Washington (Platts)--10Mar2014/1245 pm EDT/1645 GMT

In the face of congressional pressure, US regulators are taking steps to require the electricity industry to bolster physical security at key facilities on the grid, while at the same time emphasizing that stronger defenses will not be required at most facilities.

The US Federal Energy Regulatory Commission on Friday directed the North American Electric Reliability Corp. to within 90 days propose reliability standards to "address physical security risks and vulnerabilities related to the reliable operation of the bulk-power system."

In a statement issued with the order, Acting Chairman Cheryl LaFleur said the steps would complement current efforts by FERC and the electric industry to protect the grid while also enhancing the system's resilience.

One FERC commissioner, however, is expressing concern that the order's approach could limit collaboration between the commission and industry, while also warning that efforts to protect the grid should not just be focused on physical threats.

The order came as regulators and lawmakers are bringing renewed attention to physical security in light of a sophisticated attack last April on a Pacific Gas & Electric substation near San Jose, California. Last month, a group of Democratic senators, including Senate Majority Leader Harry Reid of Nevada, called the attack a "wake-up call" in a letter to LaFleur, asking whether "additional minimum standards" are needed to ensure physical security at key points on the electric grid.

LaFleur in short order responded to the senators' concerns, saying in a letter that it was appropriate to consider new standards and directing FERC staff to work with NERC on the matter. She also called on Congress to create a limited exemption under the Freedom of Information Act to protect sensitive grid information about the grid and to designate one agency to have "clear and direct authority" to respond to imminent threats.

And while it is unclear when Congress may consider such legislation, FERC on Friday moved ahead with new standards under its existing Federal Power Act authority, which allows the commission to direct NERC to develop and propose reliability standards.

Under the proposal, owners and operators of grid assets would be required to perform a risk assessment to determine whether they have under their control a "critical facility." Such assets could include substations, control centers and other facilities that "if rendered inoperable or damaged, could have a critical impact on the operation of the interconnection through instability, uncontrolled separation or cascading failures," FERC said.

The standards should in turn require entities to evaluate the potential threats to those critical facilities and then "develop and implement a security plan designed to protect against attacks to those identified critical facilities."

But FERC provided considerable leeway for NERC and industry to create the standards, including not dictating a specific approach to ensuring security at critical facilities or a specific type of risk assessment. FERC also said that the number of critical facilities will likely be small when compared to the number of assets on the grid.

"We do not expect that every owner and operator of the bulk-power system will have critical facilities under the reliability standard. We also recognize that the industry has engaged in longstanding efforts to address the physical security of its critical facilities. Thus, NERC should develop an implementation plan that requires owners or operators of the bulk-power system to implement the reliability standards in a timely fashion, balancing the importance of protecting the bulk-power system from harm while giving the owners or operators adequate time to meaningfully implement the requirements," FERC said.

But Commissioner John Norris raised concerns the order could limit FERC's collaboration with industry in the near term, given that FERC rules will bar the commission from communicating with parties during the NERC standard-development process.

"I believe that the standards development process could be weakened by this lack of engagement between the commission and industry during that process," Norris said in a concurrence with the order, saying as well that the order's approach "will inappropriately preclude an open and transparent process in which all interested parties would be able to engage with the commission as the standards development process gets underway."

Norris went on to say that "I believe the order does not sufficiently justify the uniquely expedited nature of the standard development process, particularly when it will foreclose the commission from engaging with stakeholders during that process. It would have been my preference to utilize an expedited rulemaking process for addressing this proposed reliability standard to allow the commission to continue to engage with industry throughout the standard development process."

Norris in his concurrence also continued to raise concerns that the recent focus on physical security could be to the detriment of other threats to the electric grid, including cyber attacks and geomagnetic disturbances.

"I remain concerned that the recent momentum will result in the electricity sector potentially spending billions of dollars erecting physical barriers to protect our grid infrastructure. I am particularly troubled because most if not all of those costs will be passed through to ratepayers," Norris said.

--Bobby McMahon, bobby.mcmahon@platts.com --Edited by Derek Sands, derek.sands@platts.com

© 2014 Platts, The McGraw-Hill Companies Inc. All rights reserved.  To subscribe or visit go to:  http://www.platts.com

http://www.platts.com/latest-news/electric-power/washington/us-ferc-takes-steps-to-require-stronger-physical-21312319