Document ID: FERC-2018-1373-0001
Agency: ferc
Document Type: Rule
Title: Supply Chain Risk Management Reliability Standards
Posted Date: 2018-10-26T04:00Z

[Federal Register Volume 83, Number 208 (Friday, October 26, 2018)]
[Rules and Regulations]
[Pages 53992-54005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-23201]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket No. RM17-13-000; Order No. 850]

Supply Chain Risk Management Reliability Standards

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) approves 
supply chain risk management Reliability Standards CIP-013-1 (Cyber 
Security--Supply Chain Risk Management), CIP-005-6 (Cyber Security--
Electronic Security Perimeter(s)) and CIP-010-3 (Cyber Security--
Configuration Change Management and Vulnerability Assessments) 
submitted by the North American Electric Reliability Corporation 
(NERC). In addition, the Commission directs NERC to develop and submit 
modifications to the supply chain risk management Reliability Standards 
so that the scope of the Reliability Standards include Electronic 
Access Control and Monitoring Systems.

DATES: This rule is effective December 26, 2018.

FOR FURTHER INFORMATION CONTACT: 
    Simon Slobodnik (Technical Information) Office of Electric 
Reliability, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-6707, [email protected].
    Patricia Eke (Technical Information) Office of Electric 
Reliability, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-8388, [email protected].
    Kevin Ryan (Legal Information) Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE, Washington, 
DC 20426, (202) 502-6840, [email protected].

SUPPLEMENTARY INFORMATION: 

    Before Commissioners: Cheryl A. LaFleur, Neil Chatterjee, and 
Richard Glick.

    1. Pursuant to section 215(d)(2) of the Federal Power Act (FPA), 
the Commission approves supply chain risk management Reliability 
Standards CIP-013-1 (Cyber Security--Supply Chain Risk Management), 
CIP-005-6 (Cyber Security--Electronic Security Perimeter(s)) and CIP-
010-3 (Cyber Security--Configuration Change Management and 
Vulnerability Assessments).\1\ The North American Electric Reliability 
Corporation (NERC), the Commission-certified Electric Reliability 
Organization (ERO), submitted the supply chain risk management 
Reliability Standards for approval in response to a Commission 
directive in Order No. 829.\2\ As discussed below, we approve the 
supply chain risk management Reliability Standards as they are 
responsive to Order No. 829 and improve the electric industry's 
cybersecurity posture by requiring that entities mitigate certain 
cybersecurity risks associated with the supply chain for BES Cyber 
Systems.\3\
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    \1\ 16 U.S.C. 824o(d)(2).
    \2\ Revised Critical Infrastructure Protection Reliability 
Standards, Order No. 829, 156 FERC ] 61,050, at P 43 (2016).
    \3\ BES Cyber System is defined as ``[o]ne or more BES Cyber 
Assets logically grouped by a responsible entity to perform one or 
more reliability tasks for a functional entity.'' Glossary of Terms 
Used in NERC Reliability Standards (NERC Glossary), http://www.nerc.com/files/glossary_of_terms.pdf. The acronym BES refers to 
the bulk electric system.

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[[Page 53993]]

    2. The Commission has previously explained that the global supply 
chain affords significant benefits to customers, including low cost, 
interoperability, rapid innovation, and a variety of product features 
and choice.\4\ Despite these benefits, the global supply chain creates 
opportunities for adversaries to directly or indirectly affect the 
management or operations of companies with potential risks to end 
users. Supply chain risks include insertion of counterfeits or 
malicious software, unauthorized production, tampering, or theft, as 
well as poor manufacturing and development practices. Based on the 
record in this proceeding, we conclude that the supply chain risk 
management Reliability Standards largely address these supply chain 
cybersecurity risks as set out within the scope of Order No. 829. Among 
other things, the supply chain risk management Reliability Standards 
are forward-looking and objective-based and require each affected 
entity to develop and implement a plan that includes security controls 
for supply chain management for industrial control system hardware, 
software, and services associated with bulk electric system 
operations.\5\ Consistent with Order No. 829, the Reliability Standards 
focus on the following four security objectives: (1) Software integrity 
and authenticity; (2) vendor remote access protections; (3) information 
system planning; and (4) vendor risk management and procurement 
controls.
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    \4\ Revised Critical Infrastructure Protection Reliability 
Standards, Notice of Proposed Rulemaking, 152 FERC ] 61,054, at PP 
61-62 (2015).
    \5\ Order No. 829, 156 FERC ] 61,050 at P 2.
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    3. The Commission also approves the supply chain risk management 
Reliability Standards' associated violation risk factors and violation 
severity levels. Regarding the Reliability Standards' implementation 
plan and effective date, we approve NERC's proposed implementation 
period of 18 months following the effective date of a Commission order. 
The NOPR proposed to reduce the implementation period to 12 months.\6\ 
However, as discussed below, the NOPR comments provide sufficient 
justification for adopting the 18-month implementation period proposed 
by NERC. Specifically, the comments clarify that technical upgrades are 
likely necessary to meet the Reliability Standards' security 
objectives, which could involve longer time-horizon capital budgets and 
planning cycles.
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    \6\ Supply Chain Risk Management Reliability Standards, Notice 
of Proposed Rulemaking, 83 FR 3433 (January 25, 2018), 162 FERC ] 
61,044 (2018) (NOPR).
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    4. While the supply chain risk management Reliability Standards 
address the Commission's directive in Order No. 829, we determine that 
there remains a significant cybersecurity risk associated with the 
supply chain for BES Cyber Systems because the approved Reliability 
Standards do not address Electronic Access Control and Monitoring 
Systems (EACMS).\7\ As we observed in the NOPR, it is widely recognized 
that the types of access and monitoring functions that are included 
within NERC's definition of EACMS, such as firewalls, are integral to 
protecting industrial control systems.\8\ Moreover, as stated in Order 
No. 848, EACMS, which include, for example, firewalls, authentication 
servers, security event monitoring systems, intrusion detection systems 
and alerting systems, control electronic access into Electronic 
Security Perimeters (ESP), play a significant role in the protection of 
high and medium impact BES Cyber Systems.\9\ Once an EACMS is 
compromised, an attacker could more easily enter the ESP and 
effectively control the BES Cyber System or Protected Cyber Asset.\10\ 
For example, the Department of Homeland Security's Industrial Control 
Systems Cyber Emergency Response Team (ICS-CERT) identifies firewalls 
as ``the first line of defense within an ICS network environment'' that 
``keep the intruder out while allowing the authorized passage of data 
necessary to run the organization.'' \11\ ICS-CERT further explains 
that firewalls ``act as sentinels, or gatekeepers, between zones . . . 
[and] [w]hen properly configured, they will only let essential traffic 
cross security boundaries[,] . . . [i]f they are not properly 
configured, they could easily pass unauthorized or malicious users or 
content.'' \12\ Accordingly, if EACMS are compromised, that could 
adversely affect the reliable operation of associated BES Cyber 
Systems.\13\ Given the significant role that EACMS play in the 
protection scheme for medium and high impact BES Cyber Systems, we 
determine that EACMS should be within the scope of the supply chain 
risk management Reliability Standards to provide minimum protection 
against supply chain attack vectors.
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    \7\ EACMS are defined as ``Cyber Assets that perform electronic 
access control or electronic access monitoring of the Electronic 
Security Perimeter(s) or BES Cyber Systems. This includes 
Intermediate Systems.'' NERC Glossary. Reliability Standard CIP-002-
5.1a (Cyber Security -- BES Cyber System Categorization) states that 
examples of EACMS include ``Electronic Access Points, Intermediate 
Systems, authentication servers (e.g., RADIUS servers, Active 
Directory servers, Certificate Authorities), security event 
monitoring systems, and intrusion detection systems.'' Reliability 
Standard CIP-002-5.1a (Cyber Security -- BES Cyber System 
Categorization) Section A.6 at 6.
    \8\ NOPR, 162 FERC ] 61,044 at P 37.
    \9\ Cyber Security Incident Reporting Reliability Standards, 
Order No. 848, 164 FERC ] 61,033, at P 10 (2018). ESP is defined as 
``[t]he logical border surrounding a network to which BES Cyber 
Systems are connected using a routable protocol.'' NERC Glossary.
    \10\ Order No. 848, 164 FERC ] 61,033 at P 10.
    \11\ ICS-CERT, Recommended Practice: Improving Industrial 
Control System Cybersecurity with Defense-in-Depth Strategies at 23, 
https://ics-cert.us-cert.gov/sites/default/files/recommended_practices/NCCIC_ICS-CERT_Defense_in_Depth_2016_S508C.pdf.
    \12\ Id.
    \13\ NOPR, 162 FERC ] 61,044 at P 37.
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    5. To address this gap, pursuant to section 215(d)(5) of the 
FPA,\14\ the Commission directs NERC to develop modifications to 
include EACMS associated with medium and high impact BES Cyber Systems 
within the scope of the supply chain risk management Reliability 
Standards.\15\ We direct NERC to submit the directed modifications 
within 24 months of the effective date of this final rule.
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    \14\ 16 U.S.C. 824o(d)(5).
    \15\ Reliability Standard CIP-002-5.1a (Cyber Security System 
Categorization) provides a ``tiered'' approach to cybersecurity 
requirements, based on classifications of high, medium and low 
impact BES Cyber Systems.
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    6. Further, the NERC proposal does not address Physical Access 
Control Systems (PACS) \16\ and Protected Cyber Assets (PCA),\17\ with 
the exception of the modifications in Reliability Standard CIP-005-6, 
which apply to PCAs. We remain concerned that the exclusion of these 
components may leave a gap in the supply chain risk management 
Reliability Standards. Nevertheless, in contrast to EACMS, we believe 
that more study is necessary to determine the impact of PACS and PCAs 
in the context of the supply chain risk management Reliability 
Standards.

[[Page 53994]]

We distinguish among EACMS and the other Cyber Assets because 
compromise of PACS and PCAs are less likely. For example, a compromise 
of a PACS, which would potentially grant an attacker physical access to 
a BES Cyber System or PCA, is less likely since physical access is also 
required. In addition, PCAs typically become vulnerable to remote 
compromise only once EACMS have been compromised. Thus, we accept 
NERC's commitment to evaluate the cybersecurity supply chain risks 
presented by PACS and PCAs in the study of cybersecurity supply chain 
risks directed by the NERC Board of Trustees (BOT) in its resolutions 
of August 10, 2017.\18\ The Commission further directs NERC to file the 
BOT-directed final report with the Commission upon its completion.\19\
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    \16\ PACS are defined as ``Cyber Assets that control, alert, or 
log access to the Physical Security Perimeter(s), exclusive of 
locally mounted hardware or devices at the Physical Security 
Perimeter such as motion sensors, electronic lock control 
mechanisms, and badge readers.'' NERC Glossary. Reliability Standard 
CIP-002-5.1a states that examples include ``authentication servers, 
card systems, and badge control systems.''Id.
    \17\ PCAs are defined as ``[o]ne or more Cyber Assets connected 
using a routable protocol within or on an Electronic Security 
Perimeter that is not part of the highest impact BES Cyber System 
within the same Electronic Security Perimeter. The impact rating of 
Protected Cyber Assets is equal to the highest rated BES Cyber 
System in the same [Electronic Security Perimeter].'' NERC Glossary. 
Reliability Standard CIP-002-5.1a states that examples include, to 
the extent they are within the Electronic Security Perimeter, ``file 
servers, ftp servers, time servers, LAN switches, networked 
printers, digital fault recorders, and emission monitoring 
systems.'' Id.
    \18\ NERC Board of Trustees, Proposed Additional Resolutions for 
Agenda Item 9.a: Cyber Security--Supply Chain Risk Management--CIP-
005-6, CIP-010-3, and CIP-013-1 (August 10, 2017).
    \19\ As discussed later in this final rule, the NOPR proposed to 
direct NERC to file the BOT-directed interim report, due 12 months 
from the date of the BOT resolutions, as well as the final report, 
which is due 18 months from the date of the BOT resolutions. On 
September 7, 2018, NERC filed the BOT-directed interim report in 
this docket.
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I. Background

A. Section 215 and Mandatory Reliability Standards

    7. Section 215 of the FPA requires a Commission-certified ERO to 
develop mandatory and enforceable Reliability Standards, subject to 
Commission review and approval. Reliability Standards may be enforced 
by the ERO, subject to Commission oversight, or by the Commission 
independently.\20\ Pursuant to section 215 of the FPA, the Commission 
established a process to select and certify an ERO,\21\ and 
subsequently certified NERC.\22\
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    \20\ 16 U.S.C. 824o(e).
    \21\ Rules Concerning Certification of the Electric Reliability 
Organization; and Procedures for the Establishment, Approval, and 
Enforcement of Electric Reliability Standards, Order No. 672, FERC 
Stats. & Regs. ] 31,204, order on reh'g, Order No. 672-A, FERC 
Stats. & Regs. ] 31,212 (2006).
    \22\ North American Electric Reliability Corp., 116 FERC ] 
61,062, order on reh'g and compliance, 117 FERC ] 61,126 (2006), 
aff'd sub nom. Alcoa, Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009).
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B. Order No. 829

    8. In Order No. 829, the Commission directed NERC to develop a new 
or modified Reliability Standard that addresses supply chain risk 
management for industrial control system hardware, software and 
computing and networking services associated with bulk electric system 
operations.\23\ Specifically, the Commission directed NERC to develop a 
forward-looking, objective-based Reliability Standard that would 
require responsible entities to develop and implement a plan with 
supply chain management security controls focused on four security 
objectives: (1) Software integrity and authenticity; (2) vendor remote 
access; (3) information system planning; and (4) vendor risk management 
and procurement controls.\24\
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    \23\ Order No. 829, 156 FERC ] 61,050 at P 43.
    \24\ Id. P 45.
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    9. The Commission explained that verification of software integrity 
and authenticity is intended to reduce the likelihood that an attacker 
could exploit legitimate vendor patch management processes to deliver 
compromised software updates or patches to a BES Cyber System.\25\ For 
vendor remote access, the Commission stated that the objective is 
intended to address the threat that vendor credentials could be stolen 
and used to access a BES Cyber System without the responsible entity's 
knowledge, as well as the threat that a compromise at a trusted vendor 
could traverse over an unmonitored connection into a responsible 
entity's BES Cyber System.\26\ As to information system planning, Order 
No. 829 indicated that the objective is intended to address the risk 
that responsible entities could unintentionally plan to procure and 
install unsecure equipment or software within their information 
systems, or could unintentionally fail to anticipate security issues 
that may arise due to their network architecture or during technology 
and vendor transitions.\27\ For vendor risk management and procurement 
controls, the Commission explained that this objective is intended to 
address the risk that responsible entities could enter into contracts 
with vendors that pose significant risks to the responsible entities' 
information systems, as well as the risk that products procured by a 
responsible entity fail to meet minimum security criteria. This 
objective also addresses the risk that a compromised vendor would not 
provide adequate notice and related incident response to responsible 
entities with whom that vendor is connected.\28\
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    \25\ Id. P 49.
    \26\ Id. P 52.
    \27\ Id. P 57.
    \28\ Id. P 60.
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    10. Order No. 829 stated that while responsible entities should be 
required to develop and implement a plan, NERC need not impose any 
specific controls or ``one-size-fits-all'' requirements.\29\ In 
addition, the Commission stated that NERC's response to the Order No. 
829 directive should respect the Commission's jurisdiction under FPA 
section 215 by only addressing the obligations of responsible entities 
and not by directly imposing any obligations on non-jurisdictional 
suppliers, vendors or other entities that provide products or services 
to responsible entities.\30\
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    \29\ Id. P 13.
    \30\ Id. P 21.
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C. NERC Petition and Proposed Reliability Standards

    11. On September 26, 2017, NERC submitted for Commission approval 
proposed Reliability Standards CIP-013-1, CIP-005-6, and CIP-010-3 and 
their associated violation risk factors and violation severity levels, 
implementation plan, and effective date.\31\ NERC states that the 
purpose of the Reliability Standards is to enhance the cybersecurity 
posture of the electric industry by requiring responsible entities to 
take additional actions to address cybersecurity risks associated with 
the supply chain for BES Cyber Systems. NERC explains that the 
Reliability Standards are designed to augment the existing controls 
required in the currently-effective CIP Reliability Standards that help 
mitigate supply chain risks, providing increased attention on 
minimizing the attack surfaces of information and communications 
technology products and services procured to support reliable bulk 
electric system operations, consistent with Order No. 829.
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    \31\ Reliability Standards CIP-013-1, CIP-005-6, and CIP-010-3 
are not attached to this final rule. The Reliability Standards are 
available on the Commission's eLibrary document retrieval system in 
Docket No. RM17-13-000 and on the NERC website, www.nerc.com.
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    12. NERC states that the supply chain risk management Reliability 
Standards apply only to medium and high impact BES Cyber Systems. NERC 
explains that the goal of the CIP Reliability Standards is to ``focus[] 
industry resources on protecting those BES Cyber Systems with 
heightened risks to the [bulk electric system] . . . [and] that the 
requirements applicable to low impact BES Cyber Systems, given their 
lower risk profile, should not be overly burdensome to divert resources 
from the protection of medium and high impact BES Cyber Systems.'' \32\ 
NERC further maintains that the standard drafting team chose to limit 
the applicability of the Reliability Standards to medium and high 
impact BES Cyber Systems because the supply chain risk management 
Reliability Standards are ``consistent with the type of existing CIP 
cybersecurity requirements applicable

[[Page 53995]]

to high and medium impact BES Cyber Systems as opposed to those 
applicable to low impact BES Cyber Systems.'' \33\
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    \32\ NERC Petition at 16-17.
    \33\ Id. at 18.
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    13. NERC states that the standard drafting team also excluded 
EACMS, PACS, and PCAs from the scope of the supply chain risk 
management Reliability Standards, with the exception of the 
modifications in Reliability Standard CIP-005-6, which apply to PCAs. 
NERC explains that although certain requirements in the existing CIP 
Reliability Standards apply to EACMS, PACS, and PCAs due to their 
association with BES Cyber Systems (either by function or location), 
the standard drafting team determined that the supply chain risk 
management Reliability Standards should focus on high and medium impact 
BES Cyber Systems only. NERC states that this determination was based 
on the conclusion that applying the proposed Reliability Standards to 
EACMS, PACS, and PCAs ``would divert resources from protecting medium 
and high BES Cyber Systems.'' \34\
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    \34\ Id. at 20.
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    14. NERC asserts that with respect to low impact BES Cyber Systems 
and EACMS, PACS, and PCAs, while not mandatory, NERC expects that these 
assets will likely be subject to responsible entity supply chain risk 
management plans required by Reliability Standard CIP-013-1. 
Specifically, NERC explains that ``[r]esponsible [e]ntities may 
implement a single process for procuring products and services 
associated with their operational environments.'' \35\ NERC contends 
that ``by requiring that entities implement supply chain cybersecurity 
risk management plans for high and medium impact BES Cyber Systems, 
those plans would likely also cover their low impact BES Cyber 
Systems.'' \36\ NERC also claims that responsible entities ``may also 
use the same vendors for procuring PACS, EACMS, and PCAs as they do for 
their high and medium impact BES Cyber Systems such that the same 
security considerations may be addressed for those Cyber Assets.'' \37\
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    \35\ Id.
    \36\ Id. at 19.
    \37\ Id. at 20.
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Proposed Reliability Standard CIP-013-1
    15. NERC states that the focus of proposed Reliability Standard 
CIP-013-1 is on the steps that responsible entities must take ``to 
consider and address cybersecurity risks from vendor products and 
services during BES Cyber System planning and procurement.'' \38\ NERC 
explains that proposed Reliability Standard CIP-013-1 does not require 
any specific controls or mandate ``one-size-fits-all'' requirements due 
to the differences in needs and characteristics of responsible entities 
and the diversity of bulk electric system environments, technologies, 
and risks. NERC states that the goal of the proposed Reliability 
Standard is ``to help ensure that responsible entities establish 
organizationally-defined processes that integrate a cybersecurity risk 
management framework into the system development lifecycle.'' \39\ NERC 
observes that, among other things, proposed Reliability Standard CIP-
013-1 addresses the risk associated with information system planning, 
as well as vendor risk management and procurement controls, the third 
and fourth objectives outlined in Order No. 829.
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    \38\ Id. at 22.
    \39\ Id. at 23.
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    16. NERC maintains that, consistent with Order No. 829, responsible 
entities need not apply their supply chain risk management plans to the 
acquisition of vendor products or services under contracts executed 
prior to the effective date of Reliability Standard CIP-013-1, nor 
would such contracts need to be renegotiated or abrogated to comply 
with the Reliability Standard. In addition, NERC indicates that, 
consistent with the development of a forward looking Reliability 
Standard, it would not expect entities in the middle of procurement 
activities for an applicable product or service at the time of the 
effective date of Reliability Standard CIP-013-1 to begin those 
activities anew to implement their supply chain cybersecurity risk 
management plan.
    17. With regard to assessing compliance with Reliability Standard 
CIP-013-1, NERC states that NERC and Regional Entities would focus on 
whether responsible entities: (1) Developed processes reasonably 
designed to (i) identify and assess risks associated with vendor 
products and services in accordance with Part 1.1 and (ii) ensure that 
the security items listed in Part 1.2 are an integrated part of 
procurement activities; and (2) implemented those processes in good 
faith. NERC explains that NERC and Regional Entities will evaluate the 
steps a responsible entity took to assess risks posed by a vendor and 
associated products or services and, based on that risk assessment, the 
steps the entity took to mitigate those risks, including the 
negotiation of security provisions in its agreements with the vendor.
Proposed Modifications in Reliability Standard CIP-005-6
    18. Proposed Reliability Standard CIP-005-6 includes two new parts, 
Parts 2.4 and 2.5, to address vendor remote access, which is the second 
objective discussed in Order No. 829. NERC explains that the new parts 
work in tandem with proposed Reliability Standard CIP-013-1, 
Requirement R1.2.6, which requires responsible entities to address 
Interactive Remote Access and system-to-system remote access when 
procuring industrial control system hardware, software, and computing 
and networking services associated with bulk electric system 
operations. NERC states that proposed Reliability Standard CIP-005-6, 
Requirement R2.4 requires one or more methods for determining active 
vendor remote access sessions, including Interactive Remote Access and 
system[hyphen]to[hyphen]system remote access. NERC explains that the 
security objective of Requirement R2.4 is to provide awareness of all 
active vendor remote access sessions, both Interactive Remote Access 
and system[hyphen]to[hyphen]system remote access, that are taking place 
on a responsible entity's system.
Proposed Modifications in Reliability Standard CIP-010-3
    19. Proposed Reliability Standard CIP-010-3 includes a new part, 
Part 1.6, to address software integrity and authenticity, the first 
objective addressed in Order No. 829, by requiring that the publisher 
is identified and the integrity of all software and patches are 
confirmed. NERC explains that proposed Reliability Standard CIP-010-3, 
Requirement R1.6 requires responsible entities to verify software 
integrity and authenticity prior to a change from the existing baseline 
configuration, if the software source provides a method to do so. 
Specifically, NERC states that proposed Reliability Standard CIP-010-3, 
Requirement R1.6 requires that responsible entities verify the identity 
of the software source and the integrity of the software obtained by 
the software sources prior to installing software that changes 
established baseline configurations, when methods are available to do 
so. NERC asserts that the security objective of proposed Requirement 
R1.6 is to ensure that the software being installed in the BES Cyber 
System was not modified without the awareness of the software supplier 
and is not counterfeit. NERC contends that these steps help reduce the

[[Page 53996]]

likelihood that an attacker could exploit legitimate vendor patch 
management processes to deliver compromised software updates or patches 
to a BES Cyber System.
BOT Resolutions
    20. In the petition, NERC states that in conjunction with the 
adoption of the supply chain risk management Reliability Standards, on 
August 10, 2017, the BOT adopted resolutions regarding supply chain 
risk management. In particular, the BOT directed NERC management, in 
collaboration with appropriate NERC technical committees, industry 
representatives, and appropriate experts, including representatives of 
industry vendors, to further study the nature and complexity of 
cybersecurity supply chain risks, including risks associated with low 
impact assets not currently subject to the supply chain risk management 
Reliability Standards. The BOT further directed NERC to develop 
recommendations for follow-up actions that will best address any issues 
identified. Finally, the BOT directed that NERC management provide an 
interim progress report no later than 12 months after the adoption of 
these resolutions (i.e., by August 10, 2018) and a final report no 
later than 18 months after the adoption of the resolutions (i.e., by 
February 10, 2019). In its petition, NERC states that ``over the next 
18 months, NERC, working with various stakeholders, will continue to 
assess whether supply chain risks related to low impact BES Cyber 
Systems, PACS, EACMS and PCA necessitate further consideration for 
inclusion in a mandatory Reliability Standard.'' \40\
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    \40\ Id. at 20-21.
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Implementation Plan
    21. NERC's proposed implementation plan provides that the supply 
chain risk management Reliability Standards become effective on the 
first day of the first calendar quarter that is 18 months after the 
effective date of a Commission order approving them. NERC states that 
the proposed implementation period is designed to afford responsible 
entities sufficient time to develop and implement their supply chain 
cybersecurity risk management plans required under proposed Reliability 
Standard CIP-013-1 and implement the new controls required in proposed 
Reliability Standards CIP-005-6 and CIP-010-3.

D. Notice of Proposed Rulemaking

    22. On January 18, 2018, the Commission issued a NOPR proposing to 
approve supply chain risk management Reliability Standards CIP-013-1, 
CIP-005-6, and CIP-010-3 (83 FR 3422, January 25, 2018). The NOPR 
stated that the supply chain risk management Reliability Standards 
``will enhance existing protections for bulk electric system 
reliability by addressing the four objectives set forth in Order No. 
829: (1) Software integrity and authenticity; (2) vendor remote access; 
(3) information system planning; and (4) vendor risk management and 
procurement controls.'' \41\ Accordingly, the NOPR proposed to 
determine that the supply chain risk management Reliability Standards 
constitute substantial progress in addressing the supply chain 
cybersecurity risks identified by the Commission in Order No. 829.\42\
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    \41\ NOPR, 162 FERC ] 61,044 at P 29.
    \42\ Id. P 30.
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    23. The NOPR proposed to approve the supply chain risk management 
Reliability Standards' associated violation risk factors and violation 
severity levels. However, with respect to the implementation plan and 
effective date, the NOPR proposed to reduce the implementation period 
from the first day of the first calendar quarter that is 18 months 
following the effective date of a Commission order approving the 
proposed Reliability Standards, as proposed by NERC, to the first day 
of the first calendar quarter that is 12 months following the effective 
date of a Commission order.\43\
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    \43\ Id. P 44.
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    24. The NOPR proposed to determine that a significant cybersecurity 
risk associated with the supply chain for BES Cyber Systems persists 
because the proposed supply chain risk management Reliability Standards 
exclude EACMS, PACS, and PCAs, with the exception of the modifications 
in Reliability Standard CIP-005-6, which apply to PCAs. To address this 
gap, pursuant to section 215(d)(5) of the FPA, the NOPR proposed to 
direct NERC to develop modifications to the CIP Reliability Standards 
to include EACMS associated with medium and high impact BES Cyber 
Systems within the scope of the supply chain risk management 
Reliability Standards. In addition, the Commission proposed to direct 
that NERC evaluate the cybersecurity supply chain risks presented by 
PACS and PCAs in the study of cybersecurity supply chain risks directed 
by the NERC BOT in its resolutions of August 10, 2017.
    25. The Commission received fifteen comments on the NOPR.

E. Interim BOT-Directed Report

    26. On September 7, 2018, NERC submitted to the Commission an 
informational filing containing the BOT-directed interim report 
prepared by the Electric Power Research Institute (EPRI).\44\ The 
interim report explains that EPRI analyzed:
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    \44\ NERC, Informational Filing regarding Proposed Supply Chain 
Risk Management Reliability Standards, Docket No. RM17-13-000 
(September 7, 2018) (NERC Interim Report).
---------------------------------------------------------------------------

    (1) Information regarding bulk electric system products and 
manufacturers; (2) emerging vendor practices and industry standards; 
and (3) the applicability of the CIP Reliability Standards to supply 
chain risks. The interim report concludes with three categories of 
identified next steps for further analysis and investigation.
    27. First, EPRI identifies four noteworthy industry practices, not 
already required by the CIP Reliability Standards, which may 
potentially reduce future supply chain risks if implemented correctly: 
(1) Third-party accreditation processes; (2) secure hardware delivery; 
(3) threat-informed procurement language; and (4) processes related to 
unsupported or open-source technology. Second, EPRI recommends further 
study in modeling and assessing the potential impact of common-mode 
vulnerabilities, especially those targeting low-impact BES Cyber 
Systems. EPRI states that ``risks of common-mode vulnerabilities . . . 
can be mitigated if supply chain security practices are applied 
uniformly across cyber asset types.'' \45\ Finally, EPRI recommends 
various methods to obtain additional data on industry practices. These 
methods included issuing pre-audit surveys and questionnaires; 
targeting outreach to bulk electric system vendors; developing standard 
vendor data sheets related to the CIP Reliability Standards; and 
independently testing legacy assets. In its accompanying filing, NERC 
states its intention to continue to study supply chain risks over the 
coming months, develop recommendations for follow-up actions, and 
present a final report to the NERC BOT at its February 2019 meeting.
---------------------------------------------------------------------------

    \45\ Id. at 5-1.
---------------------------------------------------------------------------

II. Discussion

    28. Pursuant to section 215(d)(2) of the FPA, the Commission 
approves supply chain risk management Reliability Standards CIP-013-1, 
CIP-005-6, and CIP-010-3 as just, reasonable, not unduly discriminatory

[[Page 53997]]

or preferential, and in the public interest. We determine that the 
supply chain risk management Reliability Standards will enhance 
existing protections for bulk electric system reliability by addressing 
the four objectives identified in Order No. 829: (1) Software integrity 
and authenticity; (2) vendor remote access; (3) information system 
planning; and (4) vendor risk management and procurement controls.
    29. Reliability Standard CIP-013-1 addresses information system 
planning and vendor risk management and procurement controls by 
requiring that responsible entities develop and implement one or more 
documented supply chain cybersecurity risk management plan(s) for high 
and medium impact BES Cyber Systems. The required plans must address, 
as applicable, a baseline set of six security concepts: (1) Vendor 
security event notification; (2) coordinated incident response; (3) 
vendor personnel termination notification; (4) product/services 
vulnerability disclosures; (5) verification of software integrity and 
authenticity; and (6) coordination of vendor remote access controls. 
Reliability Standard CIP-005-6 addresses vendor remote access by 
creating two new requirements for determining active vendor remote 
access sessions and for having one or more methods to disable active 
vendor remote access sessions. Reliability Standard CIP-010-3 addresses 
software authenticity and integrity by creating a new requirement that 
responsible entities verify the identity of the software source and the 
integrity of the software obtained from the software source prior to 
installing software that changes established baseline configurations, 
when methods are available to do so.
    30. While we determine that the approved supply chain risk 
management Reliability Standards constitute substantial progress in 
addressing the supply chain cybersecurity risks identified in Order No. 
829, as discussed below, we find that the exclusion of EACMS from the 
scope of the Reliability Standards presents risks to the cybersecurity 
of the bulk electric system. As explained in Order No. 848, EACMS are 
defined in the NERC Glossary as ``Cyber Assets that perform electronic 
access control or electronic access monitoring of the Electronic 
Security Perimeter(s) or BES Cyber Systems. This includes Intermediate 
Systems.'' Among other things, EACMS include firewalls, authentication 
servers, security event monitoring systems, intrusion detection systems 
and alerting systems. The purpose of an ESP, in turn, is to manage 
electronic access to BES Cyber Systems to support the protection of the 
BES Cyber Systems against compromise that could lead to misoperation or 
instability in the bulk electric system.\46\ The record indicates that 
the vulnerabilities associated with EACMS are well understood and 
appropriate for mitigation. Thus, pursuant to section 215(d)(5) of the 
FPA, we direct NERC to develop modifications to the CIP Reliability 
Standards to include EACMS within the scope of the supply chain risk 
management Reliability Standards. We direct NERC to submit the directed 
modifications within 24 months of the effective date of this final 
rule.
---------------------------------------------------------------------------

    \46\ Order No. 848, 164 FERC ] 61,033 at PP 39-40.
---------------------------------------------------------------------------

    31. In addition, while PACS and PCAs also present concerns, we 
agree with NERC and others that further study is warranted with regard 
to the impacts and benefits of directing that the ERO address the risks 
associated with PACS and PCAs in the supply chain risk management 
Reliability Standards. Accordingly, we accept NERC's commitment to 
evaluate the cybersecurity supply chain risks presented by PACS and 
PCAs in the cybersecurity supply chain risks study directed by the BOT. 
The Commission further directs NERC to file the BOT-directed final 
report with the Commission upon its completion.
    32. In the sections below, we discuss the following issues: (A) 
Inclusion of EACMS in the supply chain risk management Reliability 
Standards; (B) inclusion of PACS and PCAs in the BOT-directed study on 
cybersecurity supply chain risks and filing of the BOT-directed final 
report with the Commission; (C) supply chain risk management 
Reliability Standards' implementation plan and effective date; and (D) 
other issues raised in the NOPR comments.

A. Inclusion of EACMS in CIP Reliability Standards

1. NOPR
    33. The NOPR observed that the supply chain risk management 
Reliability Standards do not apply to low impact BES Cyber Systems or 
Cyber Assets associated with medium and high impact BES Cyber Systems 
(i.e., EACMS, PACS, and PCAs). The NOPR, however, recognized that the 
BOT-directed study on cybersecurity supply chain risks will examine the 
risks posed by low impact BES Cyber Systems.\47\ While acknowledging 
NERC's commitment to study these issues, as evinced by the BOT-directed 
study, the NOPR proposed to direct NERC to modify the supply chain risk 
management Reliability Standards to include within their scope EACMS 
associated with medium and high impact BES Cyber Systems.\48\
---------------------------------------------------------------------------

    \47\ NOPR, 162 FERC ] 61,044 at P 33.
    \48\ Id. P 39.
---------------------------------------------------------------------------

    34. Specifically, the NOPR explained that BES Cyber Systems have 
associated Cyber Assets, which, if compromised, pose a threat to the 
BES Cyber System by virtue of, inter alia, the security control 
function they perform.\49\ In particular, EACMS support BES Cyber 
Systems and are part of the network and security architecture that 
allows BES Cyber Systems to work as intended by performing electronic 
access control or electronic access monitoring of the ESP or BES Cyber 
Systems.
---------------------------------------------------------------------------

    \49\ Reliability Standard CIP-002-5.1a (Cyber Security--BES 
Cyber System Categorization), Background at 6.
---------------------------------------------------------------------------

    35. The NOPR indicated that since EACMS support and enable BES 
Cyber System operation, misoperation and unavailability of EACMS that 
support a given BES Cyber System could also contribute to misoperation 
of a BES Cyber System or render it unavailable, which could adversely 
affect bulk electric system reliability. The NOPR also explained that 
EACMS control electronic access, including interactive remote access, 
into the ESP that protects high and medium impact BES Cyber Systems. As 
the NOPR further noted, an attacker does not need physical access to 
the facility housing a BES Cyber System in order to gain access to a 
BES Cyber System or PCA via an EACMS compromise. The NOPR concluded 
that EACMS represent the most likely route an attacker would take to 
access a BES Cyber System or PCA within an ESP.\50\
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    \50\ NOPR, 162 FERC ] 61,044 at P 35.
---------------------------------------------------------------------------

2. Comments
    36. NERC does not support the proposed directive to include EACMS 
within the scope of the supply chain risk management Reliability 
Standards at this time. NERC indicates that it is currently analyzing 
supply chain risks associated with EACMS, among other things, as part 
of the BOT-directed study of supply chain risks related to low impact 
BES Cyber Systems. NERC explains that the ``study will help identify 
and differentiate the risks presented by various types of EACMS'' to 
help in any directed standards development process.\51\ NERC requests 
that the Commission refrain from issuing a directive on EACMS until the 
results of the BOT-directed study to

[[Page 53998]]

assess supply chain risks associated with EACMS are received.\52\
---------------------------------------------------------------------------

    \51\ NERC Comments at 6.
    \52\ Id. at 4-6.
---------------------------------------------------------------------------

    37. Most commenters agree with NERC that the Commission should 
approve the supply chain risk management Reliability Standards as filed 
and not direct the inclusion of EACMS at this time. Instead, Trade 
Associations, EEI, ITC, IRC, and MISO TOs support evaluating in the 
BOT-directed study the possibility of including EACMS in the supply 
chain risk management Reliability Standards.\53\
---------------------------------------------------------------------------

    \53\ Trade Associations Comments at 10, EEI Comments at 10, ITC 
Comments at 5, IRC Comments at 3.
---------------------------------------------------------------------------

    38. Trade Associations contend that first allowing completion of 
the BOT-directed study would allow NERC to assess the diversity of 
EACMS that perform control or monitoring functions with varying risk 
levels and ``is likely to provide more specific information and 
analysis concerning whether any category of EACMS might be 
appropriately included within the scope of the supply chain Reliability 
Standards.'' \54\ Trade Associations also maintain that first having 
the BOT-directed study results will facilitate a more efficient and 
effective standards development process.
---------------------------------------------------------------------------

    \54\ Trade Associations Comments at 10.
---------------------------------------------------------------------------

    39. While also supportive of awaiting the results of the BOT-
directed study, EEI asserts that EACMS are protected under existing CIP 
Reliability Standards. EEI cites Reliability Standards CIP-005-5, 
Requirements R1, Part 1.3 and R2, Parts 2.1-2.3, CIP-007-6, 
Requirements R1, Part 1.1, R2, R3, R4, and R5, and CIP-010-2, 
Requirement 2, Part 2.1 as protecting EACMS against compromise.\55\ 
Moreover, EEI states that the likelihood of compromise of an EACMS from 
potential supply chain-derived threats was not addressed in the NOPR 
and ``should be evaluated before directing a CIP Standard scope 
expansion.'' \56\ Even so, EEI supports further evaluating the 
feasibility, as well as the benefits, of adding EACMS to the supply 
chain risk management Reliability Standards. EEI contends that waiting 
for the BOT-directed study will allow industry time to gain experience 
implementing the supply chain risk management Reliability Standard 
requirements as well as help identify potential follow-up actions.\57\
---------------------------------------------------------------------------

    \55\ EEI Comments at 8.
    \56\ Id.
    \57\ Id. at 10.
---------------------------------------------------------------------------

    40. MISO TOs likewise aver that EACMS, while important, are ``not 
unprotected'' under currently-effective CIP Reliability Standards. MISO 
TOs, like EEI, reference Reliability Standard CIP-007-6 (Cyber Security 
-- System Security Management), which requires responsible entities to 
manage system security by specifying select technical, operational, and 
procedural requirements in support of protecting BES Cyber Systems. 
MISO TOs state that this Reliability Standard applies to EACMS. AECC 
also contends that the existing CIP Reliability Standards already 
sufficiently cover any risks associated with EACMS.\58\ In particular, 
AECC states that ``CIP-005-6 already addresses vendor-initiated remote 
access . . . [and] developing technology services for BEC Cyber Systems 
under CIP-010-3 inherently already requires coverage for EACMS, PACS, 
and PCAs due to the nature of the technology.'' \59\
---------------------------------------------------------------------------

    \58\ AECC Comments at 2-3.
    \59\ Id. at 3.
---------------------------------------------------------------------------

    41. ITC, IRC, and MISO TOs assert that including EACMS within the 
supply chain risk management Reliability Standards would constitute a 
substantial expansion of the Reliability Standards and would require 
significant additional resources for compliance, without a commensurate 
improvement in bulk electric system reliability. According to ITC, the 
record does not contradict NERC's technical assessment that inclusion 
of EACMS within the supply chain risk management Reliability Standards 
is not justified. ITC claims that the NOPR, while ``descriptively 
accurate,'' misunderstands the purpose and function of EACMS, which, 
ITC states, are intended to protect the ESP and the BES Cyber Assets 
contained therein and are not intended to provide a reliability 
function. ITC concludes that misoperation of an EACMS, while serious, 
does not rise to the level of a direct threat to the reliability of the 
bulk electric system.
    42. IRC similarly believes that including EACMS within the scope of 
the supply chain risk management Reliability Standards would require 
``significant resources and effort'' and because EACMS vendors supply 
such systems to a larger market than just the power sector there would 
need to be coordination with other industries before implementing a 
supply chain risk management Reliability Standard for EACMS.\60\ MISO 
TOs also contend that including EACMS would affect numerous pieces of 
equipment and assets, with associated costs, system changes, and other 
burdens, without showing commensurate benefits.\61\
---------------------------------------------------------------------------

    \60\ IRC Comments at 2-3.
    \61\ MISO TO Comments at 16.
---------------------------------------------------------------------------

    43. Idaho Power, for its part, does not believe that EACMS should 
be included in the scope of the supply chain risk management 
Reliability Standards based on its view that EACMS are used in other 
industries and are not specific to critical infrastructure. Instead, 
Idaho Power states that the focus should be on correctly configuring 
EACMS devices as opposed to addressing procurement practices.\62\
---------------------------------------------------------------------------

    \62\ Idaho Power Comments at 2.
---------------------------------------------------------------------------

    44. Appelbaum, Reclamation, Resilient Societies, Isologic, Mabee, 
and MPUC support the NOPR directive regarding EACMS associated with 
medium and high impact BES Cyber Systems. In addition, the commenters 
urge the Commission to extend the scope of the supply chain risk 
management Reliability Standards to low impact BES Cyber Systems.\63\ 
MPUC states, for example, that the supply chain risk management 
Reliability Standards should apply to all BES Cyber System assets, 
unless the specific asset can be shown to be completely isolated from 
the bulk electric system.\64\ Resilient Societies states that the 
supply chain risk management Reliability Standards should apply to low 
impact BES Cyber Systems since the compromise of a low impact BES Cyber 
System could lead to the compromise of medium or high impact BES Cyber 
Systems.\65\
---------------------------------------------------------------------------

    \63\ Appelbaum Comments at 6, Reclamation Comments at 7, 
Resilient Societies Comments at 3-4, Isologic Comments at 3, Mabee 
Comments at 4, MPUC Comments at 6.
    \64\ MPUC Comments at 6.
    \65\ Resilient Societies Comments at 3.
---------------------------------------------------------------------------

    45. APS states that it supports the NOPR proposal to direct NERC to 
modify the supply chain risk management Reliability Standards to 
include EACMS associated with medium and high impact BES Cyber Systems. 
However, APS contends that the Commission should delay their inclusion 
until NERC and industry complete their analysis of the potential need 
to separate the functions reflected in the current EACMS definition 
(e.g., electronic access control versus electronic access monitoring). 
APS states that, including EACMS that perform electronic access control 
functions within the scope of the supply chain risk management 
Reliability Standards ``represents good cybersecurity posture . . . 
[h]owever, at this time, the definition of EACMS is not sufficiently 
mature to make the necessary distinction discussed above.'' \66\
---------------------------------------------------------------------------

    \66\ APS Comments at 5.

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[[Page 53999]]

3. Commission Determination
    46. Pursuant to section 215(d)(5) of the FPA, we adopt the NOPR 
proposal and direct NERC to develop modifications to include EACMS 
associated with medium and high impact BES Cyber Systems within the 
scope of the supply chain risk management Reliability Standards. While 
we are sensitive to the position taken by NERC and other commenters 
that the Commission should not issue a directive until after completion 
of the BOT-directed final report, we conclude that the record before us 
supports directing NERC to include at least some subset of EACMS 
associated with medium and high impact BES Cyber Systems at this time. 
We are not persuaded by comments advocating delay in view of the 
forthcoming BOT-directed final report because the standard drafting 
team will have the benefit of the BOT-directed final report, which is 
due in February 2019, when developing the directed Reliability Standard 
modifications.\67\
---------------------------------------------------------------------------

    \67\ As we have imposed a 24-month deadline for NERC to file the 
modified supply chain risk management Reliability Standards, the 
standard drafting team will have ample time to review and 
incorporate the findings in the BOT-directed final report.
---------------------------------------------------------------------------

    47. We continue to believe that EACMS represent the most likely 
route an attacker would take to access a BES Cyber System or PCA within 
an ESP based on the functions they perform.\68\ EACMS support BES Cyber 
Systems and are part of the network and security architecture that 
allows BES Cyber Systems to work as intended because they perform 
electronic access control or electronic access monitoring of the ESP or 
BES Cyber Systems. In particular, EACMS control electronic access, 
including interactive remote access, into the ESP that protects high 
and medium impact BES Cyber Systems. One specific function of 
electronic access control is to prevent malware or malicious actors 
from gaining access to the BES Cyber Systems and PCAs within the 
ESP.\69\ Given the significant role that EACMS play in the protection 
scheme for medium and high impact BES Cyber Systems, we determine that 
EACMS should be within the scope of the supply chain risk management 
Reliability Standards to provide minimum protection against supply 
chain attack vectors.
---------------------------------------------------------------------------

    \68\ See NOPR, 162 FERC ] 61,044 at P 35.
    \69\ Id.
---------------------------------------------------------------------------

    48. No commenter disagreed with the NOPR that misoperation or 
unavailability of EACMS that support a given BES Cyber System could 
contribute to the misoperation of the BES Cyber System or render it 
unavailable, which could pose a significant risk to reliable operation. 
Instead, commenters generally agree that EACMS perform important 
security-related functions.\70\ For example, NERC states that a 
compromised firewall ``may allow unfettered access to the ESP.'' \71\ 
EEI also agrees that the compromise of certain EACMS that control 
access could adversely affect the reliable operation of an associated 
BES Cyber System, although EEI asserts that other CIP Reliability 
Standards adequately protect those EACMS.\72\ Although some commenters, 
as discussed below, maintain that the reliability benefit of including 
EACMS in the supply chain risk management Reliability Standards is 
outweighed by the perceived costs, these commenters do not challenge 
the proposition that misoperation or unavailability of EACMS has 
negative reliability ramifications. For example, ITC, while opposing 
the NOPR directive, recognizes that misoperation of an EACMS is 
``serious'' and ``[w]ere CIP resources infinite, it would no doubt 
increase BES reliability by some degree to include EACMS within this 
Standard.'' \73\
---------------------------------------------------------------------------

    \70\ See NERC Comments at 5-6, Appelbaum Comments at 5-6, APS 
Comments at 5, EEI Comments at 7-8, IRC Comments at 3, Idaho Power 
Comments at 2, MPUC Comments at 6.
    \71\ NERC Comments at 5.
    \72\ EEI Comments at 7-8.
    \73\ ITC Comments at 5.
---------------------------------------------------------------------------

    49. We disagree with the comments asserting that existing CIP 
Reliability Standards adequately protect EACMS against supply chain-
based threats. While existing CIP Reliability Standards include 
requirements that address aspects of supply chain risk management, 
existing Reliability Standards do not adequately protect EACMS based on 
the four security objectives in Order No. 829.\74\ The CIP Reliability 
Standards cited by EEI, MISO TOs and AECC address aspects of electronic 
access control, systems security management, and configuration 
monitoring, but they do not address protection from supply chain 
threats such as insertion of counterfeits or malicious software, 
unauthorized production, tampering, or theft, as well as poor 
manufacturing and development practices. By contrast, the supply chain 
risk management Reliability Standards approved in this final rule 
specifically address the above listed supply chain threats, and, we 
determine, should be extended to at least some subset of EACMS.
---------------------------------------------------------------------------

    \74\ Order No. 829, 156 FERC ] 61,050 at P 71.
---------------------------------------------------------------------------

    50. Specifically, the goal of the supply chain risk management 
Reliability Standards is ``to help ensure that responsible entities 
establish organizationally-defined processes that integrate a 
cybersecurity risk management framework into the system development 
life cycle.'' \75\ The current CIP Reliability Standards identified in 
the comments, however, do not adequately address supply chain risks. 
For example, while Reliability Standard CIP-005-5 provides a level of 
electronic access protection for an ESP through controls applied to an 
Electronic Access Point associated with an EACMS, those controls would 
only apply after an asset is procured and deployed on a responsible 
entity's system. In this situation, the EACMS at issue could already 
contain built-in vulnerabilities making it susceptible to compromise 
or, in the worst-case scenario, could have been compromised before 
acquisition.
---------------------------------------------------------------------------

    \75\ NERC Comments at 23.
---------------------------------------------------------------------------

    51. Given the documented risks to the cyber posture of the bulk 
electric system associated with EACMS, we are not persuaded to await 
the completion of the BOT-directed final report before issuing a 
directive regarding EACMS.\76\ Instead, it is reasonable to initiate 
modification of the supply chain risk management Reliability Standards 
based on the conclusion that at least some categories of EACMS should 
be included. As discussed above, we are convinced that EACMS in general 
are a known risk that should be protected under the supply chain risk 
management Reliability Standards. But we leave it to the standard 
drafting team to assess the various types of EACMS and their associated 
levels of risk. We are confident that the standard drafting team will 
be able to develop modifications that include only those EACMS whose 
compromise by way of the cybersecurity supply chain can affect the 
reliable operation of high and medium impact BES Cyber Systems. While 
it will no doubt inform the standard drafting team's work, the BOT-
directed final report is not, in our view, likely to alter the 
conclusion that at least some EACMS functions should be included in the 
supply chain risk management Reliability Standards.\77\
---------------------------------------------------------------------------

    \76\ See NERC Comments at 4-6, EEI Comments at 7-10, IRC 
Comments at 3, ITC Comments at 5, Trade Associations at 8-12, MISO 
TOs Comments at 16-18.
    \77\ The BOT-directed interim report provides the example of a 
situation where a firewall used to protect BES Cyber Systems within 
an ESP was compromised due to supply chain vulnerability, noting 
that each system within the ESP could be exposed due to its logical 
proximity to the compromised firewalls. NERC Interim Report at 4-4.

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[[Page 54000]]

    52. The record does not support delaying a directive to modify the 
CIP Reliability Standards to include EACMS. While commenters opposing 
the NOPR proposal contend that the Commission should not act until NERC 
has the results of the BOT-directed final report, we note that: (1) 
NERC will have 24 months from the effective date of this final rule to 
develop and submit the modified Reliability Standards; and (2) the BOT-
directed final report is due in the near term (i.e., February 2019). 
Nothing in our directive prevents the standard drafting team from using 
the findings in the BOT-directed final report to refine its 
understanding of which types of EACMS functions present the greatest 
risk and are worthy of inclusion in the supply chain risk management 
Reliability Standards. Indeed, as discussed below, in view of the BOT-
directed study and the Commission's guidance, the standard drafting 
team could modify the supply chain risk management Reliability 
Standards to include an appropriate subset of EACMS functions similar 
to the approach in Order No. 848.\78\
---------------------------------------------------------------------------

    \78\ Order No. 848, 164 FERC ] 61,033 at PP 53-54.
---------------------------------------------------------------------------

    53. As we have indicated above, including EACMS within the scope of 
the supply chain risk management Reliability Standards is consistent 
with the approach in Order No. 848 regarding cybersecurity incident 
reporting. In Order No. 848, the Commission determined that EACMS that 
perform certain functions are significant to bulk electric system 
reliability so as to justify their being within the scope of the 
cybersecurity incident reporting Reliability Standards. Specifically, 
Order No. 848 addressed the identification of EACMS that should be 
subject to mandatory reporting requirements:

    With regard to identifying EACMS for reporting purposes, NERC's 
reporting threshold should encompass the functions that various 
electronic access control and monitoring technologies provide. Those 
functions must include, at a minimum: (1) Authentication; (2) 
monitoring and logging; (3) access control; (4) interactive remote 
access; and (5) alerting.\79\

    \79\ Id. P 54.
---------------------------------------------------------------------------

    54. As with cybersecurity incident reporting, in the context of 
this proceeding, if, for example, a vulnerability in the supply chain 
for EACMS is found, we determine that responsible entities should have 
processes in place to be notified of such vulnerabilities by the 
vendor, as required by Reliability Standard CIP-013-1, Requirement 
R1.2.4. We recognize that including EACMS within the scope of the 
supply chain risk management Reliability Standards will impose a burden 
on responsible entities. Nonetheless, the burden of possible 
procurement inefficiencies or resource constraints must be weighed 
against the significant risk of a cyber incident resulting from 
unmitigated supply chain vulnerabilities.\80\
---------------------------------------------------------------------------

    \80\ EEI Comments at 9, MISO TOs Comments at 16-17, ITC Comments 
at 5.
---------------------------------------------------------------------------

    55. It is also important to consider that in Order No. 848 the 
Commission determined that the modified reporting Reliability Standard 
need not include all EACMS as currently defined and, instead, the 
standard drafting team may analyze the matter to determine an 
appropriate subset of EACMS for reporting purposes.\81\ Likewise, the 
standard drafting team that is formed in response to our present 
directive may determine, based on the work done in response to Order 
No. 848 as well as the results of the BOT-directed study, what EACMS 
functions are most important to the reliable operation of the Bulk-
Power System and therefore should be included in the supply chain risk 
management Reliability Standards.
---------------------------------------------------------------------------

    \81\ Order No. 848, 164 FERC ] 61,033 at P 53.
---------------------------------------------------------------------------

    56. We find the remaining objections to our directive unpersuasive. 
BES Cyber Systems rely on EACMS to enable and secure the communications 
capability that these systems depend on to control their assigned 
portion of the bulk electric system. Commenters opposing the NOPR 
directive fail to provide convincing examples of why EACMS should not 
receive the same level of protection as the BES Cyber Systems with 
which they are associated. In addition, contrary to EEI's assertion 
that the ``likelihood of compromise'' is unclear, ample evidence exists 
that supply chain vulnerabilities are an active issue for vendors, whom 
malicious parties have intentionally targeted.\82\ By contrast, 
commenters supporting the NOPR directive provided examples where 
notable vendors of EACMS functions announced vulnerabilities, 
specifically in firewall firmware.\83\ Reliability Standard CIP-013-1, 
Requirement R1, Part 1.2.1, when applied to certain EACMS functions, 
will require that responsible entities have processes to require 
notification by the vendor of the discovery of such vulnerabilities, 
representing a clear enhancement of the protections provided by the CIP 
Reliability Standards.
---------------------------------------------------------------------------

    \82\ EEI Comments at 8-9.
    \83\ Resilient Societies Comments at 3 (noting a February 2016 
Cisco ``critical'' security advisory on a vulnerability that could 
allow an unauthenticated, remote attacker to obtain full control of 
its Industrial Security Appliance line of firewalls, and a December 
2015 Juniper ``out-of-cycle security advisory'' on unauthorized code 
identified in a specific operating system that could allow an 
attacker to access some firewalls).
---------------------------------------------------------------------------

    57. Although some commenters question the importance of the EACMS 
monitoring function, we note that these systems work in concert with 
access control systems to alert of possible intrusion.\84\ Standard 
monitoring systems such as intrusion detection systems are an essential 
component designed to recognize suspicious activity and collect data 
used for incident reporting. A compromised intrusion detection system 
may provide false information and generate false alarms. Indeed, a 
compromised intrusion detection system may not only negate the value of 
the reported information, but could also potentially provide misleading 
information. Various intrusion detection system modules collect user 
logs, provide audit trails and indicate whether suspicious activity is 
malicious or normal. An attacker could change the various settings, 
removing or inserting false information. A compromised intrusion 
detection system may also allow the attacker to manipulate the system 
continuously without generating an alarm. In addition, an attacker may 
alter the compromised system such that it will deny legitimate activity 
and accept malicious activity.\85\
---------------------------------------------------------------------------

    \84\ EEI Comments at 7, APS Comments at 3-5, MISO TOs Comments 
17-18.
    \85\ International Journal of Information Sciences and 
Techniques (IJIST) Vol.6, No.1/2, March 2016, Cyber Attacks on 
Intrusion Detection Systems at P 195, http://aircconline.com/ijist/V6N2/6216ijist20.pdf.
---------------------------------------------------------------------------

    58. For the reasons discussed above, we adopt the NOPR proposal 
and, pursuant to section 215(d)(5) of the FPA, direct NERC to develop 
modifications to the CIP Reliability Standards to include EACMS 
associated with medium and high impact BES Cyber Systems within the 
scope of the supply chain risk management Reliability Standards. We 
direct NERC to submit the directed modifications within 24 months of 
the effective date of this final rule.

B. Study of PACS and PCAs in the BOT-Directed Cybersecurity Supply 
Chain Risk Study

1. NOPR
    59. The NOPR stated that it would be appropriate to await the 
findings from the BOT-directed study on cybersecurity supply chain 
risks before considering

[[Page 54001]]

whether low impact BES Cyber Systems should be addressed in the supply 
chain risk management Reliability Standards. The NOPR explained that 
the BOT resolutions stated that the BOT-directed study should examine 
the risks posed by low impact BES Cyber Systems, but the BOT 
resolutions did not identify PACS and PCAs as subjects of the study. 
The NOPR noted, however, that NERC's petition suggests that NERC will 
evaluate PACS and PCAs as part of the BOT-directed study.\86\
---------------------------------------------------------------------------

    \86\ NOPR, 162 FERC ] 61,044 at P 27 (citing NERC Petition at 21 
(``over the next 18 months, NERC, working with various stakeholders, 
will continue to assess whether supply chain risks related to low 
impact BES Cyber Systems, PACS, EACMS, and PCA necessitate further 
consideration for inclusion in a mandatory Reliability Standard'')).
---------------------------------------------------------------------------

    60. The NOPR proposed to direct that NERC, consistent with the 
representation made in NERC's petition, include PACS and PCAs in the 
BOT-directed study and to await the findings of the study's final 
report before considering further action. The NOPR indicated that the 
risks posed by EACMS also apply to varying degrees to PACS and PCAs. 
However, the NOPR explained the distinction between EACMS and the other 
Cyber Assets: For example, a compromise of a PACS through the supply 
chain, which would potentially grant an attacker physical access to a 
BES Cyber System or PCA, is more difficult since it would also require 
physical access. Physical access is not required to take advantage of a 
compromised EACMS. Accordingly, the NOPR proposed immediate action to 
provide for the protection of EACMS, because they represent the most 
likely route an attacker would take to access a BES Cyber System or PCA 
within an ESP, while possible action on other Cyber Assets can await 
completion of the BOT-directed study's final report.\87\
---------------------------------------------------------------------------

    \87\ NOPR, 162 FERC ] 61,044 at P 42.
---------------------------------------------------------------------------

    61. In addition to proposing to direct NERC to include PACS and 
PCAs in the BOT-directed study, the NOPR proposed to direct that NERC 
file the study's interim and final reports with the Commission upon 
their completion.\88\
---------------------------------------------------------------------------

    \88\ Id. P 43.
---------------------------------------------------------------------------

2. Comments
    62. NERC concurs with the NOPR proposal and states that the 
Commission should ``await the results of the Board-requested study 
before considering whether low impact BES Cyber Systems, PACS, and PCAs 
should be addressed in the proposed Reliability Standards.'' \89\ NERC 
maintains that the BOT-directed report will help determine whether the 
supply chain risk management Reliability Standards are appropriately 
scoped to mitigate the risks identified by the Commission.\90\
---------------------------------------------------------------------------

    \89\ NERC Comments at 4.
    \90\ Id. at 5.
---------------------------------------------------------------------------

    63. EEI and Trade Associations support the supply chain risk 
management Reliability Standards' exclusion of low impact BES Cyber 
Systems. EEI agrees with the NOPR proposal to wait for NERC to study 
the supply chain risks posed by low impact BES Cyber Systems as well as 
PACS and PCAs before directing further modifications.\91\ Trade 
Associations also ``strongly support'' limiting the supply chain risk 
management Reliability Standards' applicability to medium and high 
impact BES Cyber Systems.\92\
---------------------------------------------------------------------------

    \91\ EEI Comments at 3.
    \92\ Trade Associations Comments at 7.
---------------------------------------------------------------------------

    64. Other commenters contend that low impact BES Cyber Systems pose 
a significant risk and disagree with the view that excluding such 
assets will focus industry resources on protecting systems with 
heightened risk, while not being overly burdensome. For example, 
Resilient Societies maintains that cyber attackers could use low impact 
BES Cyber Systems as network entry points to attack high and medium 
impact BES Cyber Systems, with a potential coordinated cyberattack on 
multiple low impact facilities causing a cascading collapse.\93\ 
Similarly, Appelbaum asserts that ``if a large number of [low impact 
BES Cyber Systems] are compromised, then the effort to correct or 
replace the compromised assets could be significant.'' \94\ Reclamation 
also recommends including low impact BES Cyber Systems in the proposed 
Reliability Standards in order to avoid gaps that could compromise bulk 
electric system security.\95\
---------------------------------------------------------------------------

    \93\ Resilient Societies Comments at 3-4.
    \94\ Appelbaum Comments at 6.
    \95\ Reclamation Comments at 1.
---------------------------------------------------------------------------

    65. MPUC states that many of the concerns identified in the NOPR 
apply to all classifications of BES Cyber Systems and that responsible 
entities should be required to apply the supply chain risk management 
Reliability Standards to all BES Cyber System assets, unless the 
entities can show the assets in question to be completely isolated.\96\ 
Reclamation has similar concerns and states that the supply chain risk 
management Reliability Standards should apply to all BES Cyber System 
impact ratings, including low impact.\97\ Mabee cautions against giving 
industry the discretion to determine which cyber systems are ``easy'' 
to protect and which are ``burdensome'' to protect.\98\ Isologic also 
disagrees with the exclusion of low impact BES Cyber Systems and 
contends that awaiting the BOT-directed final report would unduly delay 
an examination by the Commission of risks involving the ``massive array 
of unprotected [low impact] transmission substations.'' \99\
---------------------------------------------------------------------------

    \96\ MPUC Comments at 6.
    \97\ Reclamation Comments at 1.
    \98\ Mabee Comments at 4.
    \99\ Isologic Comments at 5.
---------------------------------------------------------------------------

3. Commission Determination
    66. We accept NERC's commitment to evaluate the cybersecurity 
supply chain risks presented by low impact BES Cyber Systems, PACS, and 
PCAs in the study of cybersecurity supply chain risks directed by the 
NERC BOT. In light of that commitment, we conclude it is not necessary 
to separately direct that NERC expand the scope of the BOT-directed 
study. However, we adopt the NOPR proposal to direct NERC to file the 
BOT-directed study's final report with the Commission upon its 
completion.
    67. We continue to believe that it is appropriate to await the 
findings from the BOT-directed final report on cybersecurity risks 
before considering whether low impact BES Cyber Systems, PACS and PCAs 
should be addressed in modified supply chain risk management 
Reliability Standards.\100\ While we do not prejudge the findings from 
the forthcoming final report, at this time we find that NERC is taking 
adequate and timely steps to study whether low impact BES Cyber 
Systems, PACS and PCAs should be included in the supply chain risk 
management Reliability Standards. Given that the BOT-directed final 
report is scheduled to be completed in February 2019, we do not view 
our determination as unduly delaying consideration of this important 
issue. Once NERC submits the BOT-directed final report, the Commission 
will be in a better position to consider what further steps, if any, 
should be taken to provide for the reliability of the bulk electric 
system.
---------------------------------------------------------------------------

    \100\ NOPR, 162 FERC ] 61,044 at P 40.
---------------------------------------------------------------------------

C. Implementation Plan

1. NOPR
    68. The NOPR stated that the 18-month implementation period 
proposed by NERC may not be justified based on the anticipated effort 
required to develop and implement a supply chain risk management plan. 
The NOPR explained that while, according to NERC, the proposed 
implementation period is ``designed to afford responsible entities 
sufficient time to develop and implement their supply

[[Page 54002]]

chain cybersecurity risk management plans required under proposed 
Reliability Standard CIP-013-1 and implement the new controls required 
in proposed Reliability Standards CIP-005-6 and CIP-010-3,'' the 
security objectives of the proposed Reliability Standards are process-
based and do not prescribe technology that might justify an extended 
implementation period.\101\ Accordingly, the NOPR proposed to reduce 
the time for implementation such that the supply chain risk management 
Reliability Standards would become effective the first day of the first 
calendar quarter that is 12 months, as opposed to NERC's 18 months, 
following the effective date of a Commission order approving the 
Reliability Standards.
---------------------------------------------------------------------------

    \101\ NOPR, 162 FERC ] 61,044 at P 44 (citing NERC Petition at 
35).
---------------------------------------------------------------------------

2. Comments
    69. NERC does not support the NOPR proposal to reduce the 
implementation period for the supply chain risk management Reliability 
Standards to 12 months. NERC states that the proposed 18-month 
implementation period is intended to give responsible entities adequate 
time to develop and implement a supply chain risk management plan 
required under proposed Reliability Standard CIP-013-1, as well as to 
implement new controls required under proposed Reliability Standards 
CIP-005-6 and CIP-010-3. NERC explains that although proposed 
Reliability Standard CIP-013-1 is process-based, the development and 
implementation of the underlying Reliability Standard requirements 
``involves performing a complex risk assessment process for planning 
and procuring BES Cyber Systems.'' \102\
---------------------------------------------------------------------------

    \102\ NERC Comments at 7.
---------------------------------------------------------------------------

    70. Other commenters support NERC's proposed 18-month 
implementation period and contend that 12 months is not enough time for 
responsible entities to develop and implement the plan and controls 
required under the supply chain risk management Reliability Standards. 
EEI, Idaho Power, IRSC, MISO TOs, and Trade Associations contend that 
while the Commission is correct that the requirements in the 
Reliability Standards are process-based, certain requirements will 
require technology enhancements, as well as coordination with 
vendors.\103\ For example, Trade Associations state that Reliability 
Standard CIP-005-6 will require work with vendors to facilitate the 
ability to disable vendor remote access, while Reliability Standard 
CIP-010-3 will also require technology upgrades.\104\ APS does not 
agree with the NOPR's assessment that a 12-month implementation period 
is reasonable, noting the potential need for new technology and the 
limitations imposed by capital budget and planning cycles.\105\ ITC and 
MISO TOs argue that the Commission does not have the legal authority to 
modify the implementation period unilaterally for a proposed 
Reliability Standard.
---------------------------------------------------------------------------

    \103\ See EEI Comments at 3-4, Idaho Power Comments at 3-4, IRC 
Comments at 4, Trade Associations Comments at 12-13.
    \104\ Trade Associations Comments at 12-13 (citing NOPR, 152 
FERC ] 61,054 at P 44).
    \105\ APS Comments at 5-7.
---------------------------------------------------------------------------

    71. Appelbaum supports a shortened implementation period for 
proposed Reliability Standards CIP-010-3 and CIP-005-6, for the reasons 
stated in the NOPR, but contends that an 18-month implementation period 
for proposed Reliability Standard CIP-013-1 is more appropriate. 
Specifically, Appelbaum notes that the proposed Reliability Standard 
includes new risk planning and documentation requirements that will 
take time to implement. Appelbaum also contends that the risk 
assessment will likely involve multiple vendors and various different 
assets. Appelbaum states that an 18-month implementation period would 
provide the time to develop a supply chain risk management policy and 
associated processes, and then apply the processes to current and 
future procurement activities.\106\
---------------------------------------------------------------------------

    \106\ Appelbaum Comments at 4.
---------------------------------------------------------------------------

3. Commission Determination
    72. We do not adopt the NOPR proposal to reduce the implementation 
period and instead approve the implementation plan and effective date 
as proposed by NERC. The NOPR proposal was largely based on the premise 
that the security objectives of the supply chain risk management 
Reliability Standards are process-based and do not prescribe technology 
that might justify a longer implementation period. However, based on 
the comments, we are persuaded that technical upgrades are likely 
necessary to meet the security objectives of the supply chain risk 
management Reliability Standards, which could involve longer time-
horizon capital budgets and planning cycles.
    73. While the Commission could, as Appelbaum suggests, direct an 
18-month implementation period for Reliability Standard CIP-013-1 and a 
12-month period for Reliability Standards CIP-005-6 and CIP-010-3, we 
conclude that different timelines could complicate implementation and 
potentially increase the administrative burden of implementation 
without a commensurate improvement in security.
    74. Based on the discussion above, we do not adopt the NOPR 
proposal and approve NERC's proposed implementation plan whereby the 
supply chain risk management Reliability Standards will be effective on 
the first day of the first calendar quarter that is 18 months following 
the effective date of this final rule.

D. Other Issues

1. Comments
    75. Certain commenters raised additional issues not addressed in 
the NOPR. MISO TOs, APS, and Trade Associations request clarification 
regarding the term ``vendor.'' Specifically, APS seeks clarification of 
the definition of ``vendor'' and on the applicability of Reliability 
Standard CIP-013-1 to those vendors that would only provide services 
associated with a BES Cyber System that is already procured and in 
service.\107\ APS also seeks clarification on whether responsible 
entities are required to perform individualized vendor assessments for 
every in-scope procurement activity.\108\
---------------------------------------------------------------------------

    \107\ APS Comments at 9-11.
    \108\ Id.
---------------------------------------------------------------------------

    76. MISO TOs contend that the Commission should clarify that the 
supply chain risk management Reliability Standards do not apply to 
vendors and that responsible entities will not be responsible for 
vendor noncompliance. MISO TOs also request that the Commission clarify 
that responsible entities do not have any obligation to work only with 
compliant vendors.\109\
---------------------------------------------------------------------------

    \109\ MISO TOs Comments at 7-9.
---------------------------------------------------------------------------

    77. APS also seeks clarification regarding the scope of access 
intended within the term ``system-to-system access.'' \110\ As an 
example, APS asserts that, although there is a connection, User 
Datagram Protocol would not qualify as ``system-to-system access'' and 
seeks clarification regarding the scope of connections that would 
qualify as ``system-to-system access.'' \111\
---------------------------------------------------------------------------

    \110\ APS Comments at 9-11.
    \111\ Id.
---------------------------------------------------------------------------

2. Commission Determination
    78. The Supplemental Materials for Reliability Standard CIP-013-1 
explain the meaning of the term ``vendor.'' Specifically, the 
Supplemental Materials state that a vendor ``is limited to those 
persons, companies, or other organizations with whom the

[[Page 54003]]

[r]esponsible [e]ntity, or its affiliates, contracts with to supply BES 
Cyber Systems and related services.'' \112\ The Supplemental Materials 
also note that a vendor, for purposes of the supply chain risk 
management Reliability Standards, may include: (i) Developers or 
manufacturers of information systems, system components, or information 
system services; (ii) product resellers; or (iii) system 
integrators.\113\
---------------------------------------------------------------------------

    \112\ Reliability Standard CIP-013-1 at 12.
    \113\ Id.
---------------------------------------------------------------------------

    79. With regard to vendor-related compliance concerns, vendors are 
not subject to the supply chain risk management Reliability Standards. 
As NERC explains, ``the proposed Reliability Standards apply only to 
registered entities and do not directly impose obligations on 
suppliers, vendors or other entities that provide products or services 
to registered entities.'' \114\ This is consistent with the 
Commission's guidance in Order No. 829 that ``any action taken by NERC 
in response to the Commission's directive to address the supply chain-
related reliability gap should respect `section 215 jurisdiction by 
only addressing the obligations of responsible entities' and `not 
directly impose obligations on suppliers, vendors or other entities 
that provide products or services to responsible entities.' '' \115\
---------------------------------------------------------------------------

    \114\ NERC Petition at 14.
    \115\ Order No. 829, 156 FERC ] 61,050 at P 21.
---------------------------------------------------------------------------

    80. As to the question of responsible entity liability for vendor 
noncompliance, NERC explains that ``any resulting obligation that a 
supplier, vendor or other entity accepts in providing products or 
services to the registered entity is a contractual matter between the 
registered entity and the third party outside the scope of the proposed 
Reliability Standard[.]'' \116\ The security objective of the supply 
chain risk management Reliability Standards is to ``ensure that 
[r]esponsible [e]ntities consider the security, integrity, quality, and 
resilience of the supply chain, and take appropriate mitigating action 
when procuring BES Cyber Systems to address threats and vulnerabilities 
in the supply chain.'' \117\ Therefore, while a responsible entity is 
not directly liable for vendor actions, the responsible entity is 
required to mitigate any resulting risks. Finally, the supply chain 
risk management Reliability Standards do not dictate a responsible 
entity's contracting decision.
---------------------------------------------------------------------------

    \116\ NERC Petition at 17.
    \117\ Id. at 13.
---------------------------------------------------------------------------

    81. As to the term ``system-to-system,'' NERC explains that the 
objective of Reliability Standard CIP-005-6, Requirement R2.4 is for 
entities to have visibility of active vendor remote access sessions, 
including Interactive Remote Access and system-to-system remote access, 
taking place on their system.\118\ Reliability Standard CIP-005-6 
requires entities to have a method to determine all active vendor 
remote access sessions.\119\
---------------------------------------------------------------------------

    \118\ Id. at 31.
    \119\ See Reliability Standard CIP-005-6 at 28.
---------------------------------------------------------------------------

III. Information Collection Statement

    82. The FERC-725B information collection requirements contained in 
this final rule are subject to review by the Office of Management and 
Budget (OMB) under section 3507(d) of the Paperwork Reduction Act of 
1995.\120\ OMB's regulations require approval of certain information 
collection requirements imposed by agency rules.\121\ Upon approval of 
a collection of information, OMB will assign an OMB control number and 
expiration date. Respondents subject to the filing requirements of this 
rule will not be penalized for failing to respond to these collections 
of information unless the collections of information display a valid 
OMB control number. In the NOPR, the Commission solicited comments on 
the Commission's need for this information, whether the information 
will have practical utility, the accuracy of the burden estimates, ways 
to enhance the quality, utility, and clarity of the information to be 
collected or retained, and any suggested methods for minimizing 
respondents' burden, including the use of automated information 
techniques. The Commission did not receive any comments on the specific 
burden estimates discussed below.
---------------------------------------------------------------------------

    \120\ 44 U.S.C. 3507(d).
    \121\ 5 CFR 1320.11.
---------------------------------------------------------------------------

    83. The Commission bases its paperwork burden estimates on the 
changes in paperwork burden presented by the approved CIP Reliability 
Standard CIP-013-1 and the approved revisions to CIP Reliability 
Standard CIP-005-6 and CIP-010-3 as compared to the current Commission-
approved Reliability Standards CIP-005-5 and CIP-010-2, respectively. 
As discussed above, the final rule addresses several areas of the CIP 
Reliability Standards through Reliability Standard CIP-013-1, 
Requirements R1, R2, and R3. Under Requirement R1, responsible entities 
would be required to have one or more processes to address the 
following baseline set of security concepts, as applicable, in their 
procurement activities for high and medium impact BES Cyber Systems: 
(1) Vendor security event notification processes (Part 1.2.1); (2) 
coordinated incident response activities (Part 1.2.2); (3) vendor 
personnel termination notification for employees with access to remote 
and onsite systems (Part 1.2.3); (4) product/services vulnerability 
disclosures (Part 1.2.4); (5) verification of software integrity and 
authenticity (Part 1.2.5); and (6) coordination of vendor remote access 
controls (Part 1.2.6). Requirement R2 mandates that each responsible 
entity implement its supply chain cybersecurity risk management plan. 
Requirement R3 requires a responsible entity to review and obtain the 
CIP Senior Manager's approval of its supply chain risk management plan 
at least once every 15 calendar months in order to ensure that the plan 
remains up-to-date.
    84. Separately, Reliability Standard CIP-005-6, Requirement R2.4 
requires one or more methods for determining active vendor remote 
access sessions, including Interactive Remote Access and 
system[hyphen]to[hyphen]system remote access. Reliability Standard CIP-
005-6, Requirement R2.5 requires one or more methods to disable active 
vendor remote access, including Interactive Remote Access and 
system[hyphen]to[hyphen]system remote access. Reliability Standard CIP-
010-3, Requirement R1.6 requires responsible entities to verify 
software integrity and authenticity in the operational phase, if the 
software source provides a method to do so.
    85. The NERC Compliance Registry, as of December 2017, identifies 
approximately 1,250 unique U.S. entities that are subject to mandatory 
compliance with Reliability Standards. Of this total, we estimate that 
288 entities will face an increased paperwork burden under the approved 
Reliability Standards CIP-013-1, CIP-005-6, and CIP-010-3. Based on 
these assumptions, we estimate the following reporting burden:

[[Page 54004]]

                                                                 RM17-13-000 Final Rule
                             [Mandatory Reliability Standards for Critical Infrastructure Protection Reliability Standards]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Annual  number
                                          Number of     of  responses   Total number     Average burden & cost     Total annual  burden      Cost per
                                         respondents         per        of responses      per  response \122\     hours  & total annual   respondent ($)
                                                         respondent                                                        cost
                                                  (1)             (2)     (1) * (2) =  (4).....................  (3) * (4) = (5)........       (5) / (1)
                                                                                  (3)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Create supply chain risk management               288               1             288  546 hrs.; $44,226.......  157,248 hrs.;                   $44,226
 plan (one-time) \123\ (CIP-013-1 R1).                                                                            $12,737,088.
Updates and reviews of supply chain               288               1             288  30 hrs.; 2,430..........  8,640 hrs.; 699,840....           2,430
 risk management plan (ongoing) \124\
 (CIP-013-1 R2).
Develop Procedures to update remote               288               1             288  50 hrs.; 4,050..........  14,400 hrs.; 1,166,400.           4,050
 access requirements (one time) (CIP-
 005-6 R1-R4).
Develop procedures for software                   288               1             288  50 hrs.; 4,050..........  14,400 hrs.; 1,166,400.           4,050
 integrity and authenticity
 requirements (one time) (CIP-010-3
 R1-R4).
    Total (one-time).................  ..............  ..............             864  ........................  186,048 hrs.;            ..............
                                                                                                                  15,069,888.
    Total (ongoing)..................  ..............  ..............             288  ........................  8,640 hrs.; 699,840....  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The one-time burden of 186,048 hours will be averaged over three 
years (186,048 hours / 3 = 62,016 hours/year over three years).
---------------------------------------------------------------------------

    \122\ The loaded hourly wage figure (includes benefits) is based 
on the average of the occupational categories for 2017 found on the 
Bureau of Labor Statistics website (http://www.bls.gov/oes/current/naics2_22.htm):
    Legal (Occupation Code: 23-0000): $143.68.
    Information Security Analysts (Occupation Code 15-1122): $61.55.
    Computer and Information Systems Managers (Occupation Code: 11-
3021): $96.51.
    Management (Occupation Code: 11-0000): $94.28.
    Electrical Engineer (Occupation Code: 17-2071): $66.90.
    Management Analyst (Code: 43-0000): $63.32.
    These various occupational categories are weighted as follows: 
[($94.28)(.10) + ($61.55)(.315) + ($66.90)(.02) + ($143.68)(.15) + 
($96.51)(.10) + ($63.32)(.315)] = $81.30. The figure is rounded to 
$81.00 for use in calculating wage figures in this final rule.
    \123\ One-time burdens apply in Year One only.
    \124\ Ongoing burdens apply in Year 2 and beyond..
---------------------------------------------------------------------------

    The ongoing burden of 8,640 hours applies to only Years 2 and 
beyond.
    The number of responses is also average over three years (864 
responses (one-time) + (288 responses (Year 2) + 288 responses (Year 
3)) / 3 = 480 responses.
    The responses and burden for Years 1-3 will total respectively as 
follows:

 Year 1: 480 responses; 62,016 hours
 Year 2: 480 responses; 62,016 hours + 8,640 hours = 70,656 
hours
 Year 3: 480 responses; 62,016 hours + 8,640 hours = 70,656 
hours.

    86. The following shows the annual cost burden for each year, based 
on the burden hours in the table above:
     Year 1: $15,069,888
     Years 2 and beyond: $699,840
     The paperwork burden estimate includes costs associated 
with the initial development of a policy to address requirements 
relating to: (1) Developing the supply chain risk management plan; (2) 
updating the procedures related to remote access requirements (3) 
developing the procedures related to software integrity and 
authenticity. Further, the estimate reflects the assumption that costs 
incurred in year 1 will pertain to plan and procedure development, 
while costs in years 2 and 3 will reflect the burden associated with 
maintaining the supply chain risk management plan and modifying it as 
necessary on a 15-month basis.
    87. Title: FERC-725B (Mandatory Reliability Standards, Revised 
Critical Infrastructure Protection Reliability Standards).
    Action: Information Collection, FERC-725B (Supply Chain Risk 
Management Reliability Standards).
    OMB Control No.: 1902-0248.
    Respondents: Businesses or other for-profit institutions; not-for-
profit institutions.
    Frequency of Responses: On Occasion.
    Necessity of the Information: This final rule approves the 
requested modifications to Reliability Standards pertaining to critical 
infrastructure protection. As discussed above, the Commission approves 
NERC's CIP Reliability Standards CIP-013-1, CIP-005-6, and CIP-010-3 
pursuant to section 215(d)(2) of the FPA because they improve upon the 
currently-effective suite of cybersecurity CIP Reliability Standards.
    Internal Review: The Commission has reviewed the approved 
Reliability Standards and made a determination that its action is 
necessary to implement section 215 of the FPA.
    88. Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street NE, Washington, DC 20426 [Attention: Ellen 
Brown, Office of the Executive Director, email: [email protected], 
phone: (202) 502-8663, fax: (202) 273-0873].
    89. For submitting comments concerning the collection(s) of 
information and the associated burden estimate(s), please send your 
comments to the Commission, and to the Office of Management and Budget, 
Office of Information and Regulatory Affairs, 725 17th Street NW, 
Washington, DC 20503 [Attention: Desk Officer for the Federal Energy 
Regulatory Commission, phone: (202) 395-4638, fax: (202) 395-7285]. For 
security reasons, comments to OMB should be submitted by email to: 
[email protected]. Comments submitted to OMB should include 
Docket Number RM17-13-000 and OMB Control Number 1902-0248.

IV. Environmental Analysis

    90. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human

[[Page 54005]]

environment.\125\ The Commission has categorically excluded certain 
actions from this requirement as not having a significant effect on the 
human environment. Included in the exclusion are rules that are 
clarifying, corrective, or procedural or that do not substantially 
change the effect of the regulations being amended.\126\ The actions 
taken herein fall within this categorical exclusion in the Commission's 
regulations.
---------------------------------------------------------------------------

    \125\ Regulations Implementing the National Environmental Policy 
Act of 1969, Order No. 486, FERC Stats. & Regs. ] 30,783 (1987).
    \126\ 18 CFR 380.4(a)(2)(ii).
---------------------------------------------------------------------------

V. Regulatory Flexibility Act Analysis

    91. The Regulatory Flexibility Act of 1980 (RFA) generally requires 
a description and analysis of proposed rules that will have significant 
economic impact on a substantial number of small entities.\127\ The 
Small Business Administration's (SBA) Office of Size Standards develops 
the numerical definition of a small business.\128\ The SBA revised its 
size standard for electric utilities (effective January 22, 2014) to a 
standard based on the number of employees, including affiliates (from 
the prior standard based on megawatt hour sales).\129\
---------------------------------------------------------------------------

    \127\ 5 U.S.C. 601-12.
    \128\ 13 CFR 121.101.
    \129\ 13 CFR 121.201, Subsector 221.
---------------------------------------------------------------------------

    92. Reliability Standards CIP-013-1, CIP-005-6, CIP-010-3 are 
expected to impose an additional burden on 288 entities \130\ 
(reliability coordinators, generator operators, generator owners, 
interchange coordinators or authorities, transmission operators, 
balancing authorities, and transmission owners).
---------------------------------------------------------------------------

    \130\ Public utilities may fall under one of several different 
categories, each with a size threshold based on the company's number 
of employees, including affiliates, the parent company, and 
subsidiaries. For the analysis in this NOPR, we are using a 500 
employee threshold due to each affected entity falling within the 
role of Electric Bulk Power Transmission and Control (NAISC Code: 
221121).
---------------------------------------------------------------------------

    93. Of the 288 affected entities discussed above, we estimate that 
approximately 248 or 86.2 percent of the affected entities are small 
entities. We estimate that each of the 248 small entities to whom the 
approved modifications to Reliability Standards CIP-013-1, CIP-005-6, 
and CIP-010-3 apply will incur one-time costs of approximately $52,326 
per entity to implement the approved Reliability Standards, as well as 
the ongoing paperwork burden reflected in the Information Collection 
Statement (approximately $2,430 per year per entity). We do not 
consider the estimated costs for these 248 small entities to be a 
significant economic impact. Accordingly, we certify that Reliability 
Standards CIP-013-1, CIP-005-6, and CIP-010-3 will not have a 
significant economic impact on a substantial number of small entities.

VI. Document Availability

    94. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
internet through the Commission's Home Page (http://www.ferc.gov) and 
in the Commission's Public Reference Room during normal business hours 
(8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE, Room 2A, 
Washington, DC 20426.
    95. From the Commission's Home Page on the internet, this 
information is available on eLibrary. The full text of this document is 
available on eLibrary in PDF and Microsoft Word format for viewing, 
printing, and/or downloading. To access this document in eLibrary, type 
the docket number of this document, excluding the last three digits, in 
the docket number field. User assistance is available for eLibrary and 
the Commission's website during normal business hours from the 
Commission's Online Support at (202) 502-6652 (toll free at 1-866-208-
3676) or email at [email protected], or the Public Reference 
Room at (202) 502-8371, TTY (202) 502-8659. Email the Public Reference 
Room at [email protected].

VII. Effective Date and Congressional Notification

    96. The final rule is effective December 26, 2018. The Commission 
has determined that this final rule imposes no substantial effect upon 
either NERC or NERC registered entities \131\ and, with the concurrence 
of the Administrator of the Office of Information and Regulatory 
Affairs of OMB, that this rule is not a ``major rule'' as defined in 
section 351 of the Small Business Regulatory Enforcement Fairness Act 
of 1996. This final rule is being submitted to the Senate, House, and 
Government Accountability Office.
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    \131\ 5 U.S.C. 804(3)c.

    By the Commission. Chairman McIntyre was not present at the 
Commission Meeting held on October 18, 2018 and did not vote on this 
---------------------------------------------------------------------------
item.

    Issued: October 18, 2018.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix Commenters

------------------------------------------------------------------------
           Abbreviation                           Commenter
------------------------------------------------------------------------
AECC..............................  Arkansas Electric Cooperative
                                     Corporation.
Appelbaum.........................  Jonathan Appelbaum.
APS...............................  Arizona Public Service Company.
EEI...............................  Edison Electric Institute.
Idaho Power.......................  Idaho Power Company.
IRC...............................  ISO/RTO Council.
Isologic..........................  Isologic LLC.
ITC...............................  International Transmission Company.
Mabee.............................  Michael Mabee.
MISO TOs..........................  MISO Transmission Owners.
MPUC..............................  Maine Public Utilities Commission.
NERC..............................  North American Electric Reliability
                                     Corporation.
Reclamation.......................  U.S. Bureau of Reclamation.
Resilient Societies...............  Foundation for Resilient Societies.
Trade Associations................  American Public Power Association,
                                     Electricity Consumers Resource
                                     Council, Large Public Power
                                     Council, National Rural Electric
                                     Cooperative Association, and
                                     Transmission Access Policy Study
                                     Group.
------------------------------------------------------------------------

[FR Doc. 2018-23201 Filed 10-25-18; 8:45 am]
 BILLING CODE 6717-01-P