Alert
05.06.20
On Friday, May 1, President Donald Trump issued an Executive Order that declared a national emergency with respect to the United States bulk-power system. The President’s Executive Order found that the bulk-power system is a target of “those seeking to commit malicious acts against the United States and its people, including malicious cyber activities.”
The President’s Order proceeded to prohibit the installation or acquisition of any bulk-power system equipment (after May 1) where the Secretary of Energy, in consultation with other agencies, has determined there is any foreign interest—including if that interest is limited to a contract for the provision of the equipment—where the equipment has been “designed, developed, manufactured, or supplied” by persons owned or controlled by a foreign adversary and where the transaction poses an (i) undue risk of sabotage or subversion to the U.S. bulk power system, (ii) catastrophic effects to U.S. critical infrastructures, or (iii) unacceptable risk to national security or the security and safety of American citizens. It is important to note that the Executive Order provides authority for the Secretary of Energy to prohibit the transactions covered by the Order, but does not itself prohibit these transactions.
The Order defines “foreign adversaries” as “any foreign government or foreign non-government person engaged in a long‑term pattern or serious instances of conduct significantly adverse to the national security of the United States or its allies or the security and safety of United States persons.” In addition, the Order gives the heads of all agencies the power to determine which countries or persons may be identified as foreign adversaries, exclusively for the purposes of this Order. (The identification of foreign adversaries is similar to that instructed by the President’s May 15, 2019 Executive Order Securing the Information and Communications Technology and Services Supply Chain. The implementation of the May 15, 2019 Executive Order did not cross-reference any Bureau of Industry and Security (BIS) export control or sanctions lists.) In past Executive Orders issued by President Trump, similar language has generally be interpreted to refer to known cyber adversaries such as China and Russia. Given that China is one of the dominant producers of bulk-power equipment, at this time it is a fair assumption that the language in the Order is similarly aimed at China.
Additionally, the Order gives the Secretary of Energy the power to design measures which serve as a precondition for approval of such transactions for the bulk-power system as well as pre-qualify certain vendors and manufacturers. The Order also gives agencies the authority to cease pending and future transactions prohibited by the Order. While the Order broadly defines bulk-power system electric equipment, it does not yet identify the equipment designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary. The Secretary is directed to consult with other agencies and identify potentially compromised bulk-power system equipment as soon as practicable.
Finally, the President has established a Task Force on Federal Energy Infrastructure Procurement Policies Related to National Security, chaired by the Secretary of Energy and consisting of the Secretary of Defense, the Secretary of the Interior, the Director of National Intelligence, as well as several others. The main goal of the task force is to develop a consistent set of procurement policies for agencies as it relates to the security of the bulk-power system and to “identify, isolate, monitor, and replace” any potentially compromised equipment as appropriate. Note that the Order does not contain any language indicating that the federal government will subsidize the cost of replacing bulk-power equipment it bans. Such funding could be made available through the Congressional funding process, however.
The effect of the Order is immediate. However, we are aware of no prohibition determinations that have been made by the Secretary of Energy.
It is notable that the Executive Order was issued in addition to the Director of National Intelligence’s 2019 Worldwide Threat Assessment. A DOE official, who spoke anonymously to Politico, stated the order was needed because, “We found people were buying pieces of equipment from a number of adversaries that were included in the 2019 worldwide threat assessment simply because they came in as the lowest bidder.”
While utilities are still evaluating the impact of the order, it was welcomed by the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC).
The Secretary has been directed to issue rules and regulations within 150 days of the Executive Order.