FERC directs standards requiring utility hardening against physical threat

Monday, March 17, 2014

In the wake of last year's sniper assault on a California electrical substation, federal regulators have initiated a process to require utilities to demonstrate that they have hardened their power plants, transmission lines, and other infrastructure against physical attacks.  Last week the Federal Energy Regulatory Commission ordered the North American Electric Reliability Corporation, or NERC, to develop reliability standards requiring utilities to address risks due to physical security threats and vulnerabilities.  If NERC adopts reliability standards to protect against physical threats, will the standards improve electric reliability -- and if so, at what cost?

Stacks from a power plant subject to NERC standards rise above a cove in Salem, Massachusetts.

NERC, a not-for-profit entity whose mission is to ensure the reliability of the bulk power system in North America, has been designated as the United States' electric reliability organization.  To carry out this mission, NERC develops and enforces reliability standards for owners and operators of critical electrical infrastructure.  NERC's existing standards span 1,778 pages, and cover issues ranging from personnel training and emergency preparedness to protection against hacking and cyberterrorism. 

Following the April 16, 2013, destruction by intense gunfire of a PG&E Corp. substation in San Jose, California, much attention has fallen on the protection of the U.S. electrical grid against physical threats.  At the federal regulatory level, this attention led the FERC to issue an order on March 7, 2014, directing NERC to adopt additional standards for physical security.  That order prescribes the creation of new standards requiring owners and operators of the so-called Bulk-Power System to take at least three steps to protect physical security:

  • First, owners and operators must perform a risk assessment of their system to identify their "critical facilities".  Critical facilities are defined as those that, if rendered inoperable or damaged, could have a critical impact on the operation of the interconnection through instability, uncontrolled separation, or cascading failures of the Bulk-Power System.

  • Second, owners and operators of critical facilities must evaluate potential threats and vulnerabilities to those facilities.

  • Third, owners and operators must develop and implement a security plan to address potential threats and vulnerabilities.

The order directing physical protections standards has prompted at least two sets of questions in the utility industry.  First, will these standards lead to improved reliability?  While the efficacy of the standards will likely only be proven in retrospect, if at all, fears brought to life by the California attack and others have convinced a majority of the Commission that the standards are necessary.

Other questions have arisen about the cost of implementing the standards.  While some defenses against physical threats may be adopted relatively inexpensively -- for example, opaque fencing around critical facilities -- others may prove expensive.  When the possible scope and extent of critical facilities are taken into account, some estimates of the potential cost -- including that of concurring FERC Commissioner John Norris -- rise into the billions.

Under the Commission's order, NERC has until June 5, 2014, to prepare and submit its proposed new reliability standards.

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