On May 1, 2020, President Trump issued an Executive Order on Securing the United States Bulk Power System (the “XO”) in response to his findings that foreign adversaries are increasingly creating and exploiting vulnerabilities in the United States bulk-power system and that the unrestricted foreign supply of bulk-power system electric equipment constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.
The XO prohibits:
“any acquisition, importation, transfer, or installation of any bulk-power system electric equipment (transaction) by any person, or with respect to any property, subject to the jurisdiction of the United States, where the transaction involves any property in which any foreign country or a national thereof has any interest (including through an interest in a contract for the provision of the equipment), where the transaction was initiated after the date of this order, and where the Secretary of Energy (Secretary), in coordination with the Director of the Office of Management and Budget and in consultation with the Secretary of Defense, the Secretary of Homeland Security, the Director of National Intelligence, and, as appropriate, the heads of other executive departments and agencies (agencies), has determined that:
(i) the transaction involves bulk-power system electric equipment designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary; and
(ii) the transaction:
(A) poses an undue risk of sabotage to or subversion of the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of the bulk-power system in the United States;
(B) poses an undue risk of catastrophic effects on the security or resiliency of United States critical infrastructure or the economy of the United States; or
(C) otherwise poses an unacceptable risk to the national security of the United States or the security and safety of United States persons.”
The XO also authorizes the Secretary to take such actions—including directing the timing and manner of the cessation of pending and future transactions prohibited pursuant to the XO, adopting appropriate rules and regulations—to implement this order and requires the Secretary, in consultation with the Secretary of Defense, the Secretary of the Interior, the Secretary of Homeland Security, the Director of National Intelligence, the Board of Directors of the Tennessee Valley Authority, and the heads of such other agencies as the Secretary considers appropriate, to:
“(i) identify bulk-power system electric equipment designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary that poses an undue risk of sabotage to or subversion of the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of the bulk-power system in the United States, poses an undue risk of catastrophic effects on the security or resiliency of United States critical infrastructure or the economy of the United States, or otherwise poses an unacceptable risk to the national security of the United States or the security and safety of United States persons; and
(ii) develop recommendations on ways to identify, isolate, monitor, or replace such items as soon as practicable, taking into consideration overall risk to the bulk-power system.”
For purposes of the XO, the following definitions apply:
“(a) The term ‘bulk-power system’ means (i) facilities and control systems necessary for operating an interconnected electric energy transmission network (or any portion thereof); and (ii) electric energy from generation facilities needed to maintain transmission reliability. For the purpose of this order, this definition includes transmission lines rated at 69,000 volts (69 kV) or more, but does not include facilities used in the local distribution of electric energy.
(b) The term ‘bulk-power system electric equipment’ means items used in bulk-power system substations, control rooms, or power generating stations, including reactors, capacitors, substation transformers, current coupling capacitors, large generators, backup generators, substation voltage regulators, shunt capacitor equipment, automatic circuit reclosers, instrument transformers, coupling capacity voltage transformers, protective relaying, metering equipment, high voltage circuit breakers, generation turbines, industrial control systems, distributed control systems, and safety instrumented systems. Items not included in the preceding list and that have broader application of use beyond the bulk-power system are outside the scope of this order.
(c) The term ‘entity’ means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization.
(d) The term ‘foreign adversary’ means 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.
(e) The term ‘person’ means an individual or entity.
(f) The term ‘procurement’ means the acquiring by contract with appropriated funds of supplies or services, including installation services, by and for the use of the Federal Government, through purchase, whether the supplies or services are already in existence or must be created, developed, demonstrated, and evaluated.
(g) The term ‘United States person’ means any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.”
However, several key questions are raised by, and remain unanswered in, the XO, including:
- Which foreign governments or non-government persons are “foreign adversaries”?
- What is included in the “bulk-power system"? While “local distribution” is specifically excluded, only 69kV or more transmission lines are clearly included, leaving open questions regarding two-way transmission lines or tie-lines that export wholesale generation, even if less than 69kV. Similarly, is storage included (i.e., is it “generation facilities”), and, if so, what storage is included (i.e., when storage can provide electric energy to maintain transmission reliability but does not do so exclusively)?
- What constitutes a prohibited “transfer”? Does the sale of a company that owns affected bulk-power system electric equipment constitute a “transfer” of such equipment? Does the sale of a parent company that owns such a company? Does a lease or pledge?
- When is the XO effective? The XO states that it applies to transactions initiated after May 1—but “notwithstanding any contract entered into or any license or permit granted prior to the date of this order,” suggesting a retrospective application and effect.
- How does the XO relate to existing FERC/NERC requirements and protocols (and vice versa)?
While we expect that these and other questions may be answered in the contemplated rulemaking, the uncertainty raised by the XO may have a more immediate effect on pending transactions, suggesting that clarification sooner rather than later would be beneficial to affected parties.