White House Issues Executive Order Restricting Foreign Equipment in Bulk Power System

Balch & Bingham LLP

Last Friday, May 1, the White House signed an executive order prohibiting Federal Agencies and U.S. persons from acquiring, importing, transferring, or installing any bulk power system (“BPS”) equipment in which:

  • the transaction involves bulk-power system electric equipment designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary; and
  • the Secretary of Energy determines the transaction:
  • poses an undue risk of sabotage to or subversion of the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of the bulk-power system in the United States;
  • poses an undue risk of catastrophic effects on the security or resiliency of United States critical infrastructure or the economy of the United States; or
  • otherwise poses an unacceptable risk to the national security of the United States or the security and safety of United States persons.

The Secretary, in consultation other agencies as appropriate, may design or negotiate mitigating measures, which may serve as a precondition to Secretary approval of a transaction or of a class of transactions that would otherwise be prohibited under this order.  The Executive Order also authorizes the Secretary of Energy to:

  • Establish and publish criteria for recognizing particular equipment and vendors as “pre-qualified” (pre-qualified vendor list).
  • Identify any now-prohibited equipment already in use, allowing the government to develop strategies and work with asset owners to identify, isolate, monitor, or replace this equipment as appropriate.
  • Work closely with the Departments of Commerce, Defense, Homeland Security, Interior; the Director of National Intelligence; and other appropriate Federal agencies to carry out the authorities and responsibilities outlined in the Executive Order.

A Task Force led by the Secretary will develop energy infrastructure procurement policies to ensure national security considerations are fully integrated into government energy security and cybersecurity policymaking. The Task Force will consult with the energy industry through the Electricity Subsector Coordinating Council (ESCC) and Oil and Natural Gas Subsector Coordinating Councils (ONG SCC) to further its efforts on securing the Bulk Power System.

It is unclear how the policies may be coordinated with or interact with the NERC CIP-013 supply chain standards, whose implementation was deferred three months by FERC on April 20 as a result of the COVID-19 pandemic.  Section 2(c) of the order does allow the Secretary to “redelegate any of the authorities conferred on the Secretary pursuant to this section within [DOE].” In response to this executive order, NERC issued the following statement:

“The supply chain executive order launches a critical initiative to secure the bulk power system. Efforts outlined in the order will help support activities already underway in NERC’s supply chain standards and other work. The order is a positive step forward to improve reliability and security of the bulk power system supply chain. NERC looks forward to working with industry and government stakeholders toward effective implementation of the executive order.”

To view the executive order, click here.

To view the Department of Energy’s press release, click here.

To view NERC’s response, click here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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