FERC Refines "Bulk Electric System" Definition, Adopts New Cybersecurity Standards Proving Value of the Definition
At its April meeting, the Federal Energy Regulatory Commission ("FERC") issued Order No. 773-A, which generally reaffirms its December order (Order No. 773, discussed here) approving the definition of "Bulk Electric System" proposed by the North American Electric Reliability Corporation ("NERC"). The Commission also proposed to adopt Version 5 of NERC's Critical Infrastructure Protection ("CIP") standards. These standards incorporate the BES definition, demonstrating the importance of the BES definition to the regime of mandatory electric reliability standards.
Order No. 773 capped a years-long process to define one of the fundamental terms used in the mandatory electric reliability system adopted by Congress in the Energy Policy Act of 2005. By clarifying the legal landscape, Orders No. 773 and 773-A lay the groundwork for a number of different strategies regulated utilities may employ to reduce the sometimes daunting burdens of reliability compliance.
Similarly, the CIP proposal is an important way-point in a years-long effort to develop and improve cybersecurity standards. In the proposed rule, FERC proposes to skip directly from CIP version 3 to CIP version 5 standards, jumping over the version 4 standards it previously approved. The proposal demonstrates the importance of the BES definition approved in Orders No. 773 and 773-A because the new standards, if adopted, classify facilities based on whether they have "low," "medium," or "high" impact on the BES, and impose compliance obligations depending on this classification.