Background

The electricity industry, as shown in figure 1, is composed of four distinct  functions: generation, transmission, distribution, and system operations.  Once electricity is generated—whether by burning fossil fuels; through  nuclear fission; or by harnessing wind, solar, geothermal, or hydro  energy—it is generally sent through high-voltage, high-capacity  transmission lines to local electricity distributors. Once there, electricity is  transformed into a lower voltage and sent through local distribution lines  for consumption by industrial plants, businesses, and residential  consumers. Because electric energy is generated and consumed almost  instantaneously, the operation of an electric power system requires that a  system operator constantly balance the generation and consumption of  power.
Utilities and others own and operate electricity assets, which may include  generation plants, transmission lines, distribution lines, and substations— structures often seen in residential and commercial areas that contain  technical equipment such as switches and transformers to ensure  smooth, safe flow of current and regulate voltage. Utilities may be owned  by investors, municipalities, and individuals (as in cooperative utilities).
System operators—sometimes affiliated with a particular utility or  sometimes independent and responsible for multiple utility areas— manage the electricity flows. These system operators manage and control  the generation, transmission, and distribution of electric power using  control systems—IT- and network-based systems that monitor and control  sensitive processes and physical functions, including opening and closing  circuit breakers.
As we have previously reported, the effective functioning of the electricity  industry is highly dependent on these control systems. Nevertheless, for  many years, aspects of the electricity network lacked (1) technologies— such as sensors—to allow system operators to monitor how much  electricity was flowing on distribution lines, (2) communications networks  to further integrate parts of the electricity grid with control centers, and (3)  computerized control devices to automate system management and  recovery.

		Modernization of the Electricity Infrastructure

As the electricity industry has matured and technology has advanced,  utilities have begun taking steps to update the electricity grid—the  transmission and distribution systems—by integrating new technologies  and additional IT systems and networks. Though utilities have regularly  taken such steps in the past, industry and government stakeholders have  begun to articulate a broader, more integrated vision for transforming the  electricity grid into one that is more reliable and efficient; facilitates  alternative forms of generation, including renewable energy; and gives  consumers real-time information about fluctuating energy costs.
This vision—the smart grid—would increase the use of IT systems and  networks and two-way communication to automate actions that system  operators formerly had to make manually. Electricity grid modernization is  an ongoing process, and initiatives have commonly involved installing  advanced metering infrastructure (smart meters) on homes and  commercial buildings that enable two-way communication between the  utility and customer. Other initiatives include adding “smart” components  to provide the system operator with more detailed data on the conditions  of the transmission and distribution systems and better tools to observe  the overall condition of the grid (referred to as “wide-area situational  awareness”). These include advanced, smart switches on the distribution  system to reroute electricity around a troubled line and high-resolution,  time-synchronized monitors—called phasor measurement units—on the  transmission system.
The use of smart grid systems may have a number of benefits, including  improved reliability with fewer and shorter outages, downward pressure  on electricity rates resulting from the ability to shift peak demand, an  improved ability to more efficiently use alternative sources of energy, and  an improved ability to detect and respond to potential attacks on the grid.

		Regulation of the Electricity Industry

Both the federal government and state governments have authority for  overseeing the electricity industry. For example, the Federal Energy  Regulatory Commission (FERC) regulates rates for wholesale electricity  sales and transmission of electricity in interstate commerce. This includes  approving whether to allow utilities to recover the costs of investments  they make to the transmission system, such as some smart grid  investments. Meanwhile, local distribution and retail sales of electricity are  generally subject to regulation by state public utility commissions.
State and federal authorities also play key roles in overseeing the  reliability of the electric grid. State regulators generally have authority to  oversee the reliability of the local distribution system. The North American  Electric Reliability Corporation (NERC) is the federally designated U.S.  Electric Reliability Organization, and is overseen by FERC. NERC has  responsibility for conducting reliability assessments and developing and  enforcing mandatory standards to ensure the reliability of the bulk power  system—i.e., facilities and control systems necessary for operating the  transmission network and certain generation facilities needed for  reliability. NERC develops reliability standards collaboratively through a  deliberative process involving utilities and others in the industry, which  are then sent to FERC for approval. These standards include critical  infrastructure protection standards for protecting electric utility-critical and  cyber-critical assets. FERC has responsibility for reviewing and approving  the reliability standards or directing NERC to modify them.
In addition, the Energy Independence and Security Act of 2007  established federal policy to support the modernization of the electricity  grid and required actions by a number of federal agencies, including the  National Institute of Standards and Technology (NIST), FERC, and the  Department of Energy. With regard to cybersecurity, the act required  NIST and FERC to take the following actions:
NIST was to coordinate development of a framework that includes  protocols and model standards for information management to  achieve interoperability of smart grid devices and systems. As part of  its efforts to accomplish this, NIST identified cybersecurity standards  for these systems and the need to develop guidelines for  organizations such as electric companies on how to securely  implement smart grid systems. In January 2011, we reported that  NIST had identified 11 standards involving cybersecurity that support  smart grid interoperability and had issued the first version of a  cybersecurity guideline. In February 2012, NIST issued the 2.0  version of the framework that, according to NIST documents, added  22 standards, specifications, and guidelines to the 75 standards NIST  recommended as being applicable to the smart grid in the 1.0 version  from January 2010. In September 2014, NIST issued the first revision  of the cybersecurity guidelines.
FERC was to adopt standards resulting from NIST’s efforts that it  deemed necessary to ensure smart grid functionality and  interoperability. However, according to FERC officials, the statute did  not provide specific additional authority to allow FERC to require  utilities or manufacturers of smart grid technologies to follow these  standards. As a result, any standards identified and developed  through the NIST-led process are voluntary unless regulators use  other authorities to indirectly compel utilities and manufacturers to  follow them.

		Cyber Threats and Vulnerabilities Facing the Electricity Grid

Like threats affecting other critical infrastructures, threats to the electricity  industry and its transmission and distribution systems are evolving and  growing and can come from a wide array of sources. Risks to cyber- based assets can originate from unintentional or intentional threats.  Unintentional threats can be caused by, among other things, natural  disasters, defective computer or network equipment, software coding  errors, and careless or poorly trained employees. Intentional threats  include both targeted and untargeted attacks from a variety of sources,  including criminal groups, hackers, disgruntled insiders, foreign nations  engaged in espionage and information warfare, and terrorists.
These adversaries vary in terms of their capabilities, willingness to act,  and motives, which can include seeking monetary gain or pursuing a  political, economic, or military advantage. For example, adversaries  possessing sophisticated levels of expertise and significant resources to  pursue their objectives—sometimes referred to as “advanced persistent  threats”—pose increasing risks. They make use of various techniques—  or exploits—that may adversely affect federal information, computers,  software, networks, and operations, such as a denial of service, which  prevents or impairs the authorized use of networks, systems, or  applications.
The potential impact of these threats is amplified by the connections  between industrial control systems, supervisory control and data  acquisition (or SCADA) systems, information systems, the Internet, and  other infrastructures, which create opportunities for attackers to disrupt  critical services, including electrical power. The increased reliance on IT  systems and networks also exposes the electric grid to potential and  known cybersecurity vulnerabilities. These include an increased number of entry points and paths that can be exploited; the introduction of new, unknown vulnerabilities resulting from an  increased use of new system and network technologies; wider access to systems and networks due to increased connectivity; an increased amount of customer information being collected and  transmitted, which creates a tempting target for potential attackers.
We and others have also reported that smart grid and related systems  have known cyber vulnerabilities. For example, cybersecurity experts  have demonstrated that certain smart meters can be successfully  attacked, possibly resulting in disruption to the electricity grid. In addition,  we have reported that control systems used in industrial settings such as  electricity generation have vulnerabilities that could result in serious  damages and disruption if exploited. Further, in 2007, the Department of  Homeland Security, in cooperation with the Department of Energy, ran a  test that demonstrated that a vulnerability commonly referred to as  “Aurora” had the potential to allow unauthorized users to remotely control,  misuse, and cause damage to a small commercial electric generator.  Moreover, in 2008, the Central Intelligence Agency reported that  malicious activities against IT systems and networks have caused  disruption of electric power capabilities in multiple regions overseas,  including a case that resulted in a multicity power outage. In January  2014, the Director of National Intelligence testified that industrial control  systems and SCADA systems used in electrical power distribution and  other industries provided an enticing target to malicious actors and that,  although newer architectures provide flexibility, functionality, and  resilience, large segments remain vulnerable to attack, which might cause  significant economic or human impact. Further, in 2015 the Director  testified that studies asserted that foreign cyber actors were developing  means to access industrial control systems remotely, including those that  manage critical infrastructures such as electric power grids. As  government, private sector, and personal activities continue to move to  networked operations, the threat will continue to grow.
Cyber incidents continue to affect the electric industry. For example, the  Department of Homeland Security’s Industrial Control Systems Cyber  Emergency Response Team noted that the number of reported cyber  incidents affecting control systems of companies in the electricity  subsector increased from 3 in 2009 to 25 in 2011. The response team  reported that the energy sector, which includes the electricity subsector,  led all others in fiscal year 2014 with 79 reported incidents. Reported  incidents affecting the electricity subsector have had a variety of impacts,  including hacks into smart meters to steal power, failure in control  systems devices requiring power plants to be shut down, and malicious  software disabling safety monitoring systems.

	Actions Have Been Taken to Secure the Electricity Grid, but Continued Attention Is Required

As we have previously reported, multiple entities have taken steps to help  secure the electricity grid, including NERC, NIST, FERC, and the  Departments of Homeland Security and Energy. For example, NERC  developed critical infrastructure standards for protecting electric utility– critical and cyber-critical assets. These standards established  requirements for key cybersecurity-related controls: the identification of  critical cyber assets, security management, personnel and training,  electronic “security perimeters,” physical security of critical cyber assets,  systems security management, incident reporting and response planning,  and recovery plans for critical cyber assets. In December 2011 we  reported that NERC’s cybersecurity standards, along with supplementary  guidance, were substantially similar to NIST guidance applicable at the  time to federal agencies.
NERC had also published security guidelines for companies to consider  for protecting electric infrastructure systems, although these guidelines  were voluntary and typically not checked for compliance. For example,  some of this guidance was intended to assist entities in identifying and  developing a list of critical cyber assets. As of October 2015, NERC listed  about 30 critical infrastructure protection standards for cybersecurity,  some of which were subject to enforcement, some which were subject to  future enforcement, and some which were pending regulatory filing or  approval. NERC also had enforced compliance with mandatory  cybersecurity standards through its Compliance Monitoring and  Enforcement Program, including assessing monetary penalties for  violations.
NIST, in accordance with its responsibilities under the Energy  Independence and Security Act of 2007, has identified cybersecurity  standards for smart grid systems. Specifically, in August 2010 NIST had  identified 11 such standards and issued the first version of a  cybersecurity guideline. As we reported in January 2011, NIST’s  guidelines largely addressed key cybersecurity elements, with the  exception of the risk of attacks using both cyber and physical means—an  element essential to securing smart grid systems. We recommended that  NIST finalize its plan and schedule for incorporating the missing elements  into its guidelines. In 2014, NIST issued updated guidelines, which  address the relationship of smart grid cybersecurity to cyber-physical  attacks and cybersecurity testing and certification. In addition, the  updated guidelines describe the relationship of smart grid cybersecurity to  NIST’s cybersecurity framework that was issued in February 2014. This  framework, which was developed in accordance with Executive Order  13636, is to enable organizations—regardless of size, degree of  cybersecurity risk, or cybersecurity sophistication—to apply the principles  and best practices of risk management to improving the cybersecurity and  resilience of critical infrastructure.
FERC had also taken several actions, including reviewing and approving  NERC’s critical infrastructure protection standards in 2008. It had also  directed NERC to make changes to the standards to improve  cybersecurity protections. However, in 2012 the FERC Chairman stated  that many of the outstanding directives had not been incorporated into the  standards. We also noted in our January 2011 report that FERC had  begun reviewing smart grid standards identified by NIST, but declined to  adopt them due to insufficient consensus.
The Department of Homeland Security, in its capacity as the lead federal  agency for cyber-critical infrastructure protection, had issued  recommended practices to reduce risks to industrial control systems in  critical infrastructure sectors, including the electricity subsector. The  department has also provided on-site support to respond to and analyze  security incidents and shared actionable intelligence, vulnerability  information, and threat analysis with companies in the electricity  subsector. In addition, the department, in accordance with Executive  Order 13636, established a program to promote the adoption of the NIST  cybersecurity framework.
As the lead agency responsible for critical infrastructure protection efforts  in the energy sector, the Department of Energy, as we reported in  December 2011, was involved in efforts to assist the electricity subsector  in the development, assessment, and sharing of cybersecurity standards,  according to department officials. In addition, the department has  created sector-specific guidance to assist the sector in implementing the  NIST cybersecurity framework. The guidance includes sections that  explain framework concepts for its application, identify example resources  that may support framework use, provide a general approach to  framework implementation, and identify an example of a tool-specific  approach to implementing the framework.

		Challenges Existed to Securing Electricity Systems and Networks

In our January 2011 report we identified a number of key challenges that  industry and government stakeholders faced in securing the systems and  networks supporting the electricity grid.
Monitoring implementation of cybersecurity standards. Best practices  for information security call for monitoring the extent to which security  controls have been implemented. In our report, we noted that FERC  had not developed an approach coordinated with other regulators to  monitor, at a high level, the extent to which industry follows the  voluntary smart grid standards it adopts. We recommended that  FERC, in coordination with state regulators and groups that represent  utilities subject to less FERC and state regulation, periodically  evaluate the extent to which utilities and manufacturers are following  voluntary interoperability and cybersecurity standards and develop  strategies for addressing any gaps in compliance with standards that  are identified as a result of this evaluation. However, FERC has not  implemented this recommendation. While FERC reported that it has  taken steps to collaborate with stakeholders, it has not taken steps to  determine the extent to which the voluntary standards have been  integrated into products or whether they are effective. Monitoring such  efforts would help FERC and other regulators know if their approach  to standards setting is effective or if changes are needed.
Clarifying regulatory responsibilities. Experts we spoke with during the  course of our review in 2011 expressed concern that there was a lack  of clarity about the division of responsibility between federal and state  regulators, particularly regarding cybersecurity. While jurisdictional  responsibility has historically been determined by whether a  technology is located on the transmission or distribution system,  experts raised concerns that smart grid technology may blur these  lines because, for example, devices deployed on parts of the grid  traditionally subject to state jurisdiction could, in the aggregate, affect  the reliability of the transmission system, which falls under federal  jurisdiction. Experts also noted concern about the ability of regulatory  bodies to respond quickly to evolving cybersecurity threats. Clarifying  these responsibilities could help improve the effectiveness of efforts to  protect smart grid technology from cyber threats.
Taking a comprehensive approach to cybersecurity. To secure their  systems and information, entities should adopt an integrated,  organization-wide program for managing information security risk.  Such an approach helps ensure that risk management decisions are  aligned strategically with the organization’s mission and security  controls are effectively implemented. However, as we reported in  2011, experts told us that the existing federal and state regulatory  environment had created a culture within the utility industry of  focusing on compliance with regulatory requirements instead of one  focused on achieving comprehensive and effective cybersecurity. By  taking such a comprehensive approach, utilities could better mitigate  cybersecurity risk.
Ensuring that smart grid systems have built-in security features.
Information systems should be securely configured, including having  the ability to record events that take place on networks to allow for  detecting and analyzing potential attacks. Nonetheless, experts told  us that certain currently available smart meters had not been  designed with a strong security architecture and lacked important  security features, such as event logging. By ensuring that smart grid  systems are securely designed, utilities could enhance their ability to  detect and analyze attacks, reducing the risk that attacks will succeed  and helping to prevent them from recurring.
Effectively sharing cybersecurity information. Information sharing is a  key element in the model established by federal policy for protecting  critical infrastructure. However, the electric industry lacked an  effective mechanism to disclose information about cybersecurity  vulnerabilities, incidents, threats, lessons learned, and best practices.  For example, experts we spoke with stated that while the industry had  an information-sharing center, it did not fully address these  information needs. Establishing quality processes for information  sharing will help provide utilities with the information needed to  adequately protect cyber assets against attackers.
Establishing metrics for evaluating cybersecurity. Metrics are  important for comparing the effectiveness of competing cybersecurity  solutions and determining what mix of solutions will make the most  secure system. The electric industry, however, was challenged by a  lack of cybersecurity metrics, making it difficult to determine the extent  to which investments in cybersecurity improve the security of smart  grid systems. Developing such metrics could provide utilities with key  information for making informed and cost-effective decisions on  cybersecurity investments.
In our January 2011 report, we recommended that FERC, working with  NERC as appropriate, assess whether any cybersecurity challenges  identified in our report should be addressed in commission cybersecurity  efforts.
Since that time, FERC took the following actions. First, in 2011, it began  evaluating whether cybersecurity challenges, including those identified in  our report, should be addressed under the agency’s existing cyber  security authority and efforts. As a part of this effort, the commission  directed NERC to revise the electricity industry’s critical infrastructure  protection (CIP) standards with the aim of addressing, among other  things, cybersecurity challenges identified in our report. In November  2013, NERC issued updated CIP standards to address these and other  cybersecurity challenges. Second, the commission held a technical  conference in 2011 in which it solicited feedback from industry  stakeholders to help inform the agency’s cybersecurity efforts. Third, in  September 2012, the commission established an Office of Energy  Infrastructure Security, which is to, among other things, help mitigate  cybersecurity threats to electricity industry facilities, and to improve  cybersecurity information sharing.
In summary, as they become increasingly reliant on computerized  technologies, the electricity industry’s systems and networks are  susceptible to an evolving array of cyber-based threats. Key entities,  including NERC and FERC, are critical to approving and disseminating  cybersecurity guidance and standards, while NIST, DHS, and the  Department of Energy have additional roles to play in providing guidance  and providing other forms of support for protecting the sector against  cyber threats. Moreover, without monitoring the implementation of  voluntary cybersecurity standards in the industry, FERC does not know  the extent to which such standards have been adopted or whether they  are effective. Given the increasing use of information and  communications technology in the electricity subsector and the evolving  nature of cyber threats, continued attention can help mitigate the risk  these threats pose to the electricity grid.
Chairman Weber, Chairwoman Comstock, Ranking Members Grayson  and Lipinski, and Members of the Subcommittees, this concludes my  prepared statement. I would be happy to answer any questions you may  have at this time.

	Contact and Acknowledgments

If you or your staffs have any questions about this statement, please  contact Gregory C. Wilshusen at (202) 512-6244 or  wilshuseng@gao.gov. Other staff who contributed to this statement  include Franklin J. Rusco, Director; Michael W. Gilmore; Bradley W.  Becker; Kenneth A. Johnson; Jon R. Ludwigson; Lee McCracken;  Jonathan Wall; and Jeffrey W. Woodward.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.

Summary:
Why GAO Did This Study

The electric power industry—including transmission and distribution systems—increasingly uses information and communications technology systems to automate actions with the aim of improving the electric grid's reliability and efficiency. However, these “smart grid” technologies may be vulnerable to cyber-based attacks and other threats that could disrupt the nation's electricity infrastructure. Several federal entities have responsibilities for overseeing and helping to secure the electricity grid. Because of the proliferation of cyber threats, since 2003 GAO has designated protecting the systems supporting U.S. critical infrastructure (which includes the electricity grid) as a high-risk area.
GAO was asked to provide a statement on opportunities to improve cybersecurity for the electricity grid. In preparing this statement, GAO relied on previous work on efforts to address cybersecurity of the electric sector.

What GAO Found

GAO reported in 2011 that several entities—the North American Electric Reliability Corporation (NERC), the National Institute of Standards and Technology (NIST), the Federal Energy Regulatory Commission (FERC), the Department of Homeland Security (DHS), and the Department of Energy (DOE)—had taken steps to help secure the electric grid. These included developing cybersecurity standards and other guidance to reduce risks.
While these were important efforts, GAO at that time also identified a number of challenges to securing the electricity grid against cyber threats:
Monitoring implementation of cybersecurity standards : GAO found that FERC had not developed an approach, coordinated with other regulatory entities, to monitor the extent to which the electricity industry was following voluntary smart grid standards, including cybersecurity standards.
Clarifying regulatory responsibilities: The nature of smart grid technology can blur traditional lines between the portions of the grid that are subject to federal or state regulation. In addition, regulators may be challenged in responding quickly to evolving cybersecurity threats.
Taking a comprehensive approach to cybersecurity: Entities in the electricity industry (e.g., utilities) often focused on complying with regulations rather than taking a holistic and effective approach to cybersecurity.
Ensuring that smart grid systems have built-in security features: Smart grid devices (e.g., meters) did not always have key security features such as the ability to record activity on systems or networks, which is important for detecting and analyzing attacks.
Effectively sharing cybersecurity information: The electricity industry did not have a forum for effectively sharing information on cybersecurity vulnerabilities, incidents, threats, and best practices.
Establishing cybersecurity metrics: The electricity industry lacked sufficient metrics for determining the extent to which investments in cybersecurity improved the security of smart grid systems.
Since 2011, additional efforts have been taken to improve cybersecurity in the sector. For example, in 2013, NERC issued updated standards to address these and other cybersecurity challenges. NIST also updated its smart grid cybersecurity standards in 2014. It has also developed a cybersecurity framework for critical infrastructure, and DHS and DOE have efforts under way to promote its adoption. In addition, FERC assessed whether these and other challenges should be addressed in its ongoing cybersecurity efforts. However, FERC did not coordinate with other regulators to identify strategies for monitoring compliance with voluntary cybersecurity standards in the industry, as GAO had recommended. As a result, FERC does not know the extent to which such standards have been adopted or whether they are effective. Given the increasing use of information and communications technology in the electricity subsector and the evolving nature of cyber threats, continued attention can help mitigate the risk these threats pose to the electricity grid.

What GAO Recommends

In its 2011 report, GAO recommended that (1) NIST improve its cybersecurity standards, (2) FERC assess whether challenges identified by GAO should be addressed in ongoing cybersecurity efforts, and (3) FERC coordinate with other regulators to identify strategies for monitoring compliance with voluntary standards. The agencies agreed with the recommendations, but FERC has not taken steps to monitor compliance with voluntary standards.