On December 4, 2015, President Obama signed into law the “FAST Act”—short for Fixing America’s Surface Transportation Act. Though primarily a highway bill, the FAST Act also includes energy security amendments to the Federal Power Act (“FPA”), several of which affect utilities and others in the electric industry. Many of these changes potentially affect owners, operators, and users of electric infrastructure not ordinarily subject to control by the Federal Energy Regulatory Commission (“FERC”). Thus, the new law potentially affects virtually all regulators, owners, operators, and users of electric generation and transmission infrastructure, even relatively small, intrastate utilities.
The FAST Act creates a new Section 215A in the FPA, much of which revolves around the newly-defined terms “critical electric infrastructure” and “critical electric infrastructure information.”
Critical electric infrastructure (“CEI”) is broadly defined to include both physical and virtual “systems and assets” of the bulk-power system, whose destruction or incapacity would have a negative impact on national or economic security, public health, or safety.
Critical electric infrastructure information (“CEII”) could mean potentially any information related to CEI or proposed CEI, and generated by or submitted to FERC or any other federal agency, other than classified national security information. The breadth of coverage will depend on a future rulemaking.
The FAST Act restricts disclosure of CEII, but also promotes information sharing among government and industry participants. As suggested in the definition of CEII, the full impact of these provisions will depend on rules FERC must promulgate within the next year, which will determine both procedures and substantive criteria for designating CEII and preventing its unauthorized disclosure. The Act itself does specify, however, that no federal, state, local, or tribal entity may disclose CEII on the basis of any public disclosure law at any level, including the federal Freedom of Information Act (FOIA).
Industry Impacts: Depending on implementation, these provisions could prevent disclosure of a wide swath of industry information submitted to the federal government, including FERC filings. By definition, CEII might include any “information related to critical electric infrastructure, or proposed critical electrical infrastructure, generated by or provided to [FERC] or other Federal agency, other than classified national security information” and designated according to the rules to be established. Significantly, the new federal protection preempts state and local laws, preventing CEII disclosure even by a state or local agency pursuant to a state or local public disclosure law. However, to be designated as CEII, the information must have been generated by or submitted to a federal agency.
In addition, new regulations required by the FAST Act will promote voluntary sharing of CEII among federal, state, local, and tribal authorities; NERC; regional entities; and owners, operators, and users of the bulk-power system in the United States, as well as government and electric infrastructure operators in Mexico and Canada. These provisions will thus apply to industry participants. However, the Act makes clear that the agency rules must not require disclosure of CEII by anyone who has it, nor does the Act create a cause of action to force such sharing.
Expansion of FERC Emergency Authority
The new Section 215A gives the Department of Energy (“DOE”) increased authority in case of a “grid security emergency,” including malicious physical or electronic acts, magnetic disturbances due to the sun, direct physical attacks, and related threats and reliability disruptions. When the President identifies such an emergency, DOE can order emergency measures the Secretary of Energy (“Secretary”) deems necessary to protect or restore CEI reliability. The new law requires very little process prior to issuance of these emergency orders. Though the DOE must adopt procedures for such cases, the Secretary may issue emergency orders “with or without notice, hearing, or report.” The President must notify Congress of the emergency determination, and the DOE must consult with affected governments and CEI owners and operators.
Industry Impacts: An emergency order under the new FPA section 215A could affect “any owner, user, or operator” of CEI in the U.S., even entities not ordinarily subject to FERC jurisdiction (for example, municipally owned utilities, rural electric cooperatives, and federal power marketing agencies like the Tennessee Valley Authority and Bonneville Power Administration). The DOE’s new authority also explicitly extends to the North American Electric Reliability Corporation (“NERC”) and Regional Entities. If CEI owners, operators, or users prudently incur costs in complying with an emergency order, but cannot recover those costs through their existing rate structures, the new law directs FERC to establish mechanisms for recovery of those costs.
Planning for Strategic Reserve of Spare Large Power Transformers and Emergency Mobile Substations
The new law requires DOE’s Office of Electricity Delivery and Energy Reliability, in consultation with FERC, NERC, and the Electricity Subsector Coordinating Council, to submit a plan to Congress evaluating the feasibility of establishing a Strategic Transformer Reserve for storage in strategic locations of spare large power transformers and emergency mobile substations. The plan would determine adequate amounts and locations to temporarily replace critically damaged large power transformers and substations. The reserve would aim to diminish the vulnerability of the U.S. electric grid to physical or cyber attack, electromagnetic pulse, solar disturbance of the earth’s magnetic field, severe weather, and earthquake.
Industry Impacts: DOE’s plan must include the funding options available to establish and maintain the Strategic Transformer Reserve, including imposing fees on owners and operators of bulk-power system facilities and CEI. Additionally, the plan must assess the possibility of imposing fees on the large power transformer owner/operators and substations that constitute CEI to pay for Strategic Transformer Reserve operating costs.
Elimination of Conflicts Between FERC Emergency Reliability Orders and Utility Compliance With Environmental Laws And Regulations
The law also amends Section 202(c) of the FPA (FERC’s existing emergency authority) to clarify that FERC emergency orders override federal, state, and local environmental laws. Congress intended to resolve a perceived conflict facing power plant operators, who feared violating either an emergency order from FERC or environmental regulations if an emergency arose.
An emergency order must still minimize environmental impacts and must be consistent with all applicable environmental laws “to the maximum extent practicable.” FERC must also consult with federal environmental regulators before an order can remain in effect longer than 90 days. Further, FERC must incorporate any condition submitted by the environmental agency or else explain its determination that the condition would impede an adequate emergency response. This exemption extends not only to orders under FERC’s existing Section 202(c) emergency authority, but also to the new emergency powers under Section 215A.
Industry Impacts: Utilities and other operators of electric generation and transmission facilities may now comply with FERC emergency orders with enhanced assurance that they will not incur environmental liability, whether civil (including citizen suits) or criminal. Such acts or omissions, even when taken to “voluntarily comply” with an emergency order, may not be considered violations of any federal, state, or local environmental law. This protection continues even if courts later alter or strike down the underlying FERC order. The existing language of Section 202(c) does not appear to limit FERC’s emergency authority to utilities otherwise under its jurisdiction, so it appears that the new exemption could benefit virtually any operator of electric infrastructure, should an emergency arise.
The FAST Act offers the electric power sector several benefits, most notably exemption from environmental regulations to the extent they conflict with FERC emergency orders, improved cost recovery for compliance with such orders, and also some degree of added protection of sensitive information from public disclosure. On the other hand, system participants will now be subject to broader federal control, especially in emergency situations. The Strategic Transformer Reserve planning also foreshadows potentially significant costs that Congress could impose on owners, operators, and users of generation and grid assets in the future. And significantly, most of the new agency powers and responsibilities just enacted apply not only to utilities and grid operators accustomed to dealing with FERC, but also to entities not ordinarily subject to FERC jurisdiction.