Reed Smith Client Alerts

On January 6, 2021, the U.S. Department of Energy (DOE) issued a Prohibition Order prohibiting the acquisition, importation, transfer, or installation of specified bulk-power system (BPS) electric equipment that directly serves Critical Defense Facilities (CDFs), effective January 16, 2021.  While the Prohibition Order applies to a limited number of utilities and specific BPS electric equipment from the People’s Republic of China (PRC or China), it leaves open the possibility of additional action by DOE to address threats from other “foreign adversaries” through additional action undertaken pursuant to Executive Order 13920 including, but not limited to, rulemaking and further orders of the Secretary of DOE.   Executive Order 13920 was previously discussed in our May 2020 client alert.

作者: Michael J. Lowell Colette D. Honorable Manasi Venkatesh Sarah S. Wronsky Keturah A. Brown

Background

Citing concerns with the potential for foreign adversaries to exploit vulnerabilities in the BPS that supports the country’s national defense, as well as vital emergency services, critical infrastructure, economy, and way of life, President Trump declared a national emergency related to this threat and issued Executive Order 13920, “Securing the United States Bulk-Power System” (EO), on May 1, 2020.1 DOE, in a Request for Information (RFI) issued on July 8, 2020, identified the current list of foreign adversaries as the governments of (i) The People’s Republic of China; (ii) the Republic of Cuba; (iii) the Islamic Republic of Iran; (iv) the Democratic People’s Republic of Korea (North Korea); (v) the Russian Federation; and (vi) the Bolivarian Republic of Venezuela.2

Thereafter, on January 6, 2021, DOE, in light of its determination that the PRC is “equipped and actively planning to undermine the BPS,” issued a Prohibition Order prohibiting the acquisition, importation, transfer, or subsequent installation of BPS electric equipment or programmable components in certain sections of the BPS subject to China’s ownership, control, or influence.3

Prohibited transactions

The January 6, 2021 Prohibition Order prohibits a “Responsible Utility” – defined as “an electric utility that owns or operates Defense Critical Electric Infrastructure (DCEI), as defined by section 215A(a)(4) of the Federal Power Act (FPA), that actively serves a CDF, as designated by the Secretary under section 215A(c) of the FPA” – from “acquiring, importing, transferring, or installing BPS electric equipment identified in Attachment 1 (Regulated Equipment) that (i) has been manufactured or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of the PRC, and (ii) is for use by the Responsible Utility as a component of its DCEI serving the CDF at a service voltage level of 69 kV or higher, from the point of electrical interconnection (at a service voltage level of 69 kV of higher) with the CDF up to and including the next ‘upstream’ transmission substation” (emphasis added).