The new plan builds on efforts to improve the response to attacks and disasters but recognizes that the needed investments may require regulatory changes to ensure cost recovery by utilities.
The White House has released the National Electric Grid Security and Resilience Action Plan, with dozens of directives to federal agencies to take steps to enhance the resilience of the electric grid against cyber threats, physical attacks, and natural disasters. Many of the directives build on existing initiatives scattered throughout the federal government, which the action plan gathers into a single document to provide a more focused and organized approach to the protection of the country’s power grid. Notably, the action plan realizes that many of these directives can only be achieved with the participation of public utilities and that cost recovery of investments for grid resiliency is essential if the federal government expects significant private investment to address system vulnerabilities.
The action plan is structured around three strategic goals:
First, the plan calls for improvements to efforts in grid resiliency through enhanced information sharing about threats and vulnerabilities, strengthening the defenses of the system and introducing measures to reduce identified risks, improving the ability to investigate and respond to threats, and enhancing the system’s performance when faced with disruptions. To this end, the plan requires
Second, the plan directs federal agencies to enhance the electric system’s ability to manage and respond to contingencies such as physical threats, cyber attacks, and natural hazards. To accomplish this, it requires
Third, the plan contains steps to ensure that the future transmission system is less vulnerable to the risks that the electric grid faces today. These steps include
Much of the plan is nonpartisan and uncontroversial, building on existing but disparate efforts throughout several layers of government and involving various public-private partnership initiatives. The nonpartisanship suggests that the directives are likely to remain in place despite the coming change in administration.
However, the most crucial takeaway for the utility industry is that the federal government has started to recognize that current rate regulation of electric utilities does not properly encourage grid resilience. The action plan recognizes that regulatory changes may be necessary to incentivize utilities to make investments to enhance the resilience of the power system, including greater assurance on cost recovery. Indeed, some of the action items in the plan include working with federal and state rate regulators to develop approaches for “include[ing] security and resilience considerations into cost recovery criteria.”
To the extent that public utilities are part of the effort to implement the action plan and achieve its objectives, those measures will be expensive in some cases. Certainty in how much of the expenditures can be recovered in rates will undoubtedly increase participation in these efforts.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
J. Daniel Skees