopts the proposals from the December 2017 Notice of Proposed Rulemaking (NOPR) and reflects the Commission’s view that FERC and NERC need to significantly improve their awareness of the breadth and frequency of the cybersecurity risks that electric utilities encounter.

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Officials at the US Department of Homeland Security (DHS) confirmed yesterday to The Wall Street Journal that state-sponsored hackers successfully gained remote access to the control rooms of US electric utilities and likely had the ability to disrupt power flows. The report describes the activities as part of a long-running campaign targeting US utilities and suggests that the attacks are still ongoing. This is not the first time that a federal government agency has publicly confirmed the actual or potential threat posed by hackers to critical infrastructure (see our previous post on state-sponsored attacks). Instead, it marks yet another confirmed instance of hackers gaining access to the secure networks used by industrial control systems in what has become a disconcerting trend in recent years, and continues to underline the importance of strong vendor and supply chain cybersecurity controls.

The commissioners from the Federal Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission (NRC) held a joint meeting on June 7 to discuss grid reliability and cybersecurity. FERC and NRC staff provided presentations on the recent and ongoing activities of both agencies to promote a stable, resilient, and secure grid. The presentations were largely a summary of recent agency activities and served to continue the practice of both independent regulatory agencies meeting to discuss items of common interest.

Revised Reliability Standard clarifies obligations for electronic access controls at less critical assets and places more focus on risks posed by certain portable electronic devices.

The Federal Energy Regulatory Commission (the Commission) issued a final rule (Order No. 843) on April 19, approving proposed reliability standard CIP-003-7. The currently-effective version of the standard, CIP-003-6, contains the cybersecurity requirements applicable to low impact BES Cyber Systems. The low impact category covers the BES Cyber Systems associated with less critical substations, generators, and other BES facilities. The final rule adopts NERC’s proposed reliability standard CIP-003-7, which revises the existing standard by clarifying a utility’s obligations for implementing electronic access controls for low impact BES Cyber Systems, introduces security requirements for certain portable devices, and requires utilities to have a policy for reliability-related emergencies known as CIP Exceptional Circumstances that involve low impact BES Cyber Systems.