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Grid Assurance CEO: Security standards are 'skating to where the puck was'

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Grid Assurance CEO: Security standards are 'skating to where the puck was'

Mandatory electric grid security standards often lag real-time problems, with voluntary planning between industry and government probably working better, Grid Assurance CEO Michael Deggendorf said Dec. 15 at S&P Global Market Intelligence's Utility Regulation Conference in Washington, D.C.

Grid Assurance is a collaboration among utilities and electric power companies, including American Electric Power Co. Inc. and Duke Energy Corp., to pool and store spare transformers and other equipment to aid recovery from major system failures related to weather or other high-impact, low-frequency events. The company formally launched in May and is now focused on obtaining state approvals and developing warehousing and operational plans. Sparing service and fee collection are due to start in January 2019.

Deggendorf said the electric power sector is always trying to balance core security issues requiring formal standards with voluntary efforts. While the industry has done a "pretty good job" at working voluntarily with the government, he said the act of forming new standards means "skating to where the puck was" rather than addressing existing and emerging threats. Deggendorf maintained that regulators, generators and transmission providers should instead focus on "removing impediments to doing the right thing."

The downside of that approach is costs. He noted that Grid Assurance received favorable cost treatment from FERC for its services, but those expenses are ultimately recovered at the state level by member companies. Public service commissions and other utility regulators are more likely to support cost recovery on investments needed to meet mandatory reliability or security standards, rather than voluntary defense and recovery efforts.

FERC directs the North American Electric Reliability Corp. to form reliability standards for the bulk power system, including to guard against cyber and physical attacks. Those standards are frequently changing, but Republican President-elect Donald Trump's more hands-off approach to regulation could mean fewer new security standards in his administration.

That approach, however, should not discourage investment in spare transformers or other crucial back-up equipment, a U.S. Department of Energy official said at the conference. "I don't get the sense that any of that will slow down one bit because of the [new] administration," said Devon Streit, deputy assistant secretary for infrastructure security and energy restoration.

The DOE will release a report in the next few weeks on the feasibility of a spare transformer reserve program, a report Congress required DOE to do as part of a transportation bill signed into law in December 2015.

The investment outlook is similar for pipeline safety. "I don't know that you will see a rollback of existing regulations," said Susan Olenchuck, a partner at Van Ness Feldman LLP who focuses on pipelines. But Olenchuck said conservative lawmakers are against proposed gas transmission pipeline standards from the Pipeline and Hazardous Materials Safety Administration. That agency is not expected to issue a final rule until late 2017, when Trump will be in office, so "who knows what will happen with the next administration," she said.