[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
IMPLICATIONS OF CYBER VULNERABILITIES ON THE RESILIENCE AND SECURITY OF 
                           THE ELECTRIC GRID

=======================================================================


                                HEARING

                               before the

                        SUBCOMMITTEE ON EMERGING
                        THREATS, CYBERSECURITY,
                       AND SCIENCE AND TECHNOLOGY

                                 of the

                     COMMITTEE ON HOMELAND SECURITY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 21, 2008

                               __________

                           Serial No. 110-117

                               __________

       Printed for the use of the Committee on Homeland Security
                                     

[GRAPHIC] [TIFF OMITTED] CONGRESS.#13



  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html

                               __________



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                     COMMITTEE ON HOMELAND SECURITY

               Bennie G. Thompson, Mississippi, Chairman

Loretta Sanchez, California          Peter T. King, New York
Edward J. Markey, Massachusetts      Lamar Smith, Texas
Norman D. Dicks, Washington          Christopher Shays, Connecticut
Jane Harman, California              Mark E. Souder, Indiana
Peter A. DeFazio, Oregon             Tom Davis, Virginia
Nita M. Lowey, New York              Daniel E. Lungren, California
Eleanor Holmes Norton, District of   Mike Rogers, Alabama
Columbia                             David G. Reichert, Washington
Zoe Lofgren, California              Michael T. McCaul, Texas
Sheila Jackson Lee, Texas            Charles W. Dent, Pennsylvania
Donna M. Christensen, U.S. Virgin    Ginny Brown-Waite, Florida
Islands                              Gus M. Bilirakis, Florida
Bob Etheridge, North Carolina        David Davis, Tennessee
James R. Langevin, Rhode Island      Paul C. Broun, Georgia
Henry Cuellar, Texas                 Candice S. Miller, Michigan
Christopher P. Carney, Pennsylvania
Yvette D. Clarke, New York
Al Green, Texas
Ed Perlmutter, Colorado
Bill Pascrell, Jr., New Jersey

       Jessica Herrera-Flanigan, Staff Director & General Counsel

                     Rosaline Cohen, Chief Counsel

                     Michael Twinchek, Chief Clerk

                Robert O'Connor, Minority Staff Director

                                 ______

   SUBCOMMITTEE ON EMERGING THREATS, CYBERSECURITY, AND SCIENCE AND 
                               TECHNOLOGY

               James R. Langevin, Rhode Island, Chairman

Zoe Lofgren, California              Michael T. McCaul, Texas
Donna M. Christensen, U.S. Virgin    Daniel E. Lungren, California
Islands                              Ginny Brown-Waite, Florida
Bob Etheridge, North Carolina        Paul C. Broun, Georgia
Al Green, Texas                      Peter T. King, New York (Ex 
Bill Pascrell, Jr., New Jersey       Officio)
Bennie G. Thompson, Mississippi (Ex 
Officio)

                   Jacob Olcott, Director and Counsel

       Dr. Chris Beck, Senior Advisor for Science and Technology

                       Carla Zamudio-Dolan, Clerk

           Kevin Gronberg, Minority Professional Staff Member

                                 ______

                                  (II)
                            C O N T E N T S

                              ----------                              
                                                                   Page

                               Statements

The Honorable James R. Langevin, a Representative in Congress 
  From the State of Rhode Island, and Chairman, Subcommittee on 
  Emerging Threats, Cybersecurity, and Science and Technology:
  Oral Statement.................................................     1
  Prepared Statement.............................................     3
The Honorable Ginny Brown-Waite, a Representative in Congress 
  From the State of Florida......................................     4

                               Witnesses

The Honorable Joseph T. Kelliher, Chairman, Federal Energy 
  Regulatory Commission (FERC), Accompanied by Joseph McClelland, 
  Director, Office of Electric Reliability, FERC:
  Oral Statement.................................................     6
  Prepared Statement.............................................     7
Mr. Richard Sergel, President and Chief Executive Officer, North 
  American Electric Reliability Corporation (NERC):
  Oral Statement.................................................    13
  Prepared Statement.............................................    14
Mr. Greg Wilshusen, Director, Information Security Issues, 
  Government Accountability Office (GAO), Accompanied by Naba 
  Barkakati, Senior Level Technologist, GAO:
  Oral Statement.................................................    25
  Prepared Statement.............................................    26
Mr. William R. McCollum, Jr., Chief Operating Officer, Tennessee 
  Valley Authority (TVA), Accompanied by John Long, Chief 
  Administrative Officer, TVA:
  Oral Statement.................................................    32
  Prepared Statement.............................................    34

                             For the Record

Mr. Bill Pascrell, Jr., a Representative in Congress From the 
  State of New Jersey:
  Exhibit A: ES-ISAC Advisory Follow-up Survey...................    45
  Exhibit B: Letters.............................................    47

                                Appendix

Questions From Chairman James R. Langevin........................    81


IMPLICATIONS OF CYBER VULNERABILITIES ON THE RESILIENCE AND SECURITY OF 
                           THE ELECTRIC GRID

                              ----------                              


                        Wednesday, May 21, 2008

             U.S. House of Representatives,
                    Committee on Homeland Security,
      Subcommittee on Emerging Threats, Cybersecurity, and 
                                    Science and Technology,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:13 p.m., in 
Room 311, Cannon House Office Building, Hon. James R. Langevin 
[chairman of the subcommittee], presiding.
    Present: Representatives Langevin, Lofgren, Etheridge, 
Green, Pascrell, McCaul, and Brown-Waite.
    Also present: Representative Jackson Lee.
    Mr. Langevin. The subcommittee will come to order.
    The subcommittee is meeting today to receive testimony on 
Implications of Cyber Vulnerabilities on the Resiliency and 
Security of the Electric Grid.
    I will begin by recognizing myself for an open statement.
    Good afternoon. I would like to thank our witnesses for 
testifying today.
    Over the last year, this subcommittee has spent a lot of 
time and energy on improving Federal network security. Today's 
issue, the security of our critical infrastructure networks, is 
one that demands equal attention. The effective functioning of 
our critical infrastructure, from dams and water systems to 
factories and the electric grid, is highly dependent on control 
systems, computer-based systems that are used to monitor and 
control sensitive processes and physical functions.
    Once largely proprietary closed systems, control systems 
are becoming increasingly connected to open networks such as 
corporate intranets and the Internet itself. This connectivity 
places these infrastructures at increased risk of intentional 
or unintentional control system failures which can have a 
significant and potentially devastating impact on the economy, 
public health and national security of the United States.
    There can be no doubt that America's critical 
infrastructure networks are under constant threat. Pervasive 
vulnerabilities of hardware and software and the connectivity 
of these machines to the Internet make our multi-layered lines 
of defense, meaning anti-virus, firewall and intrusion 
detection, relatively ineffective in addressing the problem.
    To compound matters, many organizations prefer to focus on 
the deployment of new technology without regard for the 
security or integrity of their systems or information. This 
often means that information security officers are 
simultaneously facing increased responsibility and shrinking 
budgets.
    These are overwhelming challenges without clear solutions. 
The Federal Government and the private sector must act with a 
sense of urgency to address these issues; and yet, as I read 
today's testimony, I still do not get the sense that we are 
addressing cybersecurity with the seriousness that it deserves.
    Today's hearing will focus on two primary issues.
    First, we will receive an update from the Federal Energy 
Regulatory Commission, FERC, and the North American Electric 
Reliability Corporation, NERC, about electric industry efforts 
to mitigate a cyber vulnerability known as Aurora. I think we 
could search far and wide and not find a more disorganized, 
ineffective response to an issue of national security of this 
import. Everything about the way this vulnerability was 
handled, from press leaks, to DHS's failure to provide more 
technical details to support the results of its test, to NERC's 
dismissive attitude to the industry's halfhearted approach 
toward mitigation, leaves me with little confidence that we are 
ready or willing to deal with the cybersecurity threat.
    As time passes, I grow particularly concerned by NERC, the 
self-regulating organization responsible for ensuring the 
reliability of the bulk power system. Not only do they propose 
cybersecurity standards that, according to the GAO and NIST, 
are inadequate for protecting critical national infrastructure, 
but throughout the committee's investigation they continued to 
provide misleading statements about their oversight of industry 
efforts to mitigate the Aurora vulnerability.
    If NERC doesn't start getting serious about national 
security, it may be time to find a new electric reliability 
organization. NERC can begin demonstrating its commitment by 
incorporating more of the NIST security controls in the next 
iteration of its reliability standards.
    Now I am thankful today that Chairman Kelliher and his 
staff at FERC are taking cybersecurity seriously. In earlier 
correspondence, Chairman Thompson and I voiced our concern that 
the Commission not only lacked authority to regulate 
potentially vulnerable cybersecurity assets, but they are not 
covered in the NERC standards, but also the authority to issue 
orders to owners and operators in the event of an imminent 
exploitation of an asset on the grid.
    The chairman and I fully support FERC's request for 
additional legal authorities to adequately protect the bulk 
power system, and we certainly look forward to working with you 
and the appropriate committees in the future.
    Our second issue of discussion today involves the GAO 
investigation that this committee commissioned last year. We 
asked GAO to provide insight into the cybersecurity controls of 
the Nation's largest public power utility, the Tennessee Valley 
Authority, TVA. The TVA's service area covers 80,000 square 
miles in the southeastern United States, with a total 
population before 8.7 million people.
    Unfortunately, the GAO found that the TVA security posture 
was seriously lacking. According to the report, TVA has not 
implemented appropriate security practices to secure the 
control systems and networks used to operate its critical 
infrastructures. Until TVA addresses these weaknesses, it risks 
a disruption of its operations as a result of a cyber incident 
which could impact its customers.
    Now I am pleased to hear that TVA has taken significant 
steps toward implementing higher levels of security.
    But these problems are not unique to TVA. I believe they 
are typical of security practices across the industry; and 
given what we have seen with the Aurora mitigation, I have 
little confidence that the industry is taking appropriate 
actions.
    Now, in closing, I would like to challenge each of you here 
and everyone in the industry to, among other things, prove to 
our committee that you are serious about cybersecurity. Show us 
you are willing to adopt better standards because it will make 
the entire grid more secure. Leverage the critical 
infrastructure community to push control system vendors to 
build more secure products and commit the manpower and the 
money to mitigating your vulnerabilities.
    I can say this, that we will continue our oversight in this 
area. It will be robust. In the next subcommittee hearing, 
though, I certainly look forward to talking about all the 
progress the industry has made in meeting our challenges.
    [The statement of Chairman Langevin follows:]
            Prepared Statement of Chairman James R. Langevin
                              May 21, 2008
    Good afternoon. I'd like to thank our witnesses for testifying 
today. Over the last year, this subcommittee has spent a lot of time 
and energy on improving Federal network security. Today's issue--the 
security of our critical infrastructure networks--is one that demands 
equal attention.
    The effective functioning of our critical infrastructure--from dams 
and water systems, to factories and the electric grid--is highly 
dependent on control systems, computer-based systems that are used to 
monitor and control sensitive processes and physical functions. Once 
largely proprietary, closed systems, control systems are becoming 
increasingly connected to open networks, such as corporate intranets 
and the Internet. This connectivity places these infrastructures at 
increased risk of intentional or unintentional control system failures, 
which can have a significant and potentially devastating impact on the 
economy, public health, and national security of the United States.
    There can be no doubt that America's critical infrastructure 
networks are under constant threat. Pervasive vulnerabilities in 
hardware and software, and the connectivity of these machines to the 
Internet make our multilayered lines of defense--anti-virus, firewall, 
and intrusion detection--relatively ineffective in addressing the 
problem. To compound matters, many organizations prefer to focus on the 
deployment of new technology without regard for the security or 
integrity of their systems or information. This often means that 
information security officers are simultaneously facing increased 
responsibilities and shrinking budgets.
    These are overwhelming challenges without clear solutions. The 
Federal Government and the private sector must act with a sense of 
urgency to address these issues, and yet, as I read today's testimony, 
I still do not get the sense that we are addressing cybersecurity with 
the seriousness it deserves.
    Today's hearing will focus on two primary issues. First, we will 
receive an update from the Federal Energy Regulatory Commission (FERC) 
and the North American Electric Reliability Corporation (NERC) about 
electric industry efforts to mitigate a cyber vulnerability known as 
Aurora. I think we could search far and wide and not find a more 
disorganized, ineffective response to an issue of national security. 
Everything about the way this vulnerability was handled--from press 
leaks, to DHS's failure to provide more technical details to support 
the results of its test, to NERC's dismissive attitude, to the 
industry's half-hearted approach toward mitigation--leaves me with 
little confidence that we are ready or willing to deal with the 
cybersecurity threat.
    As time passes, I grow particularly concerned by NERC, the self-
regulating organization responsible for ensuring the reliability of the 
bulk power system. Not only did they propose cybersecurity standards 
that--according to the GAO and NIST--are inadequate for protecting 
critical national infrastructure, but throughout the committee's 
investigation they continued to provide misleading statements about 
their oversight of industry efforts to mitigate the Aurora 
vulnerability. If NERC doesn't start getting serious about national 
security, it may be time to find a new electric reliability 
organization. NERC can begin demonstrating its commitment by 
incorporating more of the NIST security controls in the next iteration 
of its reliability standards.
    I am thankful that Chairman Kelliher and his staff at FERC are 
taking cybersecurity seriously. In earlier correspondence, Chairman 
Thompson and I voiced our concern that the Commission not only lacked 
authority to regulate potentially vulnerable cybersecurity assets that 
are not covered in the NERC standards, but also the authority to issue 
orders to owners and operators in the event of an imminent exploitation 
of an asset on the grid. The Chairman and I fully support FERC's 
request for additional legal authorities to adequately protect the bulk 
power system, and we look forward to working with you and the 
appropriate committees in the future.
    Our second issue of discussion today involves a GAO investigation 
that this committee commissioned last year. We asked GAO to provide 
insight into the cybersecurity controls of the Nation's largest public 
power company, the Tennessee Valley Authority (TVA). The TVA's service 
area covers 80,000 square miles in the southeastern United States, with 
a total population of about 8.7 million people. Unfortunately, GAO 
found that TVA's security posture was seriously lacking. According to 
the report, TVA has not fully implemented appropriate security 
practices to secure the control systems and networks used to operate 
its critical infrastructures. Until TVA addresses these weaknesses, it 
risks a disruption of its operations as a result of a cyber incident, 
which could impact its customers.
    I am pleased to hear that TVA has taken significant steps toward 
implementing higher levels of security. But these problems are not 
unique to TVA. I believe they are typical of security practices across 
the industry. And, given what we've seen with the Aurora mitigation, I 
have little confidence that the industry is taking the appropriate 
actions.
    In closing, I'd like to challenge each of you here, and everyone in 
the industry. Prove to our committee that you are serious about 
cybersecurity. Show us you're willing to adopt better standards because 
it will make the entire grid more secure. Leverage the critical 
infrastructure community to push control system vendors to build more 
secure products. And commit the manpower and the money to mitigating 
your vulnerabilities.
    We will continue our oversight in this area. At the next 
subcommittee hearing, I look forward to talking about all the progress 
the industry has made in meeting our challenges.

    Mr. Langevin. With that, the Chair now recognizes the 
ranking member of the subcommittee, standing in for Mr. McCaul 
from Texas. The gentlelady from Florida, Ms. Ginny Brown-Waite, 
is recognized 5 minutes.
    Ms. Brown-Waite. Thank you, Mr. Chairman.
    I look forward to hearing from Chairman Kelliher today as 
he provides us with an update on FERC's progress in 
implementing critical infrastructure protection standards that 
were issued earlier this year.
    While I understand the new regulations are not perfect, I 
believe that they are a positive step toward ensuring that the 
electric grid remains available to provide reliable energy 
despite emerging threats. Clearly, though, more can be done to 
secure the assets critical to generating, transmitting and 
delivering power, but I am pleased by efforts that are already 
under way to increase the focus on security.
    Regarding TVA's inadequate security posture a lack of 
regulation does not seem to be the issue. There are already 
Federal network security regulations in place, regulations that 
it clearly appears that TVA just has not lived up to. 
Regardless of whether harmful incidents arise from malicious 
attacks or operator error, the effect would be the same, 
serious damage to the critical infrastructure and limited 
ability of TVA to provide power to its customers.
    I understand that TVA actually has agreed with the majority 
of GAO's recommendations and has a plan in place to mitigate 
the vulnerabilities that GAO identified. Certainly this is good 
news. But I urge the TVA management to make every possible 
effort to secure their computer systems quickly and to fortify 
their critical assets. The increasing interconnectivity of 
computer systems and dire economic consequences of a successful 
network-based attack warrant very careful oversight of computer 
security efforts.
    I look forward to hearing from the witnesses today, and I 
thank you all very much for being here.
    With that, I yield back.
    Mr. Langevin. I thank the gentlelady.
    Other members of the subcommittee at some point are 
reminded of the committee rules that opening statements may be 
submitted for the record.
    I now welcome our distinguished panel of witnesses.
    Our first witness, Mr. Joseph Kelliher, is the chairman of 
the Federal Energy Regulatory Commission. Chairman Kelliher was 
nominated by President George W. Bush and was sworn in on 
November 20, 2003, for a first term and on December 21, 2007, 
for his second term. He was designated chairman of the 
Commission by President Bush effective July 9, 2005. Before 
becoming a Commissioner, Mr. Kelliher was a senior policy 
adviser to Secretary of Energy, Spencer Abraham. In that 
capacity, he advised the Secretary in a wide range of energy 
policy matters; and I thank you for being here, Mr. Chairman.
    Our second witness, Mr. Richard Sergel, has been President 
and Chief Executive Officer of the North American Electric 
Reliability Corporation since September 12, 2005. Until 2004, 
Mr. Sergel served as President and Chief Executive Officer for 
the National Grid USA and was National Grid Group PLC Executive 
Director for North America on the completion of the National 
Grid New England electric system merger in March, 2000.
    Our third witness is Mr. Greg Wilshusen, Director for 
Information Security Issues at GAO, where he reads information 
security related studies and audits the Federal Government. Mr. 
Wilshusen has testified before the subcommittee on a number of 
occasions, and we certainly welcome you back today.
    Our fourth witness is Mr. William McCollum, the Chief 
Operating Officer of the Tennessee Valley Authority. He has 
held that position since April, 2007. He is responsible for the 
management of TVA power's production, transmission, power 
trading and resources management programs.
    Welcome to you, Mr. McCollum.
    Without objection, the witnesses' full statements will be 
inserted into the record; and I now ask each witness to 
summarize their statement for 5 minutes, beginning with 
Chairman Kelliher.

   STATEMENT OF THE HONORABLE JOSEPH T. KELLIHER, CHAIRMAN, 
  FEDERAL ENERGY REGULATORY COMMISSION (FERC), ACCOMPANIED BY 
 JOSEPH MC CLELLAND, DIRECTOR, OFFICE OF ELECTRIC RELIABILITY, 
                              FERC

    Mr. Kelliher. Thank you, Mr. Chairman; and I want to 
commend you and the subcommittee for its interest in these 
important issues.
    I am accompanied today by Joseph McClelland, who is the 
Director of the FERC Office of Electric Reliability, who 
testified before the subcommittee last fall; and I appreciate 
the opportunity to discuss the need to improve cybersecurity 
and to protect the reliability of the power grid against cyber 
attacks.
    Congress made FERC responsible for overseeing reliability 
of the power grid, guarding the grid against reliability 
attacks, including cyber threats, by establishing and enforcing 
mandatory reliability standards; and that duty was established 
by the Energy Policy Act of 2005.
    Since then, much progress has been made on grid 
reliability. We have certified the Electric Reliability 
Organization, established mandatory reliability standards. We 
are working to improve those standards over time and are 
establishing an enforcement regime. But today I would like to 
focus my remarks on the cyber threat to the grid and the need 
for effective defense.
    In my letter to the subcommittee of November 7 of last 
year, I stated my view that an effective defense of the power 
grid from cyber attack has three necessary elements: No. 1, 
timely and effective identification of cyber vulnerabilities; 
No. 2, an ability to adopt mandatory reliability standards that 
mitigate the vulnerability on a timely basis; and, No. 3, an 
ability to maintain the confidentiality of information 
regarding cyber vulnerability during the standards development 
process, during Commission review, and during compliance 
monitoring and development.
    In my view, current law is inadequate to mount such a 
defense and that FERC needs additional legal authority to 
effectively guard the power grid from national security threats 
such as cyber attacks.
    With respect to the first element of an effective defense, 
FERC is not a national security or an intelligence agency; and 
we are not in the best position to identify cyber threats. U.S. 
Government, though, does have the ability to identify cyber 
threats in a timely and effective manner. FERC cooperates with 
agencies that are in a better position to assess these 
vulnerabilities.
    With respect to the second element of an effective defense, 
currently there is not an adequate means to establish mandatory 
reliability standards in a timely manner. Currently, there are 
two basic means to protect the grid against cyber threats: No. 
1, the process in the Energy Policy Act, section 215 of the 
Federal Power Act; or, No. 2, NERC advisories. In my view, 
neither means is adequate. The 215 process produces reliability 
standards that are mandatory but untimely, given the nature of 
cyber threats, while NERC advisories are timely but voluntary.
    With respect to the 215 process, FERC is using and will 
continue to use the process established by section 215 to set 
reliability standards including cyber standards. Just last 
January, we approved eight critical infrastructure protection 
standards, with 160 requirements designed to improve 
cybersecurity; and I think those standards will improve 
cybersecurity.
    But the principal flaw of the 215 process is it simply 
takes too long. It does not allow for protection of critical 
information. Under the 215 process, it can take years to 
develop new and modified reliability standards, including cyber 
standards.
    If you ask why is there a need for timely action in this 
area, I think it is because the cyber threat is fundamentally 
different from other reliability threats. The section 215 of 
the Federal Power Act was to designed to address different 
reliability challenges.
    Most regional blackouts in the past have been caused in 
part by poor vegetation management near power lines, trees. The 
section 215 process was designed in response to western 
blackouts in the summer of 1996 that involved tree contact. It 
was not designed with a cyber threat in mind, and I think the 
reliability threat posed by poor vegetation management and 
trees is a fundamentally different threat than the cyber 
threat. The cyber threat is a national security threat that may 
be posed by foreign governments or organized groups, and the 
process designed to guard against poor vegetation management is 
not well-suited to meet national security threats.
    The second means of protecting the power grid from cyber 
threats, the alternative to the mandatory reliability standard 
under 215, is the NERC advisory; and the principal virtue of 
the advisory is dispatch. Its fundamental flaw is that 
compliance is voluntary.
    In the advisory issued last year in response to NERC, I 
want to commend NERC for acting quickly in response to that 
threat. As detailed in our testimony, FERC has been reviewing 
the industry response to the advisory. Significant progress has 
been made, but the results have been inconsistent. I think that 
is, frankly, the predictable result of voluntary advisory, but 
those inconsistencies can weaken the grid because the grid is 
interconnected.
    The third element is confidentiality. The third element of 
an effective defense is confidentiality. The standards 
development process established under 215 typically imposes few 
or no restrictions on dissemination of information. In the case 
of cyber vulnerability, public release of information related 
to cybersecurity can be very harmful.
    For those reasons, we have concluded that legislation is 
necessary to address the cyber threat and be able to mount an 
effective defense; and we look forward to working with the 
committee and the committee of jurisdiction, the Energy and 
Commerce Committee, to give FERC the authority it needs to be 
able to effectively defend the power grid against cyber 
threats.
    With that, I just want to thank the subcommittee for its 
interest.
    [The statement of Mr. Kelliher follows:]
                Prepared Statement of Joseph T. Kelliher
                              May 21, 2008
    Mr. Chairman and Members of the subcommittee, thank you for the 
opportunity to speak with you today about the cyber vulnerabilities of 
the Nation's bulk power system. I appreciate the subcommittee's 
attention to this critically important issue.
    The Energy Policy Act of 2005 (EPAct 2005) made the Federal Energy 
Regulatory Commission (FERC or Commission) responsible for overseeing 
the reliability of the bulk power system. EPAct 2005 authorized the 
Commission to approve and enforce mandatory reliability standards, 
including cyber security standards, to protect and improve the 
reliability of the Nation's bulk power system. Under the new statutory 
framework, reliability standards are proposed by the Electric 
Reliability Organization (ERO) (the North American Electric Reliability 
Corporation or NERC) to the Commission for its review. The Commission 
must either approve the proposed standards or remand them to NERC. The 
Commission and NERC are well underway in implementing the new law, 
including now having in place an initial set of mandatory cyber 
security standards with varying effective dates. Much progress has been 
made in the past 3 years. However, more work needs to be done, both 
with respect to improving those cyber security standards and possibly 
adding new ones. In addition, the Commission has made substantial 
progress in examining whether industry has in place adequate mitigation 
to address the cyber security vulnerability, known as Aurora, which was 
raised at the subcommittee's last hearing on cyber security threats to 
the transmission grid.
    Protecting the interstate bulk power system against cyber security 
threats is critical to the welfare of our Nation's citizens. It is 
therefore appropriate to examine whether sufficient Federal authority 
exists to take timely and effective action to protect against such 
threats, particularly in emergency circumstances. In my view, FERC 
currently does not have sufficient authority to adequately guard 
against cyber security threats to reliability of the bulk power system.
                               background
    In EPAct 2005, the Congress entrusted the Commission with a major 
new responsibility to oversee mandatory, enforceable reliability 
standards for the Nation's bulk power system (excluding Alaska and 
Hawaii). This authority is in section 215 of the Federal Power Act. 
Section 215 requires the Commission to select an ERO that is 
responsible for proposing, for Commission review and approval, 
reliability standards or modifications to existing reliability 
standards to help protect and improve the reliability of the Nation's 
bulk power system. The reliability standards apply to the users, owners 
and operators of the bulk power system and become mandatory only after 
Commission approval. The ERO also is authorized to impose, after notice 
and opportunity for a hearing, penalties for violations of the 
reliability standards, subject to Commission review and approval. The 
ERO may delegate certain responsibilities to ``Regional Entities,'' 
subject to Commission approval.
    The Commission may approve proposed reliability standards or 
modifications to previously approved standards if it finds them ``just, 
reasonable, not unduly discriminatory or preferential, and in the 
public interest.'' If the Commission disapproves a proposed standard or 
modification, section 215 requires the Commission to remand it to the 
ERO for further consideration. The Commission, upon its own motion or 
upon complaint, may direct the ERO to submit a proposed standard or 
modification on a specific matter. The Commission also may initiate 
enforcement on its own motion.
    The Commission has implemented section 215 diligently. In 
anticipation of reliability legislation being passed, it established a 
reliability group at the agency even before the passage of EPAct 2005. 
Within 180 days of enactment, the Commission adopted rules governing 
the reliability program. In the summer of 2006, it approved NERC as the 
ERO. In March 2007, the Commission approved the first set of national 
mandatory and enforceable reliability standards. In April 2007, it 
approved eight regional delegation agreements to provide for 
development of new or modified standards and enforcement of approved 
standards by Regional Entities. The Commission has since approved eight 
additional reliability standards.
    In exercising its new authority, the Commission has interacted 
extensively with NERC and the industry. The Commission also has 
coordinated with other Federal agencies, such as the Department of 
Homeland Security, the Department of Energy, the Nuclear Regulatory 
Commission, and the Department of Defense. Also, the Commission has 
established regular communications with regulators from Canada and 
Mexico regarding reliability, since the North American bulk power 
system is an interconnected continental system subject to the laws of 
three nations.
          cyber security standards approved under section 215
    Section 215 defines ``reliability standard[s]'' as including 
requirements for the ``reliable operation'' of the bulk power system 
including ``cybersecurity protection.'' Section 215 defines reliable 
operation to mean operating the elements of the bulk power system 
within certain limits so instability, uncontrolled separation, or 
cascading failures will not occur ``as a result of a sudden 
disturbance, including a cybersecurity incident.'' Section 215 also 
defines a ``cybersecurity incident'' as a ``malicious act or suspicious 
event that disrupts, or was an attempt to disrupt, the operation of 
those programmable electronic devices and communication networks 
including hardware, software and data that are essential to the 
reliable operation of the bulk power system.''
    In August 2006, NERC submitted eight new cyber security standards, 
known as the Critical Infrastructure Protection (CIP) standards, to the 
Commission for approval under section 215. NERC proposed an 
implementation plan under which certain requirements would be 
``auditably compliant'' beginning by mid-2009 and the others would be 
so by the end of 2010.
    On January 18, 2008, the Commission issued a Final Rule approving 
the CIP Reliability Standards and concurrently directed NERC to develop 
modifications addressing specific concerns.
    The eight CIP standards contain over 160 requirements and sub-
requirements. Generally, the CIP standards will require the following 
actions when fully implemented at the end of 2010:
   Critical Cyber Asset Identification.--Requires the 
        identification of an entity's critical assets and critical 
        cyber assets using a risk-based assessment methodology.
   Security Management Controls.--Requires an entity to develop 
        and implement security management controls to protect critical 
        cyber assets.
   Personnel and Training.--Requires personnel with access to 
        critical cyber assets to go through identity verification, 
        criminal background checks and employee training.
   Electronic Security Perimeters.--Requires the identification 
        and protection of electronic security perimeters and access 
        points. The security perimeters are to encompass the critical 
        cyber assets.
   Physical Security of Critical Cyber Assets.--Requires the 
        creation and maintenance of a physical security plan that 
        ensures all cyber assets within an electronic security 
        perimeter are kept in an identified physical security 
        perimeter.
   Systems Security Management.--Requires an entity to define 
        methods, processes, and procedures for securing the systems 
        identified as critical cyber assets, as well as the non-
        critical cyber assets within the perimeter.
   Incident Reporting and Response Planning.--Requires the 
        identification, classification and reporting of cyber security 
        incidents related to critical cyber assets.
   Recovery Plans for Critical Cyber Assets.--Requires the 
        establishment of recovery plans for critical cyber assets using 
        established business continuity and disaster recovery 
        techniques and practices.
    In the Final Rule, the Commission stated its concern with the 
breadth of discretion left to utilities by the standards. For example, 
the standards state that utilities ``should interpret and apply the 
reliability standard[s] using reasonable business judgment.'' 
Similarly, the standards at times require certain steps ``where 
technically feasible,'' but this is defined as not requiring the 
utility ``to replace any equipment in order to achieve compliance.'' 
Also, the standards would allow a utility at times not to take certain 
action if the utility documents its ``acceptance of risk.'' To address 
this, the Final Rule directed NERC to, among other things:
   Develop modifications to the CIP reliability standards to 
        remove the ``reasonable business judgment'' language.
   Develop modifications to remove ``acceptance of risk'' 
        exceptions from the CIP reliability standards.
   Develop specific conditions that a responsible entity must 
        satisfy to invoke the ``technical feasibility'' exception. This 
        allows flexibility and customization of implementation of the 
        CIP reliability standards in a controlled manner that includes 
        external oversight and audit.
   Provide additional guidance regarding the development of a 
        risk-based assessment methodology for the identification of 
        critical assets.
    For certain other requirements in the CIP standards, the Commission 
addressed its concern about discretion by requiring external oversight 
of utility decisions, such as critical assets lists. This oversight 
could be provided by industry entities with a ``wide-area view,'' such 
as reliability coordinators or the Regional Entities, subject to the 
review of the Commission.
     current process to protect cyber security of bulk power system
    In my view, section 215 is an adequate statutory foundation to 
protect the bulk power system against most reliability threats. 
However, the cyber security threat is different. It is a national 
security threat that may be posed by foreign nations, or others intent 
on undermining the United States through its electric grid. The nature 
of the threat stands in stark contrast to other major reliability 
vulnerabilities that have caused regional blackouts and reliability 
failures in the past, such as vegetation management and relay 
maintenance. Given the national security dimension to the cyber 
security threat, there may be a need to act quickly to protect the bulk 
power system, to act in a manner where action is mandatory rather than 
voluntary, and to protect certain information from public disclosure. 
Our legal authority is inadequate for such action.
Section 215 Process
    As an initial matter, it is important to recognize how mandatory 
reliability standards are established under section 215. Under section 
215, reliability standards are developed by the ERO through an open and 
public process. The Commission can direct NERC to develop a reliability 
standard to address a particular reliability vulnerability, including 
cyber security threats. However, the NERC process can take years to 
develop standards for the Commission's review. In fact, the cyber 
security standards approved by the agency last January took the 
industry approximately 3 years to develop.
    Section 215 relies on the ERO to develop and submit proposed 
reliability standards. NERC's procedures for doing so allow extensive 
opportunity for industry comment, are open, and are generally based on 
the procedures of the American National Standards Institute (ANSI). The 
NERC process is intended to develop consensus on both the need for the 
standard and on the substance of the proposed standard. Although 
inclusive, the process is not nimble.
    Key steps in the NERC process include: nomination of a proposed 
standard using a Standard Authorization Request (SAR); public posting 
of the SAR for comment; review of the comments by industry volunteers; 
drafting or redrafting of the standard by a team of industry 
volunteers; public posting of the draft standard; field testing of the 
draft standard, if appropriate; formal balloting of the draft standard, 
with approval based on 75 percent of total votes and two-thirds of 
weighted industry sector votes; re-balloting, if negative votes are 
supported by specific comments; voting by NERC's board of trustees; and 
an appeals mechanism to resolve any complaints about the standards 
process. NERC-approved standards are then submitted to the Commission 
for its review.
    For the first set of reliability standards proposed by NERC and for 
the CIP standards, the Commission began its process by issuing a staff 
assessment of the proposed standards and allowing public comment on the 
assessment. Based on its consideration of those comments, the 
Commission then issued a Notice of Proposed Rulemaking identifying the 
Commission's proposed actions and allowing additional opportunities for 
public comment. After considering these additional comments, the 
Commission issued a Final Rule approving the proposed standards and 
requiring NERC to prospectively modify them using its standards 
development process, thereby engaging industry.
    Generally, the procedures used by NERC are appropriate for 
developing and approving reliability standards. The process allows 
extensive opportunities for industry and public comment. The public 
nature of the reliability standards development process is a strength 
of the process as it relates to most reliability standards. However, it 
can be a weakness in the development of cyber security standards, given 
the nature of the threat.
    The procedures used under section 215 for the development and 
approval of reliability standards do not provide an effective and 
timely means of addressing urgent cyber security risks to the bulk 
power system, particularly in emergency situations. Certain 
circumstances, such as those involving national security, may require 
immediate action. If a significant vulnerability in the bulk power 
system is identified, procedures used so far for adoption of 
reliability standards take too long to implement effective corrective 
steps.
    FERC rules governing review and establishment of reliability 
standards allow the agency to direct the ERO to develop and propose 
reliability standards under an expedited schedule. For example, FERC 
could order the ERO to submit a reliability standard to address an 
identified reliability vulnerability within 60 days. NERC's rules of 
procedure include a provision for approval of urgent action standards 
that can be completed within 60 days and which may be further expedited 
by a written finding by the NERC board of trustees that an 
extraordinary and immediate threat exists to bulk power system 
reliability or National security.
    However, even a reliability standard developed under the urgent 
action provisions would likely be too slow in certain circumstances. 
Faced with a cyber security or other national security threat to 
reliability, FERC may need to act decisively in hours or days, rather 
than months or years. That would not be feasible under the urgent 
action process. In the meantime, the bulk power system would be left 
vulnerable to a known cyber security threat. Moreover, existing 
procedures, including the urgent action procedure, would widely 
publicize the vulnerability and the possible solutions, thus increasing 
the risk of hostile actions before the appropriate solutions are 
implemented.
    In addition, the proposed standard submitted to the Commission may 
not be sufficient to address the vulnerability. As noted above, when a 
proposed reliability standard is submitted to FERC for its review, 
whether submitted under the urgent action provisions or the usual 
process, the agency cannot modify such standard and must either approve 
or remand it. Since the Commission may not modify a proposed 
reliability standard under section 215, we would have the choice of 
approving an inadequate standard and directing changes, which 
reinitiates a process that can take years, or rejecting the standard 
altogether. Under either approach, the bulk power system could remain 
vulnerable for a prolonged period.
NERC Advisories
    Currently, the alternative to a mandatory reliability standard is 
for NERC to issue an advisory encouraging utilities and others to take 
action to guard against cyber vulnerabilities. That approach provides 
for quicker action, but any such advisory is voluntary, and should be 
expected to produce inconsistent responses. That was our experience 
with the response to an advisory issued last year by NERC regarding an 
identified cyber security threat. Since the grid is interconnected, 
those inconsistencies can retard cyber security measures. Reliance on 
voluntary measures to assure cyber security is fundamentally 
inconsistent with the conclusion Congress reached during enactment of 
the Energy Policy Act, namely that voluntary standards cannot assure 
reliability of the bulk power system.
    In response to the risk of cyber attack identified last year as 
Aurora, this subcommittee convened a hearing on October 17, 2007. Mr. 
Joseph H. McClelland, the Director of the Commission's Office of 
Electric Reliability, testified at that hearing. NERC reported that it 
issued an advisory to generator owners, generator operators, 
transmission owners, and transmission operators. According to NERC, 
this advisory identified a number of short-term measures, mid-term 
measures and long-term measures designed to mitigate the cyber 
vulnerability. NERC asked the recipients to voluntarily implement the 
measures. NERC also sent a data request to industry members to 
determine compliance with the advisory. That data request was limited 
in scope, however, asking only that industry members indicate if their 
mitigation plans are ``complete,'' ``in progress,'' or ``not 
performing.''
    The Commission determined that the information sought by NERC in 
the above data request was not sufficient for the Commission to 
discharge its duties under section 215 because it did not provide 
sufficient details about individual mitigation efforts for the 
Commission to be certain that the threat had been addressed. For 
example, it did not provide information such as what facilities were 
the subject of the mitigation plans, what steps to mitigate the cyber 
vulnerability were being taken, and when those steps were planned to be 
taken--and, if certain actions were not being taken, why not. 
Therefore, on October 23, 2007, the Commission provided notice to the 
Office of Management and Budget (OMB) that it intended to immediately 
issue a directive requiring all generator owners, generator operators, 
transmission owners, and transmission operators that are registered by 
NERC and located in the United States to provide to NERC certain 
information related to actions they have taken or intend to take to 
protect against the cyber vulnerability; this would allow the 
Commission to review the mitigation plans at a central location to be 
certain that the vulnerability had been addressed. The Commission 
requested emergency processing of this proposed information collection. 
After receiving clearance from OMB, the Commission issued a Notice of 
Proposed Information Collection and Request for Comments (Notice). 
Comments were due on January 14, 2008.
    The Commission received seven sets of comments in response to the 
Notice, including joint comments filed by four industry trade 
associations: American Public Power Association, Edison Electric 
Institute, National Rural Electric Cooperative Association, and the 
Electric Power Supply Association. These trade associations represented 
the majority of entities that would be required to respond to the 
proposed information collection. A common concern among the commenters 
was the need to ensure the confidentiality of sensitive information 
that would be provided in response to the proposed information 
collection. Commenters urged that the Commission implement additional 
security measures to safeguard the collected information. Commission 
staff met with trade association representatives to discuss these 
concerns and how they might be addressed. Rather than experience 
further delays by answering these objections to the proposed mandatory 
information collection, it was determined that staff would first work 
with industry groups to develop a plan to informally gather 
information, on a voluntary basis, regarding the status of compliance 
with NERC's Aurora advisory. In February, Commission staff began 
performing interviews with a stratified sampling of electric utilities 
concerning their compliance with the Aurora advisory. These interviews 
are continuing as of this date.
    Commission staff has conducted over 20 detailed interviews with a 
variety of electric utilities geographically dispersed across the 
contiguous 48 States, to assess the state of the industry's protection 
against remote access cyber vulnerabilities, including the Aurora 
vulnerability. The utilities were selected to encompass both large and 
small companies, and a mixture of generating companies, transmission 
companies, and mixed-asset companies. The sample of companies included 
both investor-owned utilities and cooperative organizations. Interviews 
with publicly owned utilities and municipal organizations are planned 
in the near future. Each interview typically lasted 6 to 8 hours and 
utilities voluntarily participated. The utilities were well prepared 
with documents to explain their actions, and were very cooperative in 
responding to staff questions.
    Topics discussed included the use of passwords and other forms of 
access controls, means of authenticating users, physical security of 
cyber assets, means of communicating, vendor access, access revocation, 
the use of firewalls and intrusion detection/prevention devices, 
vulnerability assessments, the ways in which communications devices are 
utilized, as well as the prevalence and functionality of digital 
control devices. Staff found a wide range of equipment, configurations 
and security features implemented by the utilities interviewed. While 
staff intends to perform more interviews, there are several 
observations that can be made based on the interviews to date.
    All of the companies selected by the Commission fully cooperated in 
the interviews. We learned that no company we interviewed ignored the 
Aurora advisory, although we did find there was a broad range of 
compliance based on individual interpretations of the threat and the 
application of the recommended mitigation measures. In fact, all of the 
utilities interviewed by the Commission requested additional 
information to help understand the technical implications of the attack 
and the specific strategies to mitigate the identified vulnerabilities. 
Through these selected interviews, FERC staff has determined that 
although progress has been made by every entity it interviewed, much 
work remains to be done.
    While NERC can issue an alert, as it did in response to the Aurora 
vulnerability, compliance with these alerts is voluntary. Further, as 
Commission staff has found with the Aurora alert, such alerts can cause 
uncertainty about the specific strategies needed to mitigate the 
identified vulnerabilities.
                               conclusion
    The Congress made FERC responsible for overseeing the reliability 
of the bulk power system, but it provided specific restrictions on the 
procedures to be used to develop and put into effect mandatory 
reliability standards. Section 215 is an adequate basis to protect the 
bulk power system against most reliability threats, and for that reason 
I do not believe there is a need to amend section 215. However, I 
believe a different statutory mechanism is needed to protect the grid 
against cyber security threats, given the nature of these threats. One 
approach would allow the Commission to directly establish interim 
reliability standards that are mandatory and enforceable upon a finding 
by a national security or intelligence agency that there is a national 
security threat to the bulk power system. This narrowly tailored 
approach would ensure that reliability of the bulk power system can be 
protected until the ERO reliability standards development process can 
create a permanent reliability standard. It also would provide that the 
authority be used rarely, in instances when other appropriate agencies 
determine that a threat is real and the Commission determines existing 
standards to be inadequate. It also may be necessary to authorize the 
Commission to protect certain information from disclosure, if its 
release could have significant adverse effect on the health and safety 
of the public or the common defense or national security.
    The full range of cyber security risks to the bulk power system are 
not known, and new risks will continue to arise. I believe we should 
not allow the Nation's bulk power system to be vulnerable to a known 
national security threat while waiting months or years for a 
reliability standard to be developed and submitted to the Commission 
for review. At the same time, reliance on a voluntary alert issued by 
NERC similarly does not provide adequate assurance that steps will be 
taken in sufficient time to address a known vulnerability. Given the 
national security dimension to the cyber security threat, there may be 
a need to act quickly to protect the bulk power system, to act in a 
manner where action is mandatory rather than voluntary, and to protect 
certain information from public disclosure. Our legal authority is 
inadequate for such action.
    The Commission has taken, and will continue to take, action to 
protect the bulk power system from cyber vulnerabilities. We continue 
to work with national security agencies to understand the nature of the 
threats facing the bulk power grid. We have established mandatory cyber 
security standards under the section 215 process and have directed 
improvements in approved standards over time. We also continue to 
review the industry response to the NERC advisory on the Aurora threat, 
and may review the response to any future such advisories. But I do not 
want to leave you under the impression that these steps adequately 
protect the bulk power system against cyber attacks.
    Thank you again for the opportunity to testify today. I would be 
happy to answer any questions you may have.

    Mr. Langevin. Mr. Kelliher, thank you very much for your 
testimony.
    I now recognize Mr. Sergel to summarize his statement for 5 
minutes.

  STATEMENT OF RICHARD SERGEL, PRESIDENT AND CHIEF EXECUTIVE 
OFFICER, NORTH AMERICAN ELECTRIC RELIABILITY CORPORATION (NERC)

    Mr. Sergel. Good afternoon, Mr. Chairman and members of the 
subcommittee. I am president and chief executive officer of the 
North American Electric Reliability Corporation, better known 
as NERC, and appreciate the opportunity to appear here today to 
regain--to begin to regain your trust in NERC and to discuss 
the progress being made to increase the cybersecurity of the 
electric grid and to mitigate identified vulnerabilities; and I 
am going to focus on the two things that we have done since the 
last time we were here.
    The first is--my testimony will address two major points. 
First, the cybersecurity standards for the bulk power system, 
mandatory and enforceable this July, represent a significant 
improvement in cybersecurity for the electricity industry. 
Second, NERC has enhanced the process for warning the electric 
industry of cybersecurity threats and implementing mitigation 
measures to address identified vulnerabilities.
    Now cybersecurity of control systems is an increasing 
priority for every sector of the U.S. economy. NERC and the 
electricity sector have recognized and responded to this 
challenge first through the voluntary standards but now through 
mandatory critical infrastructure standards. The standards are 
intended to ensure that the electric industry will devote the 
necessary resources to securing control systems and related 
cyber assets. The Commission approved those standards in 
January 2008.
    Now the standards development requires progressive and 
continuous improvement. You have mentioned that in your 
statement, and the improvement of those standards already is 
under way through NERC's standards development process. In 
improving the standards, FERC directed NERC to make certain 
modifications. Those will be made.
    FERC also directed us to monitor the development and 
implementation of the NIST standards; and if provisions of the 
NIST standards that would better protect the system are 
identified, they will be addressed in the standards development 
process. NERC originally planned to review the standards in 
2009 but has advanced this review to address the changes 
directed by the Commission.
    Now while our protections for the grid are stronger with 
the standards in place, those standards cannot eliminate the 
threat of a cyber disruption. Vigilance is required. More is 
required.
    NERC serves as the Electricity Sector Information Sharing 
and Analysis Center, ES-ISAC, which is responsible for promptly 
analyzing and disseminating threat indications, analyses and 
warnings to assist the electric industry; and, as the 
subcommittee is aware, the ES-ISAC issued an advisory on June 
21, 2007, in relation to the vulnerability identified in the 
demonstration test. Now, since that advisory was issued, 
important improvements have been made in the cybersecurity 
alert system.
    First, NERC now has in place a formal mechanism for issuing 
alerts to the industry about important matters that come either 
from NERC's own event analysis or, as was the case with the 
Aurora demonstration test, from government agencies with 
specific information about possible threats.
    Second, NERC now has developed a contact list for all 1,800 
owners, operators, and users of the bulk power system. It did 
not have that at the time.
    Third, coordination with the Commission on these important 
communications is now a requirement of the rules of procedure.
    None of those were in place. They are in place now. We 
believe we have substantially addressed many of the concerns 
expressed by the Chair and the committee, and we look forward 
to addressing the others in the months ahead.
    In closing, the mandatory and enforceable standards now in 
place represent a important milestone to strengthen grid 
reliability; and NERC has strengthened the existing alert 
system to advise the industry when a cyber threat is 
identified.
    We look forward to answering your questions. Thank you very 
much.
    [The statement of Mr. Sergel follows:]
                  Prepared Statement of Richard Sergel
                              May 21, 2008
    Mr. Chairman and Members of the subcommittee, the North American 
Electric Reliability Corporation \1\ (``NERC'') is pleased to provide 
this testimony on the progress being made to increase the cybersecurity 
of the electric grid and to mitigate identified vulnerabilities.
---------------------------------------------------------------------------
    \1\ NERC is the corporate successor to the North American Electric 
Reliability Council, also called ``NERC,'' formed to serve as the 
electric reliability organization (``ERO'') authorized by Section 215 
of the Federal Power Act (``FPA''), as added by Title XII, Subtitle A 
of the Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594, 
941 (2005).
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                           executive summary
    Cyber security of control systems is an increasing priority for 
every sector of the U.S. economy. On behalf of the electric power 
sector, NERC has recognized and responded to this challenge, first 
through a voluntary cybersecurity standard and now through mandatory 
Critical Infrastructure Protection (``CIP'') Reliability Standards for 
the bulk power grid. CIP Reliability Standards CIP-002-1 through CIP-
009-1 were approved by the Federal Energy Regulatory Commission 
(``FERC'') in January 2008 and become mandatory and enforceable in 
July. The CIP Reliability standards are intended to assure that the 
electricity industry will devote the necessary resources to securing 
control systems and identifying, responding to and reporting security 
incidents related to critical cyber assets.
    The CIP Reliability Standards represent a significant improvement 
in cyber security for the electricity industry. The new standards will 
increase the resiliency of control systems and improve the ability of 
these critical assets to withstand cyber-based attacks. Cyber security 
requirements will be applied to companies and assets where they have 
never before been applied, including substations and generating plants. 
The bulk power system will be more reliable with the CIP Reliability 
Standards in place.
    In approving the CIP Reliability Standards, FERC directed NERC to 
make certain modifications to the standards, and also to monitor the 
development and implementation of Recommended Security Controls for 
Federal Information Systems under development by the National Institute 
of Standards and Technology (``NIST''). The Commission-required 
modifications to the CIP Reliability Standards are being addressed 
through NERC's American National Standards Institute (``ANSI'') 
accredited Reliability Standards development process. That process also 
provides the mechanism for NERC to monitor developments in the NIST 
process, and to determine whether any provisions of the NIST standards 
would better protect bulk power system reliability than the CIP 
Reliability Standards.
    The CIP Reliability Standards will be reviewed, modified and 
improved on an ongoing basis through the NERC Reliability Standards 
development process. This will result in ever-increasing cyber security 
for the bulk power system.
    The CIP Reliability Standards, however, cannot eliminate the threat 
of a cyber disruption of critical national infrastructure. Because NERC 
has jurisdiction only to propose reliability standards for the bulk 
power system, the CIP Reliability Standards cannot address other 
critical assets--such as telecommunications systems, for example, or 
electricity distribution systems. Moreover, the open process by which 
Reliability Standards are developed, while demonstrably successful in 
producing standards that have significantly enhanced the reliability of 
the grid, may not be ideally suited to situations where, because of the 
sensitive subject matter, confidentiality is required.
    NERC reviews cybersecurity threats on an ongoing basis. Since 2003, 
NERC, acting through its Critical Infrastructure Protection Committee 
(``CIPC''), has compiled an annual list of the highest priority cyber 
vulnerabilities and their associated mitigation measures.\2\ 
Additionally, NERC serves as the Electricity Sector Information Sharing 
and Analysis Center (``ES-ISAC''),\3\ which is responsible for promptly 
analyzing and disseminating threat indications, analyses and warnings 
to assist the electricity industry.
---------------------------------------------------------------------------
    \2\ The most recent list is available on the NERC website at: ftp:/
/ftp.nerc.com/pub/sys/all_updl/cip/
2007_Top_10_Final_Approved_by_CIPC.pdf.
    \3\ The ES-ISAC has been operated by NERC since it was formed in 
2001. The ES-ISAC was created as a result of action by the U.S. 
Department of Energy in response to Presidential Decision Directive 63 
issued in 1998. The ES-ISAC works with the electricity industry to 
identify and mitigate cyber vulnerabilities by providing information, 
recommending mitigation measures, and following up to monitor 
implementation of recommended measures.
---------------------------------------------------------------------------
    As the subcommittee is aware, the ES-ISAC issued an Advisory on 
June 21, 2007, in relation to the vulnerability identified in the 
Aurora demonstration test. Since that Advisory was issued, important 
improvements have been made in the notification process. First, NERC 
now has in place a formal mechanism for issuing alerts to the industry 
about important matters that come either from NERC's own event analysis 
efforts or, as was the case with the Aurora demonstration test, from 
government agencies with specific information about possible threats. 
Second, NERC has now developed a contact list for every owner, operator 
and user of the bulk power system. This comprehensive list will assure 
that future Advisories are directed to those officials responsible for 
cybersecurity.
                             i. background
    NERC's mission is to ensure that the bulk power system in North 
America is reliable. To achieve this objective, NERC develops and 
enforces reliability standards; monitors the bulk power system; 
assesses and reports on the adequacy of electricity supplies and 
transmission; evaluates owners, operators, and users for reliability 
preparedness; and educates, trains and certifies industry personnel. 
NERC is a self-regulatory organization that draws upon the collective 
expertise of the electricity industry. FERC certified NERC as the 
Electric Reliability Organization (``ERO'') in its order issued July 
20, 2006.\4\
---------------------------------------------------------------------------
    \4\ Order Certifying North American Electric Reliability 
Corporation as the Electric Reliability Organization and Ordering 
Compliance Filing, 116 FERC  61,062 (2006).
---------------------------------------------------------------------------
    Because Reliability Standards are applicable to the entire, 
interconnected North American bulk power system, NERC is subject to 
oversight by governmental authorities in both Canada and the United 
States. In the United States, with oversight from FERC, since June 18, 
2007, NERC has had legal authority to enforce reliability standards 
applicable to all owners, operators, and users of the bulk power 
system.
      ii. critical infrastructure protection reliability standards
    On January 18, 2008, FERC issued Order No. 706, approving eight 
mandatory Reliability Standards for Critical Infrastructure 
Protection.\5\ NERC views the Commission's approval of the CIP 
Reliability Standards as another major step forward in ensuring the 
reliability of the electric grid.
---------------------------------------------------------------------------
    \5\ Mandatory Reliability Standards for Critical Infrastructure 
Protection, Order No. 706, 122 FERC  61,040 (2008), reh'g denied, 
Order No. 706-A, 123 FERC  61,174 (2008).
---------------------------------------------------------------------------
    The standards set forth specific requirements that are binding on 
users, owners and operators of the bulk power system to safeguard 
critical cyber assets (programmable electronic devices and 
communication networks including hardware, software, and data). They 
require identification and documentation of cyber risks and 
vulnerabilities, establishment of controls to secure critical cyber 
assets from physical and cyber sabotage, reporting of security 
incidents, and establishment of plans for recovery in the event of an 
emergency. The eight approved CIP Reliability Standards are:
   CIP-002-1--Cyber Security--Critical Cyber Asset 
        Identification.--Requires a responsible entity to identify its 
        critical assets and critical cyber assets using a risk-based 
        assessment methodology.
   CIP-003-1--Cyber Security--Security Management Controls.--
        Requires a responsible entity to develop and implement security 
        management controls to protect identified critical cyber 
        assets.
   CIP-004-1--Cyber Security--Personnel and Training.--Requires 
        verification of identity for personnel with access to critical 
        cyber assets, a criminal background check, and training.
   CIP-005-1--Cyber Security--Electronic Security Perimeters.--
        Requires the identification and protection of an electronic 
        security perimeter (which encompass the identified critical 
        cyber assets) and access points.
   CIP-006-1--Cyber Security--Physical Security of Critical 
        Cyber Assets.--Requires a responsible entity to create and 
        maintain a physical security plan that ensures that all cyber 
        assets within an electronic security perimeter are kept in an 
        identified physical security perimeter.
   CIP-007-1--Cyber Security--Systems Security Management.--
        Requires a responsible entity to define methods, processes, and 
        procedures for securing the systems identified as critical 
        cyber assets, as well as the non-critical cyber assets within 
        an electronic security perimeter.
   CIP-008-1--Cyber Security--Incident Reporting and Response 
        Planning.--Requires a responsible entity to identify, classify, 
        respond to, and report cyber security incidents related to 
        critical cyber assets.
   CIP-009-1--Cyber Security--Recovery Plans for Critical Cyber 
        Assets.--Requires the establishment of recovery plans for 
        critical cyber assets using established business continuity and 
        disaster recovery techniques and practices.
    The critical infrastructure protection standards approved through 
Order No. 706 are a sound starting point for the electric industry to 
address cybersecurity. Order No. 706 is not the end of the process, 
however. Standards development requires progressive and continuous 
improvement. Indeed, improvement of the CIP Reliability Standards 
already is underway, both in response to directions given by FERC in 
Order No. 706 and as part of NERC's Reliability Standards development 
process, which requires that each Reliability Standard be reviewed at 
least every 5 years.
A. Implementation of the Approved CIP Reliability Standards
    Order No. 706 approved the implementation plan for the CIP 
Reliability Standards submitted by NERC, which phases in full 
compliance with all of the requirements over a 3-year period (July 
2008-December 2010). NERC proposed and FERC approved timelines for 
achieving compliance that afford a reasonable period of time for grid 
users, owners and operators to acquire and install the necessary 
software and equipment and develop new programs and procedures to 
achieve compliance. Enforcement begins in July for the most urgent 
requirements, with the implementation of additional requirements 
continuing through 2010.
    NERC has allocated and will continue to devote the resources 
necessary to administer and enforce the CIP Reliability Standards. 
NERC's 2008 Business Plan and Budget, as approved by FERC,\6\ allocates 
nearly $8 million (approximately 30 percent of NERC's overall budget) 
for compliance enforcement and organization registration and 
certification activities. To enable NERC to carry out its 
responsibilities for developing and administering Reliability 
Standards, NERC's total number of full time equivalent employees will 
increase by approximately 20 percent above 2007 levels in 2008.
---------------------------------------------------------------------------
    \6\ North American Electric Reliability Corp., FERC  61,057 
(2007). The major program elements of NERC's business plan and budget 
are: (1) Reliability Standards; (2) compliance enforcement and 
organization registration and certification; (3) reliability readiness 
audits and improvement; (4) training, education and operator 
certification; (5) reliability assessment and performance analysis; (6) 
situational awareness and infrastructure security; and (7) 
administrative services. P 12. In approving the NERC 2008 Budget and 
Business Plan, the Commission considered the adequacy of staffing and 
funding proposed by NERC in finding that the Budget is reasonable. P 
22. NERC's funding comes primarily from end users based on net energy 
for load.
---------------------------------------------------------------------------
    Additionally, FERC has approved the 2008 budgets for the regional 
Reliability Entities, which share enforcement authority with NERC 
pursuant to delegation agreements approved by FERC. The Regional 
Entities are in the process of holding regional seminars on the CIP 
Reliability Standards.
    The Commission in Order No. 706 directed NERC to develop 
modifications to the CIP Reliability Standards to address specific 
matters through the Reliability Standards development process. The 
Commission provided expressly that the development of modifications was 
not to affect the implementation of the CIP Reliability Standards as 
approved.\7\ NERC originally planned to review the CIP Reliability 
Standards in 2009, but has advanced this review to address the changes 
directed by FERC in Order No. 706.
---------------------------------------------------------------------------
    \7\ As the Commission explained in Order No. 706 at P 30: 
``Consistent with section 215 of the FPA, our regulations, and Order 
No. 693, any modification to a Reliability Standard, including a 
modification that addresses a Commission directive, must be developed 
and fully vetted through NERC's Reliability Standard development 
process. Until the Commission approves NERC's proposed modification to 
a Reliability Standard, the preexisting Reliability Standard will 
remain in effect.''
---------------------------------------------------------------------------
B. Modifications to Approved CIP Reliability Standards and Additional 
        Directives to NERC
    The Commission in Order No. 706 directed NERC to modify the CIP 
Reliability Standards to remove ``reasonable business judgment'' \8\ 
and ``acceptance of risk'' \9\ language. The Commission also directed 
NERC to better define the circumstances under which exceptions to the 
standards based on technical infeasibility would be allowed.\10\ 
Additional changes pertaining to each of the eight CIP Reliability 
Standards were ordered by the Commission.
---------------------------------------------------------------------------
    \8\ Order No. 706 at P 128. ``Reasonable business judgment'' would 
have been used as a guide in determining what constituted compliance 
with the CIP Reliability Standards.
    \9\ Order No. 706 at P 150. The acceptance of risk language would 
have permitted entities subject to the CIP Reliability Standards to 
accept the risk of non-compliance.
    \10\ Order No. 706 at P 178.
---------------------------------------------------------------------------
    Of particular interest to the subcommittee, the Commission did not 
direct NERC to incorporate provisions of NIST Special Publication (SP) 
800-53 into the CIP Reliability Standards. Order No. 706, P 232. The 
Commission did direct NERC to ``monitor the development and 
implementation of the NIST standards to determine if they contain 
provisions that will protect the Bulk-Power System better than the CIP 
Reliability Standards.'' Order No. 706, P 233. Any provisions of the 
NIST standards that are determined to better protect bulk power system 
reliability are to be addressed in the NERC Reliability Standards 
development process. Id.
    FERC further directed NERC to consult with Federal entities 
required to comply with both the NIST standards and the CIP Reliability 
Standards on implementation and effectiveness issues. Id. This 
consultation is underway. NERC personnel spoke at the recent Federal 
Power Marketing Agencies Cyber Security Conference and are working on 
this issue with representatives from the Bonneville Power 
Administration and the Tennessee Valley Authority.
    Another issue raised in the Subcommittee's comments on the NOPR 
concerned interdependencies with other critical infrastructure. The 
Commission addressed this issue in Order No. 706, concluding that 
Section 215 of the Federal Power Act, which authorizes the 
establishment of mandatory Reliability Standards, does not extend 
beyond assets critical to the bulk power system:

    Section 215 of the FPA authorizes the Commission to approve 
        Reliability Standards that ``provide for the reliable operation 
        of the bulk-power system,'' which the statute defines as the 
        facilities and control systems necessary for operation of an 
        interconnected electric energy transmission network and the 
        electric energy needed to maintain transmission system 
        reliability. In addition, section 215(a)(1) specifically 
        excludes from the definition of Bulk-Power System ``facilities 
        used in the local distribution of electric energy.'' Moreover, 
        given the complexities surrounding this issue and the 
        aggressive timeline that will be necessary merely to meet the 
        more modest task of developing and implementing cyber security 
        standards capable of protecting the reliability of the Bulk-
        Power System, we will follow the approach that we described in 
        the CIP NOPR of approving CIP Reliability Standards designed to 
        safeguard the reliability of the Bulk-Power System.

    Order No. 706 at P 340. The Commission identified a need for 
coordination with stakeholders of other infrastructures and with other 
government agencies in order to address interdependencies. NERC is 
pursuing this through the Information Sharing and Analysis Center 
(``ISAC'') Council, which is made up of representatives from critical 
infrastructure sectors, including telecom, water, oil and natural gas, 
emergency services, and maritime, in addition to the electricity 
sector. The ISAC Council routinely shares information about 
interdependencies. Also, NERC participates in the Partnership for 
Critical Infrastructure Security (``PCIS'') and is actively working 
through the PCIS Cross Sector Cyber Security Working Group to 
facilitate information sharing about cyber vulnerabilities and 
successful mitigation strategies.
C. CIP Reliability Standards Improvement Is Underway
    On March 20, the NERC Standards Committee \11\ authorized the 
posting for comments of a Standard Authorization Request (``SAR'') 
proposing modifications to the CIP Reliability Standards to address the 
directives from FERC in Order No. 706. The comment period closed on 
April 19, and the Standards Committee appointed a SAR Drafting Team on 
April 24 to review and respond to the 30 comments received on the first 
draft of the SAR.\12\ There is active Federal agency input to this 
process: NIST was among the entities submitting comments on the SAR, 
and a representative of the Bureau of Reclamation serves on the SAR 
Drafting Team.
---------------------------------------------------------------------------
    \11\ The NERC Standards Committee reports to the NERC Board of 
Trustees and is responsible for overseeing the development of 
Reliability Standards.
    \12\ Detailed information on the proposed modifications is 
available on the NERC Web site at: http://www.nerc.com/%7Efilez/
standards/Project_2008-06_Cyber_Security.html.
---------------------------------------------------------------------------
    The SAR, once approved by the Standards Committee, will become the 
framework upon which the Standard Drafting Team develops the specific 
revisions to the CIP Reliability Standards. The process of improving 
the CIP Reliability Standards will likely be structured in multiple 
phases to address priority items and measures such as removal of the 
``reasonable business judgment'' language first, while recognizing that 
other improvements will require more time. Application of the NIST 
standards will be considered during the drafting of the revisions to 
the CIP Reliability Standards.
    Another of the key topics identified in Order No. 706 is for NERC 
to develop guidance documents to help entities know what is expected to 
comply with certain aspects of the CIP Reliability Standards. The 
Standard Drafting Team will work closely with CIPC to develop these 
guidelines or examples.
    In summary, NERC's Reliability Standards development process 
enables the progressive and continuous improvement of Reliability 
Standards. Going forward, NERC will address the Commission's directives 
and continually evaluate how these standards are executed in practice, 
utilizing this experience as the basis for further improvements. NERC 
also will monitor key industry and technology developments related to 
the CIP Reliability Standards, in order to ensure that the bulk power 
system in North America remains as reliable as possible.
     iii. enhanced mechanisms to communicate emerging threats and 
                          cybersecurity issues
    As noted above, the CIP Reliability Standards in and of themselves 
cannot eliminate the possibility of a cyber disruption of critical 
national infrastructure. The limitation on NERC's jurisdiction to 
propose reliability standards only for the bulk power system means that 
the CIP Reliability Standards cannot address other critical assets--
such as telecommunications systems or electricity distribution systems. 
Moreover, the Reliability Standards development process is by design a 
public and transparent one. That public process--while demonstrably 
successful in producing standards that have significantly enhanced the 
reliability of the grid--may not be ideally suited to situations where 
confidentiality is required (such as the response to the Aurora 
demonstration test).
    NERC recognizes the subcommittee's continuing interest in the 
response to the Aurora demonstration test. Attachment 1 contains a 
description of the actions taken by NERC, in its role as the ES-ISAC, 
to notify the industry of the identified vulnerability, define 
mitigation measures and assess the industry's implementation of those 
measures. NERC believes the industry is cooperating in completing the 
implementation of the recommended mitigation measures contained in the 
Advisory regarding cybersecurity vulnerabilities issued on June 21, 
2007 by the ES-ISAC.
    NERC as the ES-ISAC continues to respond to inquiries regarding the 
measures contained in the June 21 Advisory. Additionally, NERC meets 
with government agencies as requested to discuss the Aurora 
demonstration test. On April 25, NERC met with the Department of 
Defense, the Department of Energy, FERC and other agencies to review 
DOD installations and determine what additional actions should be taken 
by DOD to address vulnerabilities resulting from the Aurora 
demonstration test.
    Lessons Learned: Among the key lessons learned from the Aurora 
demonstration test was the need to improve the alert mechanism by which 
the industry is made aware of significant vulnerabilities and 
recommended mitigation measures. While ES-ISAC alerts are, by their 
very nature, advisory only, with careful oversight of the 
implementation of recommended measures, these alerts can be effective 
in eliciting responses to identified cyber vulnerabilities that are not 
addressed by the Reliability Standards.
    Additionally, the Aurora demonstration test highlighted the 
importance of having in place a comprehensive contact list for all 
users, owners and operators of the bulk power system to facilitate 
rapid communication of ES-ISAC advisories.
    Notwithstanding the limitations on NERC's ability to deal with all 
aspects of the cybersecurity issue, we are acting to address 
effectively those aspects of the critical infrastructure cybersecurity 
challenge that are within our control. If a cyber exploit of an 
identified vulnerability is imminent, NERC as the ES-ISAC will take the 
following actions:
   Obtain approval from the Electricity Sector Coordinating 
        Council to escalate the Cyber Threat Alert Level to Red;
   Post the escalated level on the ES-ISAC Web site;
   Issue an industry advisory with recommended mitigation 
        measures/essential actions to respond to the identified 
        vulnerability;
   Send e-mail notifications to the electric industry through 
        distribution lists designed for notification purposes 
        recommending that the industry promptly complete the immediate 
        mitigation measures identified in the ES-ISAC Advisory; and
   Follow-up to monitor progress in implementing the immediate 
        mitigation measures and report to appropriate government 
        agencies.
    Since the Aurora demonstration test, this notification system has 
been significantly enhanced. First, NERC now has in place a formal 
mechanism for issuing alerts to the industry about important matters 
that come either from NERC's own event analysis efforts or, as was the 
case with the Aurora demonstration test, from government agencies with 
specific information about possible threats. The alert system is set 
out in Rule 810 of NERC's Rules of Procedure \13\ and has three levels:
---------------------------------------------------------------------------
    \13\ Rule 810, ``Information Exchange and Issuance of NERC 
Advisories, Recommendations and Essential Actions.'' See ftp://
ftp.nerc.com/pub/sys/all_updl/rop/
NERC_Rules_of_Procedure_EFFECTIVE_20080321.pdf at pp. 69-70. NERC's 
Rules of Procedure have been approved by FERC. See 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, at P 672; order 
on reh'g, Order No. 672-A, FERC Stats. & Regs.  31,212 (2006); see 
also North American Electric Reliability Council, et al., 122 FERC  
61,245 (2008).
---------------------------------------------------------------------------
   (1) ``Advisories'' are purely informational and are intended 
        to advise certain owners, operators and users of the bulk power 
        system of findings and lessons learned.
   (2) ``Recommendations'' are specific actions that NERC is 
        recommending be considered on a particular topic by certain 
        owners, operators, and users of the bulk power system, 
        according to each entity's facts and circumstances.
   (3) ``Essential Actions'' are specific actions that NERC has 
        determined are essential to be taken by certain owners, 
        operators, or users of the bulk power system to ensure the 
        reliability of the bulk power system. Essential Actions require 
        NERC board approval before issuance.
    ``Recommendations'' and ``Essential Actions'' have mandatory 
reporting requirements on how each entity responds to the alert. This 
reporting will allow NERC to determine whether further actions may be 
necessary. FERC requires that NERC provide at least 5 business days' 
notice to the Commission before an alert is issued, with provision for 
shorter times in the event that faster action is necessary. The Rules 
of Procedure further provide that a report will be filed with the 
Commission (and other government agencies, as appropriate) no later 
than 30 days after the date on which bulk power system owners, users 
and operators are required to report to NERC on their actions taken in 
response to the notification.
    These alerts are not the same as reliability standards--they are 
not enforceable with financial penalties and other sanctions. NERC 
believes, however, that the alerts offer an effective and expeditious 
means of communicating vital information to all owners, operators, and 
users of the bulk power system who have a need to know. When the NERC 
Board of Trustees determines that certain actions are essential for 
owners, operators, and users to take to ensure the reliability of the 
bulk power system, NERC believes those entities will do what is 
necessary.
    Second, NERC has now developed a contact list for every owner, 
operator and user of the bulk power system. At present, there are over 
1,800 entities on the list. The list was initially developed as NERC's 
compliance registry, to identify the entities that are responsible for 
complying with the mandatory reliability standards. This list is more 
comprehensive than the ES-ISAC list used to distribute the June 21 
Advisory.
    NERC is presently using this expanded contact list for alerts, 
including an alert that relates to cyber security. Each alert is 
targeted to the types of entities to which it applies (e.g., 
Reliability Coordinators, Transmission Operators, Generation Owners) 
and identifies the types of employees within the entity (e.g., system 
planners, information technology workers) who need to be informed of 
the alert. NERC is working with the Regional Reliability Entities and 
industry trade associations to expand the contact list, so that we have 
specific contacts for executive officers, cyber security, physical 
security, and operations within each entity on the list.
 iv. government's ability to share information with the private sector
    As described above, NERC, working with the FERC, has enhanced the 
formal cybersecurity alerts/communication processes. However, these 
processes are only as good as the information being distributed. In its 
roles as the ERO and the ES-ISAC, NERC operates as an information 
bridge to the electric industry. NERC collects information from users, 
owners, or operators of the bulk power system, commonly about events on 
the power system, and shares that information throughout the industry 
and with government agencies. In addition to this ``bottom up'' flow of 
information, NERC also receives information from government agencies in 
the United States and Canada, which is also shared with the industry. 
The information regarding the Aurora demonstration test addressed in 
the June 21 ES-ISAC Advisory is an example of this ``top down'' 
communication.
    Effective communication with the private sector that will trigger 
an immediate and comprehensive response to an identified vulnerability 
requires an ability to articulate the seriousness of the threat. NERC 
understands that the subcommittee has concerns regarding whether the 
Department of Homeland Security, in the case of the Aurora 
demonstration test, shared enough information with the private sector 
to reveal the magnitude of the agency's concern. Where to draw the line 
between releasing information that is necessary to inform private 
action and information that actually expands the vulnerability is a 
concern for both the public and private sectors.
    The formality of the information sharing process now in place has 
improved the flow of information between the government, NERC and the 
industry. Under Rule 810.5 of NERC's Rules of Procedure, NERC advises 
FERC and other applicable governmental authorities of its intent to 
issue advisories, recommendations and essential actions 5 days prior to 
their issuance. The benefits of this notification have already been 
seen with several alerts. Moreover, NERC will report to FERC on the 
actions taken by the relevant grid users, owners, and operators in 
response to an alert and the success of those actions in correcting 
vulnerabilities or deficiencies.
    Another example of formalized information exchange is the 
memorandum of agreement (``MOA'') between the U.S. Nuclear Regulatory 
Commission (``NRC'') and NERC, which describes how the two 
organizations will communicate and cooperate in sharing of information 
on grid reliability in general and specifically on the analysis of 
events that occur on the grid that have the potential to affect nuclear 
power plants. First executed in 2004, the MOA was updated in 2007. 
Under the coordination plan for communications and information sharing 
during or immediately following emergencies, NERC as the ES-ISAC will 
contact the NRC Headquarters Operations Officer when NERC becomes aware 
of a significant grid disturbance or an unusual grid event that has 
affected or may affect the reliability of offsite power to one or more 
nuclear power plants. In turn, when the NRC learns through reports from 
its licensees or other sources about grid events or conditions that 
have affected or could potentially affect the reliability of offsite 
power to one or more nuclear power plants, the NRC will contact NERC 
through the ES-ISAC.
    With this structure in place, Federal agencies, including the 
Department of Energy and the Department of Homeland Security, should 
have increased confidence in NERC's ability to notify the industry 
expeditiously about vulnerabilities identified by the government and 
the appropriate actions to be taken in response.
    Beyond these formal processes, CIPC meetings offer one venue for 
the technical discussion of vulnerabilities between government agencies 
and the industry. Even within these established mechanisms, however, 
challenges will still arise when (as in the case of the Aurora 
demonstration test) the information is classified or there are tight 
controls on the distribution of the information that needs to be 
communicated to the industry.
                               conclusion
    The mandatory and enforceable CIP Reliability Standards represent 
an important milestone to help ensure grid reliability by improving the 
resiliency of control system cyber assets and enhancing their ability 
to withstand cyber-based attacks. The NERC Reliability Standards 
Development Procedure provides a systematic approach to continuously 
improving the standards and documenting the basis for those 
improvements. In addition to providing the mechanism to respond to the 
directions given by FERC in Order No. 706 to modify the 8 CIP 
Reliability Standards, this process provides the opportunity to monitor 
technical and other developments--including the further development of 
the NIST guidance--and reflect those developments, where appropriate, 
in the CIP Reliability Standards. NERC will continue to place a high 
priority on assuring that robust CIP Reliability Standards are adhered 
to by all responsible entities associated with the bulk power system.
    Not all cybersecurity vulnerabilities, however, can be addressed 
through the CIP Reliability Standards. While NERC's enforcement 
authority is limited to the measures that are contained in the CIP 
Reliability Standards, we are committed to analyzing the electric grid 
to identify vulnerabilities, and working with government agencies and 
industry through the ES-ISAC and otherwise to support the rapid 
dissemination of information and mitigation measures for identified 
vulnerabilities.
   Attachment 1.--Assessment of the Implementation of the Mitigation 
       Measures Recommended in the June 21, 2007 ES-ISAC Advisory
                              introduction
    The June 21, 2007 ES-ISAC Advisory regarding cybersecurity 
vulnerabilities (ES-ISAC Advisory) was sent to generation owners, 
generation operators, transmission owners, and transmission operators. 
It was distributed broadly through the industry trade associations 
(American Public Power Association; Canadian Electricity Association; 
Edison Electric Institute (EEI); Electric Power Supply Association; and 
the National Rural Electric Cooperative Association).
    The ES-ISAC Advisory consisted of three parts. The first part 
contained the recommended short- and mid-range (0-180 days) mitigation 
measures.\1\ Part two was the longer term (greater than 180 days) 
measures.\2\ Part three contained recommendations for immediate 
measures.\3\ The ES-ISAC Advisory recommended the development of plans 
to implement the immediate measures in the event that a vulnerability 
is being exploited, but did not recommend that the immediate measures 
be put into practice.
---------------------------------------------------------------------------
    \1\ These measures are designated as numbers 1, 2.1, 2.1.1, 2.1.2, 
2.1.3, 2.1.4, 3.1 and 3.2 in the ES-ISAC Advisory.
    \2\ These measures are designated as numbers 4.1, 4.2, 4.2.1, 
4.2.2, 4.2.3, 5, 6, 7 and 8 in the ES-ISAC Advisory.
    \3\ These immediate measures are designated as numbers 1, 2, 3, 4, 
and 5 in the ES-ISAC Advisory.
---------------------------------------------------------------------------
    After the ES-ISAC Advisory was issued, numerous conference calls 
were held with industry participants to explain the Advisory. Calls 
were convened by trade associations, reliability regions, and 
transmission owner and operator forums. ES-ISAC representatives also 
responded to inquiries from a large number of companies. In general, 
the industry response was constructive and demonstrated a commitment to 
mitigating the vulnerability. In communications with the industry, the 
ES-ISAC acknowledged its lack of authority to require completion of the 
mitigation measures, and the fact that the Advisory was not part of the 
NERC Reliability Standards mandatory compliance program. ES-ISAC 
representatives also discussed the ``For Official Use Only'' 
classification on the Advisory, which was established by the 
Departments of Homeland Security and Energy and the Nuclear Regulatory 
Commission, and the need for maintenance of the confidentiality of 
information.
    The ES-ISAC conducted both an initial assessment of the 
implementation of the recommended measures and a formal, written survey 
to measure industry progress in completing the mitigation measures. The 
initial assessment was conducted in September and early October 2007 
and was performed by gathering information with sector entities in 
phone conversations and at meetings. No formalized survey instrument 
was used. In addition, a small number of entities submitted unsolicited 
reports on their progress to the ES-ISAC.
    Based on the information gathered in the discussions, the submitted 
reports, and expert knowledge of the ownership and geography of the 
bulk power system, the ES-ISAC concluded that approximately 75 percent 
of the transmission grid had received mitigation measures or such 
measures were in progress.
    The October 19, 2007 survey was sent to a list of 65 contacts 
representing major entities in the bulk power system developed by the 
ES-ISAC with assistance from EEI. The written survey focused on the 
implementation of the short- and mid-range measures only. The survey 
did not measure progress on the long-term measures. A blank copy of the 
survey and cover letter is attached.
    One hundred thirty-three entities responded to the survey. The 
respondents ranged from small municipally-owned utilities to very 
large, multistate, investor-owned utilities. More responses were 
received than surveys were distributed because in some cases, 
recipients further distributed the survey to affected entities. As an 
example, surveys were sent to reliability regions and the regions 
passed the survey on to multiple entities in the region. Responses to 
the survey were requested by November 2, 2007.
    Survey respondents were assured the information submitted would be 
kept confidential. The following paragraph was included in the survey 
instrument:

    Information supplied in this response will be kept confidential by 
        the ES-ISAC, and will not be shared in any attributable manner 
        with any other entity or government agency, unless the ES-ISAC 
        first provides notice of its intention to do so. Statistical 
        summary information will be calculated from the results, and 
        that information will be shared with select agencies in the 
        U.S. and Canadian governments to indicate an overall state of 
        completeness.
                    general summary of responses \4\
---------------------------------------------------------------------------
    \4\ Detailed information on the survey responses was submitted by 
letter dated December 5, 2007, from David A. Whiteley, Executive Vice 
President of NERC, to Chairman Langevin.
---------------------------------------------------------------------------
    The October 19 survey results indicated that 94 percent of the 
short- and mid-range mitigation measures recommended in the ES-ISAC 
Advisory, including the recommendation to establish a plan to implement 
immediate measures when and if needed, were completed or were in 
progress. This 94 percent consisted of 60 percent completed and 34 
percent in progress. The remaining 6 percent were not being performed 
for a variety of reasons (not applicable due to characteristics of 
equipment; work being done by another entity; the measure could 
comprise reliability rather than help reliability).
    In addition, the information received from the nuclear sector 
confirmed that the electricity sector worked diligently to complete 
mitigation measures on the bulk power system near nuclear facilities. 
The electricity sector took a prioritized approach to completing the 
mitigation measures, working in the early stages with the nuclear 
facilities and then continuing to work on other less critical 
facilities on a prioritized basis. In general, electricity sector 
entities weighed the risks associated with the vulnerability addressed 
in the ES-ISAC Advisory against risks associated with other 
vulnerabilities and worked to balance multiple demands for resources, 
perform routine maintenance, repair damage caused by weather, build new 
facilities for a growing economy, and replace obsolete facilities, 
while mitigating vulnerabilities.
    Several key observations regarding the survey responses:
   The survey results were encouraging and positive and major 
        electricity sector entities representing over 75 percent of the 
        geography and ownership of the bulk power system were proactive 
        in this mitigation effort.
   A significant portion (25 percent to 30 percent) of the 
        sectors' entities did not have the vulnerability due to how 
        they installed their protective systems.
   Respondents were very concerned about the confidentiality of 
        information submitted.
   The results demonstrated a responsible and appropriate 
        response to the ES-ISAC Advisory.
       summary of survey responses by measure (see table 1 below)
    A total of 105 responses were received on behalf of 133 entities. 
In certain cases, a single response was provided on behalf of multiple 
affiliated independent power producers. Of the 105 responses received, 
32 entities indicated that none of the vulnerabilities or 
recommendations contained in the ES-ISAC Advisory was applicable to 
their facilities. This ``non-applicable'' response was very common for 
the independent power producers and a number of the smaller entities 
that responded their facilities did not have any remotely accessible 
digital protective control devices (DPCD). The remaining 73 respondents 
identified at least one of the recommendations in the ES-ISAC Advisory 
that applied to their facilities, and reported on the implementation of 
all of the measures that were deemed applicable.
    The percentages shown in the grid below are calculated by adding 
the number of responses that the measure is ``complete'' or ``in-
progress'' and dividing by the total number of responding entities that 
have the vulnerability. Entities classified as ``not applicable'' on 
Table 1 because they determined that their facilities did not have the 
vulnerability the measure was meant to address are not included in 
figuring the percentage. The narrative in the grid is based on the 
specific survey results as shown in Table 1. Both the grid and the 
table are keyed to the order in which the recommendations were included 
in the ES-ISAC Advisory.

------------------------------------------------------------------------
                  Measure                         Response Analysis
------------------------------------------------------------------------
1    Plan Immediate Action................  Seventy of 71 respondents to
                                             which these measures are
                                             applicable indicated this
                                             is complete or in progress.
                                             This 98 percent (70/71)
                                             rate represented a strong
                                             effort by the sector to
                                             develop the plans to
                                             complete the five immediate
                                             actions if required.
2.1    Enhance Security Remote Access.....  This measure is a summary of
                                             the four below it. The
                                             compliance rate was 97
                                             percent rate (62/64).
2.1.1    Security.........................  This measure required
                                             strengthening the
                                             protections to reduce
                                             unauthorized remote access.
                                             The compliance rate was 98
                                             percent (63/64).
2.1.2    Training.........................  This measure is to provide
                                             security training to
                                             employees with access to
                                             DPCD. While the overall
                                             compliance rate was 98
                                             percent (63/64), more of
                                             the entities reported this
                                             as ``in progress'' (35)
                                             rather than ``completed''
                                             (28).
2.1.3    Information Protection...........  Respondents indicated 100
                                             percent (64/64) took
                                             measures to protect DPCD
                                             access information,
                                             although 28 of 64, almost
                                             half, were still in
                                             progress.
2.1.4    Seal Unused Ports................  This action was more
                                             problematic for some
                                             respondents due to the
                                             virtual impossibility of
                                             sealing unused ports in
                                             some equipment. Fifty-seven
                                             of 62 respondents to which
                                             this measure applied were
                                             completed or in progress,
                                             while five believed sealing
                                             unused ports is not
                                             possible or is counter
                                             productive.
3.1    Control Center Authentication......  Fifty-five of 59 respondents
                                             considered this
                                             configuration that requires
                                             an operator in the control
                                             center to authenticate a
                                             DPCD access. This measure
                                             was not feasible in some
                                             configurations nor
                                             practical if the entity was
                                             small and did not have a
                                             control room.
3.2    Situation Awareness Process........  Forty-seven of 66
                                             respondents reported that
                                             they had not performed this
                                             measure or that the measure
                                             was not applicable. This
                                             was an expected response
                                             because performance of this
                                             measure is the
                                             responsibility of
                                             Independent System
                                             Operators, Regional
                                             Transmission Organizations,
                                             and reliability
                                             coordinators, and thus not
                                             the responsibility of many
                                             of the recipients of the
                                             October 19 survey.
1.1 to 1.5    Specific Immediate Measures.  As discussed above, the
                                             respondents indicated a
                                             high degree of attention to
                                             developing the plans
                                             necessary to complete these
                                             measures if necessary.
                                             There was a higher degree
                                             of variation in the
                                             responses in this category
                                             due to different DPCD and
                                             equipment configurations.
------------------------------------------------------------------------


  TABLE 1.--SURVEY RESPONSES SHOWING IMPLEMENTATION OF RECOMMENDATIONS FOR SHORT-TERM AND MID-TERM MEASURES AND
                                           IMMEDIATE MEASURE PLANNING
----------------------------------------------------------------------------------------------------------------
                                                                           In        Not         Not
                     Mitigation Measure                       Complete  Progress  Performed  Applicable   Total
----------------------------------------------------------------------------------------------------------------
1. Plan immediate actions...................................        55        15         1           2        73
2.1 Enhance security-remote access..........................        38        24         2           9        73
    2.1.1 Security..........................................        38        25         1          10        74
    2.1.2 Training..........................................        28        35         1           5        69
    2.1.3 Information protection............................        36        28         0           5        69
    2.1.4 Seal unused ports.................................        33        24         5           8        70
3.1 Control center authentication...........................        26        29         4           9        68
3.2 Situational awareness process...........................         7        12        12          35        66
----------------------------------------------------------------------------------------------------------------
1.1 Attachment A (only) Planning Access.....................        47        17         0           7        71
1.2 Disable remote change...................................        45        14         5           4        68
1.3 Disable auto reclose....................................        41        11         2          14        68
1.4 Add time delay..........................................        29        12         5          25        71
1.5 Disable remote close....................................        38        10         7          15        70
----------------------------------------------------------------------------------------------------------------
      Totals................................................       461       256        45         148   .......
----------------------------------------------------------------------------------------------------------------

    Mr. Langevin. I thank you for your testimony.
    I will now recognize Mr. Wilshusen to summarize his 
statement for 5 minutes.
    Welcome, Mr. Wilshusen.

  STATEMENT OF GREG WILSHUSEN, DIRECTOR, INFORMATION SECURITY 
ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE (GAO), ACCOMPANIED BY 
         NABA BARKAKATI, SENIOR LEVEL TECHNOLOGIST, GAO

    Mr. Wilshusen. Thank you. Mr. Chairman and members of the 
subcommittee, thank you for the opportunity to participate in 
today's hearing to discuss control systems security.
    I am accompanied today by Naba Barkakati, GAO's acting 
technologist.
    As you know, we have previously reported and testified 
before this subcommittee that critical infrastructure control 
systems face increasing risks due to cyber threats, system 
vulnerabilities and the serious potential impact of attacks, as 
demonstrated by several reported incidents. If control systems 
are not adequately secured, their vulnerabilities could be 
exploited and our critical infrastructures could be disrupted 
or disabled, possibly resulting in loss of life, physical 
damage or economic losses.
    Mr. Chairman, at your request, GAO examined the information 
security controls for the control systems and networks used to 
operate TVA's critical infrastructure. In reports being issued 
today on the results of our examination, we determined that TVA 
had not fully implemented appropriate security controls to 
properly protect its networks and control systems.
    On TVA's corporate network, for example, many of the work 
stations and servers that we examined lacked key security 
patches or were insecurely configured. In addition, certain 
network protocols and devices provided limited protections; and 
TVA's ability to monitor its network using its intrusion 
detection system was limited. On certain control systems and 
networks, passwords or other equivalent documented controls 
were not effectively implemented, user activity was not logged, 
software patches were not current, and viruses protection 
software was not consistently implemented.
    The interconnectivity between the corporate network and 
control systems networks at certain facilities provided 
opportunities for weaknesses on one network to potentially 
affect systems on other networks. Physical security weaknesses 
also introduced risk to control systems at certain facilities. 
For example, live network jacks connected to TVA's internal 
network were publicly accessible.
    An underlying reason for these weaknesses is that TVA had 
not fully implemented its information security program. 
Although TVA had implemented program activities related to 
contingency planning and incident response, it had not 
consistently conducted key activities related to, among other 
things, developing an inventory of systems, assessing risks, 
completing appropriate training for individuals with 
significant security responsibilities, testing and monitoring 
the effectiveness of security controls and identifying and 
tracking remedial actions to mitigate known uncontrolled 
weaknesses. As a result, systems and networks that operate 
TVA's critical infrastructures were at increased risk of 
unauthorized modification or disruption by both internal and 
external threats.
    Accordingly, opportunities exist for TVA to enhance the 
security of its control systems networks. In reports being 
issued today, we are making a total of 92 recommendations to 
strengthen security controls and implement an effective 
information security program that can provide TVA with a solid 
foundation for ensuring sufficient protection of its control 
systems. TVA has concurred with most of our recommendations.
    In summary, TVA's power generation and transmission 
critical infrastructures are important to the economy of the 
southeastern United States and the safety, security and welfare 
of millions of people. However, multiple weaknesses in both the 
agency's corporate network and control systems networks place 
these infrastructures at increased risk. If TVA does not take 
sufficient steps to secure its control systems and fully 
implement its security program, it risks not being able to 
prevent or respond properly to a disruption caused by either 
malicious or unintended cyber incident.
    Mr. Chairman, this concludes our statement. We would be 
happy to answer questions at this time.
    [The statement of Mr. Wilshusen follows:]
               Prepared Statement of Gregory C. Wilshusen
                              May 21, 2008
    information security: tva needs to enhance security of critical 
              infrastructure control systems and networks
   gao highlights: highlights of gao-08-775t, a testimony before the 
   subcommittee on emerging threats, cybersecurity, and science and 
  technology, committee on homeland security, house of representatives
Why GAO Did This Study
    The control systems that regulate the Nation's critical 
infrastructures face risks of cyber threats, system vulnerabilities, 
and potential attacks. Securing these systems is therefore vital to 
ensuring national security, economic well-being, and public health and 
safety. While most critical infrastructures are privately owned, the 
Tennessee Valley Authority (TVA), a Federal corporation and the 
Nation's largest public power company, provides power and other 
services to a large swath of the American Southeast.
    GAO was asked to testify on its public report being released today 
on the security controls in place over TVA's critical infrastructure 
control systems. In doing this work, GAO examined the security 
practices in place at TVA facilities; analyzed the agency's information 
security policies, plans, and procedures in light of Federal law and 
guidance; and interviewed agency officials responsible for overseeing 
TVA's control systems and their security.
What GAO Recommends
    In public and limited distribution reports being issued today, GAO 
is recommending that TVA take steps to improve implementation of the 
agency's information security program and to correct specific security 
weaknesses identified at TVA facilities.
    In comments on drafts of GAO's reports, TVA provided information on 
steps it is taking to implement these recommendations.
What GAO Found
    TVA had not fully implemented appropriate security practices to 
secure the control systems used to operate its critical infrastructures 
at facilities GAO reviewed. Multiple weaknesses within the TVA 
corporate network left it vulnerable to potential compromise of the 
confidentiality, integrity, and availability of network devices and the 
information transmitted by the network. For example, almost all of the 
workstations and servers that GAO examined on the corporate network 
lacked key security patches or had inadequate security settings. 
Furthermore, TVA did not adequately secure its control system networks 
and devices on these networks, leaving the control systems vulnerable 
to disruption by unauthorized individuals. Network interconnections 
provided opportunities for weaknesses on one network to potentially 
affect systems on other networks. For example, weaknesses in the 
separation of network segments could allow an individual who gained 
access to a computing device connected to a less secure portion of the 
network to compromise systems in a more secure portion of the network, 
such as the control systems. In addition, physical security at multiple 
locations that GAO reviewed did not sufficiently protect the control 
systems. For example, live network jacks connected to TVA's internal 
network at certain facilities GAO reviewed had not been adequately 
secured from unauthorized access. As a result, TVA's control systems 
were at increased risk of unauthorized modification or disruption by 
both internal and external threats.
    An underlying reason for these weaknesses was that TVA had not 
consistently implemented significant elements of its information 
security program. For example, the agency lacked a complete and 
accurate inventory of its control systems and had not categorized all 
of its control systems according to risk, limiting assurance that these 
systems are adequately protected. In addition, TVA's patch management 
process lacked a mechanism to effectively prioritize vulnerabilities. 
As a result, patches that were identified as critical, meaning they 
should be applied immediately to vulnerable systems, were not applied 
in a timely manner.
    Numerous opportunities exist for TVA to improve the security of its 
control systems. For example, TVA can strengthen logical access 
controls, improve physical security, and fully implement its 
information security program. If TVA does not take sufficient steps to 
secure its control systems and fully implement an information security 
program, it risks not being able to respond properly to a major 
disruption that is the result of an intended or unintended cyber 
incident.
    Mr. Chairman and Members of the subcommittee, thank you for the 
opportunity to participate in today's hearing to discuss control 
systems security. We have previously reported and testified before this 
subcommittee that critical infrastructure control systems face 
increasing risks due to cyber threats, system vulnerabilities, and the 
serious potential impact of attacks as demonstrated by reported 
incidents.\1\ If control systems are not adequately secured, their 
vulnerabilities could be exploited, and our critical infrastructures 
could be disrupted or disabled, possibly resulting in loss of life, 
physical damage, or economic losses.
---------------------------------------------------------------------------
    \1\ GAO, Critical Infrastructure Protection: Federal Efforts to 
Secure Control Systems Are Under Way, but Challenges Remain, GAO-07-
1036 (Washington, D.C.: September 2007) and GAO, Critical 
Infrastructure Protection: Multiple Efforts to Secure Control Systems 
Are Under Way, but Challenges Remain. GAO-08-119T (Washington, D.C.: 
October 2007).
---------------------------------------------------------------------------
    The majority of our Nation's critical infrastructures are owned by 
the private sector; however, the Federal Government owns and operates 
critical infrastructure facilities including ones used for energy, 
water treatment and distribution, and transportation. One such entity, 
the Tennessee Valley Authority (TVA)--a Federal corporation and the 
Nation's largest public power company--generates electricity using its 
52 fossil, hydro, and nuclear facilities, all of which use control 
systems. As a wholly owned government corporation, TVA is to comply 
with the Federal Information Security Management Act of 2002 \2\ 
(FISMA) by developing a risk-based information security program and 
implementing appropriate information security controls for its computer 
systems.
---------------------------------------------------------------------------
    \2\ FISMA was enacted as title III, E-Government Act of 2002, Pub. 
L. No. 107-347 (Dec.17, 2002).
---------------------------------------------------------------------------
    In our testimony today, we will summarize the results of our review 
of the security controls over TVA's critical infrastructure control 
systems. We are issuing two reports today, one publicly available and 
one with limited distribution, which provide additional details on the 
results of our review.\3\ Our objective was to determine whether TVA 
has effectively implemented appropriate information security practices 
for its control systems. In preparing for this testimony, we relied on 
our work supporting these reports, which discuss the details of our 
scope and methodology. The information in this testimony is 
specifically based on our public report, which has been reviewed for 
sensitivity by TVA.
---------------------------------------------------------------------------
    \3\ GAO, Information Security: TVA Needs to Address Weaknesses in 
Control Systems and Networks, GAO-08-459SU and GAO-08-526 (Washington, 
D.C.: May 2008).
---------------------------------------------------------------------------
    Our testimony is based on the work done for our reports from March 
2007 to May 2008. The work on which this testimony is based was 
conducted in accordance with generally accepted government auditing 
standards, which require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives.
                            results in brief
    TVA had not fully implemented appropriate security practices to 
secure the control systems used to operate its critical infrastructures 
at facilities we reviewed. Specifically, network interconnections 
provided opportunities for weaknesses on one network to potentially 
affect systems on other networks. For example, weaknesses in the 
separation of network segments could allow an individual who gained 
access to a computing device connected to a less secure portion of the 
network to compromise systems in a more secure portion of the network, 
such as the control systems. In addition, physical security at multiple 
locations that we reviewed did not sufficiently protect the control 
systems. As a result, TVA's control systems were at increased risk of 
unauthorized modification or disruption by both internal and external 
threats.
    An underlying reason for these weaknesses was that TVA had not 
consistently implemented significant elements of its information 
security program. For example, the agency lacked a complete and 
accurate inventory of its control systems and it had not categorized 
all of its control systems according to risk, limiting assurance that 
these systems were adequately protected. In addition, TVA's patch 
management process lacked a mechanism to effectively prioritize 
vulnerabilities. Until TVA fully and consistently implements its 
information security program, it risks a disruption of its operations, 
which could impact both TVA and its customers.
    In the reports being issued today,\4\ we are making 19 
recommendations to the Chief Executive Officer of TVA to improve the 
implementation of its agencywide information security program and 73 
recommendations to correct specific information security weaknesses.
---------------------------------------------------------------------------
    \4\ GAO-08-526 and GAO-08-459SU.
---------------------------------------------------------------------------
    In its comments on our reports, TVA concurred with all of our 
recommendations regarding its information security program and the 
majority of our recommendations regarding specific information security 
weaknesses and provided information on steps the agency was taking to 
implement our GAO recommendations.
                               background
    Information security is a critical consideration for any 
organization that depends on information systems and computer networks 
to carry out its mission or business. Of particular importance is the 
security of information and systems supporting critical 
infrastructures--physical or virtual systems and assets so vital to the 
Nation that their incapacitation or destruction would have a 
debilitating impact on national and economic security and on public 
health and safety. Although the majority of our Nation's critical 
infrastructures are owned by the private sector, the Federal Government 
owns and operates key facilities that use control systems, including 
oil, gas, water, electricity, and nuclear facilities. In the electric 
power industry, control systems can be used to manage and control the 
generation, transmission, and distribution of electric power. For 
example, control systems can open and close circuit breakers and set 
thresholds for preventive shutdowns.
    Critical infrastructure control systems face increasing risks due 
to cyber threats, system vulnerabilities, and the potential impact of 
attacks as demonstrated by reported incidents.\5\ Control systems are 
more vulnerable to cyber threats and unintended incidents now than in 
the past for several reasons, including their increasing 
standardization and connectivity to other systems and the Internet. For 
example, in August 2006, two circulation pumps at Unit 3 of the Browns 
Ferry, Alabama, nuclear power plant operated by TVA failed, forcing the 
unit to be shut down manually. The failure of the pumps was traced to 
an unintended incident involving excessive traffic on the control 
system's network.
---------------------------------------------------------------------------
    \5\ See GAO, Critical Infrastructure Protection: Multiple Efforts 
to Secure Control Systems Are Under Way, but Challenges Remain, GAO-07-
1036 (Washington, D.C.: Sept. 10, 2007).
---------------------------------------------------------------------------
    To address this increasing threat to control systems governing 
critical infrastructures, both Federal and private organizations have 
begun efforts to develop requirements, guidance, and best practices for 
securing those systems. For example, FISMA outlines a comprehensive 
risk-based approach to securing Federal information systems, which 
include control systems. Federal organizations, including the National 
Institute of Standards and Technology (NIST), the Federal Energy 
Regulatory Commission (FERC), and the Nuclear Regulatory Commission 
(NRC), have used a risk-based approach to develop guidance and 
standards to secure control systems. NIST guidance has been developed 
that currently applies to Federal agencies; however, much of the 
guidance and standards developed by FERC and NRC has not yet been 
finalized. Once implemented, FERC and NRC standards will apply to both 
public and private organizations that operate covered critical 
infrastructures.
TVA Provides Power to the Southeastern United States
    The TVA is a Federal corporation and the Nation's largest public 
power company. TVA's power service area includes almost all of 
Tennessee and parts of Mississippi, Kentucky, Alabama, Georgia, North 
Carolina, and Virginia. It operates 11 coal-fired fossil plants, 8 
combustion turbine plants, 3 nuclear plants, and a hydroelectric system 
that includes 29 hydroelectric dams and one pumped storage facility.\6\ 
TVA also owns and operates one of the largest transmission systems in 
North America.
---------------------------------------------------------------------------
    \6\ A pumped-storage plant uses two reservoirs, with one located at 
a much higher elevation than the other. During periods of low demand 
for electricity, such as nights and weekends, energy is stored by 
reversing the turbines and pumping water from the lower to the upper 
reservoir. The stored water can later be released to turn the turbines 
and generate electricity as it flows back into the lower reservoir.
---------------------------------------------------------------------------
    Control systems are essential to TVA's operation because it uses 
them to both generate and deliver power. To generate power, control 
systems are used within power plants to open and close valves, control 
equipment, monitor sensors, and ensure the safe and efficient operation 
of a generating unit. Many control systems networks connect with other 
agency networks to transmit system status information. To deliver 
power, TVA monitors the status of its own and surrounding transmission 
facilities from two operations centers.
 tva had not fully implemented appropriate controls to protect control 
                    systems from unauthorized access
    TVA had not fully implemented appropriate security practices to 
secure the networks on which its control systems rely. Specifically, 
the interconnected corporate and control systems networks at certain 
facilities that we reviewed did not have sufficient information 
security safeguards in place to adequately protect control systems. In 
addition, TVA did not always implement controls adequate to restrict 
physical access to control system areas and to protect these systems--
and their operators--from fire damage or other hazards. As a result 
TVA, control systems were at increased risk of unauthorized 
modification or disruption by both internal and external threats.
Weaknesses in TVA's Corporate Network Controls Placed Network Devices 
        at Risk
    Multiple weaknesses within the TVA corporate network left it 
vulnerable to potential compromise of the confidentiality, integrity, 
and availability of network devices and the information transmitted by 
the network. For example:
   Almost all of the workstations and servers that we examined 
        on the corporate network lacked key security patches or had 
        inadequate security settings.
   TVA had not effectively configured host firewall controls on 
        laptop computers we reviewed, and one remote access system that 
        we reviewed had not been securely configured.
   Network services had been configured across lower- and 
        higher-security network segments, which could allow a malicious 
        user to gain access to sensitive systems or modify or disrupt 
        network traffic.
   TVA's ability to use its intrusion detection system \7\ to 
        effectively monitor its network was limited.
---------------------------------------------------------------------------
    \7\ An intrusion detection system detects inappropriate, incorrect, 
or anomalous activity that is aimed at disrupting the confidentiality, 
availability, or integrity of a protected network and its computer 
systems.
---------------------------------------------------------------------------
Weaknesses in TVA Control Systems Networks Jeopardized the Security of 
        its Control Systems
    The access controls implemented by TVA did not adequately secure 
its control systems networks and devices, leaving the control systems 
vulnerable to disruption by unauthorized individuals. For example:
   TVA had implemented firewalls to segment control systems 
        networks from the corporate network. However, the configuration 
        of certain firewalls limited their effectiveness.
   The agency did not have effective passwords or other 
        equivalent documented controls to restrict access to the 
        control systems we reviewed. According to agency officials, 
        passwords were not always technologically possible to 
        implement, but in the cases we reviewed there were no 
        documented compensating controls.
   TVA had not installed current versions of patches for key 
        applications on computers on control systems networks. In 
        addition, the agencywide policy for patch management did not 
        apply to individual plant-level control systems.
   Although TVA had implemented antivirus software on its 
        transmission control systems network, it had not consistently 
        implemented antivirus software on other control systems we 
        reviewed.
Physical Security Did Not Sufficiently Protect Sensitive Control 
        Systems
    TVA had not consistently implemented physical security controls at 
several facilities that we reviewed. For example:
   Live network jacks connected to TVA's internal network at 
        certain facilities we reviewed had not been adequately secured 
        from unauthorized access.
   At one facility, sufficient emergency lighting was not 
        available, a server room had no smoke detectors, and a control 
        room contained a kitchen (a potential fire and water hazard).
   The agency had not always ensured that access to sensitive 
        computing and industrial control systems resources had been 
        granted to only those who needed it to perform their jobs. At 
        one facility, about 75 percent of facility badgeholders had 
        access to a plant computer room, although the vast majority of 
        these individuals did not need access. Officials stated that 
        all of those with access had been through the required 
        background investigation and training process. Nevertheless, an 
        underlying principle for secure computer systems and data is 
        that users should be granted only those access rights and 
        permissions needed to perform their official duties.
     information security management program was not consistently 
            implemented across tva's critical infrastructure
    An underlying reason for TVA's information security control 
weaknesses was that it had not consistently implemented significant 
elements of its information security program, such as: documenting a 
complete inventory of systems; assessing risk of all systems 
identified; developing, documenting, and implementing information 
security policies and procedures; and documenting plans for security of 
control systems as well as for remedial actions to mitigate known 
vulnerabilities. As a result of not fully developing and implementing 
these elements of its information security program, TVA had limited 
assurance that its control systems were adequately protected from 
disruption or compromise from intentional attack or unintentional 
incident.
TVA's Inventory of Systems Did Not Include Many Control Systems
    TVA's inventory of systems did not include all of its control 
systems as required by agency policy. In its fiscal year 2007 FISMA 
submission, TVA included the transmission and the hydro automation 
control systems in its inventory. However, the plant control systems at 
its nuclear and fossil facilities had not been included in the 
inventory. At the conclusion of our review, agency officials stated 
they planned to develop a more complete and accurate system inventory 
by September 2008.
TVA Had Not Assessed Risks to Its Control Systems
    TVA had not completed categorizing risk levels or assessing the 
risks to its control systems. FISMA mandates that agencies assess the 
risk and magnitude of harm that could result from the unauthorized 
access, use, disclosure disruption, modification, or destruction of 
their information and information systems. However, while the agency 
had categorized the transmission and hydro automation control systems 
as high-impact systems,\8\ its nuclear division and fossil business 
unit, which includes its coal and combustion turbine facilities, had 
not assigned risk levels to its control systems. TVA had also not 
completed risk assessments for the control systems at its 
hydroelectric, nuclear, coal, and combustion turbine facilities. 
According to TVA officials, the agency plans to complete the 
hydroelectric and nuclear control systems risk assessments by June 2008 
and they plan to complete the security categorization of remaining 
control systems throughout TVA by September 2008, except for fossil 
systems, for which no date has been set.
---------------------------------------------------------------------------
    \8\ Federal Information Processing Standard 199 provides criteria 
for categorizing risk to systems as high, moderate, or low.
---------------------------------------------------------------------------
Inconsistent Application of TVA's Policies and Procedures Contributed 
        to Program Weaknesses
    Several shortfalls in the development, documentation, and 
implementation of TVA's information security policies contributed to 
many of the inadequacies in TVA's security practices. For example:
   TVA had not consistently applied agencywide information 
        security policies to its control systems, and TVA business unit 
        security policies were not always consistent with agencywide 
        information security policies.
   Cyber security responsibilities for interfaces between TVA's 
        transmission control system and its hydroelectric and fossil 
        generation units had not been documented.
   Physical security standards for control system sites had not 
        been finalized or were in draft form.
Patch Management Weaknesses Left TVA's Control Systems Vulnerable
    Weaknesses in TVA's patch management process hampered the efforts 
of TVA personnel to identify, prioritize, and install critical software 
security patches to TVA systems in a timely manner. For a 15-month 
period, TVA documented its analysis of 351 reported vulnerabilities, 
while NIST's National Vulnerability Data base \9\ reported about 2,000 
vulnerabilities rated as high or medium risk for the types of systems 
in operation at TVA for the same time period. In addition, upon release 
of a patch by the software vendor, the agency had difficulty in 
determining the patch's applicability to the software applications in 
use at the agency because it did not have a mechanism in place to 
provide timely access to software version and configuration information 
for the applications. Furthermore, TVA's written guidance on patch 
management provided only limited guidance on how to prioritize 
vulnerabilities. The guidance did not refer to the criticality of IT 
resources or specify situations in which it was acceptable to upgrade 
or downgrade a vulnerability's priority from that given by its vendors 
or third-party patch tracking services. For example, agency staff had 
reduced the priority of three vulnerabilities identified as critical or 
important by the vendor or a patch tracking service and did not provide 
sufficient documentation of the basis for this decision. As a result, 
patches that were identified as critical were not applied in a timely 
manner; in some cases, a patch was applied more than 6 months past TVA 
deadlines for installation.
---------------------------------------------------------------------------
    \9\ The National Vulnerability Data base is the U.S. government 
repository of standards based vulnerability management data. This data 
enables automation of vulnerability management, security measurement, 
and compliance.
---------------------------------------------------------------------------
TVA Had Not Developed System Security and Remedial Action Plans for All 
        Control Systems
    TVA had not developed system security or remedial action plans for 
all control systems as required under Federal law and guidance. 
Security plans document the system environment and the security 
controls selected by the agency to adequately protect the system. 
Remedial action plans document and track activities to implement 
missing controls such as missing system security plans and other 
corrective actions necessary to mitigate vulnerabilities in the system. 
Although TVA had developed system security and remedial action plans 
for its transmission control system, it had not done so for control 
systems at the hydroelectric, nuclear, or fossil facilities. According 
to agency officials, TVA plans to develop a system security plan for 
its hydroelectric automation and nuclear control systems by June 2008, 
but no timeframe has been set to complete development of a security 
plan for control systems at fossil facilities. Until the agency 
documents security plans and implements a remediation process for all 
control systems, it will not have assurance that the proper controls 
will be applied to secure control systems or that known vulnerabilities 
will be properly mitigated.
    opportunities exist to improve security of tva's control systems
    Numerous opportunities exist for TVA to improve the security of its 
control systems. Specifically, strengthening logical access controls 
over agency networks can better protect the confidentiality, integrity, 
and availability of control systems from compromise by unauthorized 
individuals. In addition, fortifying physical access controls at its 
facilities can limit entry to TVA restricted areas to only authorized 
personnel, and enhancing environmental safeguards can mitigate losses 
due to fire or other hazards. Further, establishing an effective 
information security program can provide TVA with a solid foundation 
for ensuring the adequate protection of its control systems.
    Because of the interconnectivity between TVA's corporate network 
and certain control systems networks, we recommend that TVA implement 
effective patch management practices, securely configure its remote 
access system, and appropriately segregate specific network services. 
We also recommend that the agency take steps to improve the security of 
its control systems networks, such as implementing strong passwords or 
equivalent authentication mechanisms, implementing antivirus software, 
restricting firewall configuration settings, and implementing 
equivalent compensating controls when such steps cannot be taken.
    To prevent unauthorized physical access to restricted areas 
surrounding TVA's control systems, we recommend that the agency take 
steps to toughen barriers at points of entry to these facilities. In 
addition, to protect TVA's control systems operators and equipment from 
fire damage or other hazards, we also recommend that the agency improve 
environmental controls by enhancing fire suppression capabilities and 
physically separating cooking areas from system equipment areas.
    Finally, to improve the ability of TVA's information security 
program to effectively secure its control systems, we are recommending 
that the agency improve its configuration management process and 
enhance its patch management policy. We also recommend that TVA 
complete a comprehensive system inventory that identifies all control 
systems, perform risk assessments and security risk categorization of 
these systems, and document system security and remedial action plans 
for these systems. Further, we recommend improvements to agency 
information security policies.
    In commenting on drafts of our reports, TVA concurred with all of 
our recommendations regarding its information security program and the 
majority of our recommendations regarding specific information security 
weaknesses. The agency agreed on the importance of protecting critical 
infrastructures and stated that it has taken several actions to 
strengthen information security for control systems, such as 
centralizing responsibility for cyber security within the agency. It 
also provided information on steps the agency was taking to implement 
certain GAO recommendations.
    In summary, TVA's power generation and transmission critical 
infrastructures are important to the economy of the southeastern United 
States and the safety, security, and welfare of millions of people. 
Control systems are essential to the operation of these 
infrastructures; however, multiple information security weaknesses 
exist in both the agency's corporate network and individual control 
systems networks and devices. An underlying cause for these weaknesses 
is that the agency had not consistently implemented its information 
security program throughout the agency. If TVA does not take sufficient 
steps to secure its control systems and implement an information 
security program, it risks not being able to respond properly to a 
major disruption that is the result of an intended or unintended cyber 
incident.
    Mr. Chairman, this concludes our statement. We would be happy to 
answer questions at this time.

    Mr. Langevin. Thank you, Mr. Wilshusen.
    The Chair now recognizes Mr. McCollum to summarize your 
statement for 5 minutes. Welcome.

STATEMENT OF WILLIAM R. McCOLLUM, JR., CHIEF OPERATING OFFICER, 
  TENNESSEE VALLEY AUTHORITY (TVA), ACCOMPANIED BY JOHN LONG, 
               CHIEF ADMINISTRATIVE OFFICER, TVA

    Mr. McCollum. Good afternoon, Chairman Langevin, Ranking 
Member Ms. Brown-Waite and members of the subcommittee.
    I am Bill McCollum, Chief Operating Officer of the 
Tennessee Valley Authority. I am accompanied today by TVA's 
Chief Administrative Officer, John Long.
    I appreciate this opportunity to appear before you to 
discuss the Government Accountability Office report on the 
security of the computer networks and control system used in 
TVA's operations.
    As TVA's Chief Operating Officer, I am responsible for the 
safe and reliable operation of the TVA power system which 
generates and distributes electricity for a region of the 
southeast which covers the State of Tennessee and adjacent 
parts of six neighboring States. All of our operations are 
financed by revenues from the sale of electricity. TVA does not 
receive any annual congressional appropriations.
    I am also pleased to note that earlier this week we 
observed the 75th anniversary of the TVA. As we have for 75 
years, we remain focused on carrying out our three-part mission 
in energy, economic development and environmental stewardship. 
Each part of this mission has contributed significantly to the 
progress of our 80,000-square-mile service region.
    In performing our mission, the safety of our employees and 
the public is paramount in all of our operations, including 
specialized security requirements to protect the computerized 
control systems involved in the generation and transmission of 
electricity.
    On behalf of TVA, we appreciate the substantial time and 
resources that the GAO allotted to examining and evaluating our 
computer security. As you know, the report made public today 
listed 19 recommendations for improving the security of our 
computer systems. We concur with all of these recommendations, 
and we have either completed or are aggressively moving to 
implement remedial actions for all 19.
    It is important to note that TVA was already in the process 
of addressing 17 of the 19 recommendation areas when GAO's 
field work began at TVA last October. We also initiated several 
actions to address other aspects of our security while the 
field team was conducting its evaluation. These actions were 
the result of ongoing assessments by TVA staff and the 
independent TVA office of the Inspector General, which had 
initiated planning for an audit of our information technology 
security by Science Applications International Corporation. 
GAO's work has been very helpful in affirming and focusing the 
need for these and other measures that we are taking.
    Some of the security issues identified by the GAO report 
involved instances that have been addressed by the 
centralization of our cybersecurity policy, its administration 
and its oversight activities into a corporate-level 
organization. The centralization of this responsibility was 
completed in February, which now gives TVA a uniform security 
set of procedures to be followed by all its organizations and 
covers all control systems.
    In conjunction with our implementation of additional 
measures to strengthen our defense-in-depth security posture, 
we commissioned a third-party consultant to perform penetration 
testing of our infrastructure to identify any immediate 
weaknesses. Testing involved both informed and uninformed 
circumstances in which the third party made attempts to 
penetrate our networks. We are pleased to note that the 
consultant's team was unable to gain access to any of the 
targeted process control networks in either type of test. While 
the test failed to penetrate our control network security, the 
process identified several opportunities to further insulate 
and protect our security systems. We are now implementing those 
additional measures.
    In closing, the TVA fully understands that it has a solemn 
responsibility to ensure the safety and security of the systems 
that are vital to our Nation's critical infrastructure, our 
region and the Nation's economy and the health and safety of 
the public. One of my responsibilities is ensuring that we 
embrace safety as a value in all aspects of our operations to 
protect the health and well-being of our work force and the 
public. We are moving as quickly as possible to complete 
remedial measures for all 19 of the GAO's recommendations, 
along with other steps that have been identified to elevate 
every level of our security and computer network security.
    As a Federal entity, we are cognizant of our special 
responsibility to provide leadership in this important aspect 
of our electric system operations. We assure the subcommittee 
and the public at large that TVA is committed to ensuring that 
the infrastructure entrusted to our responsibility meets or 
exceeds the best accepted practices in government and in the 
electric utility industry.
    Thank you for this opportunity to provide our perspectives 
and experiences as you continue this subcommittee's important 
work in assessing the adequacy of security measures within the 
Nation's critical electric power infrastructure.
    [The statement of Mr. McCollum follows:]
             Prepared Statement of William R. McCollum, Jr.
                              May 21, 2008
    Good afternoon Chairman Langevin, Ranking Member McCaul, and 
Members of the subcommittee. I am Bill McCollum, Chief Operating 
Officer of the Tennessee Valley Authority (TVA). I am accompanied today 
by TVA's Chief Administrative Officer, John Long.
    I appreciate this opportunity to appear before you to discuss the 
Government Accountability Office (GAO) report on the security of the 
computer networks and control systems used in TVA's operations.
    As TVA's Chief Operating Officer, I am responsible for the safe and 
reliable operation of the TVA power system, which generates and 
distributes electricity for a region of the Southeast which covers 
Tennessee and adjacent parts of six neighboring States. All of our 
operations--the generation and distribution of electricity and our 
stewardship of the Nation's fifth largest river system and economic 
development work--are financed by revenue from the sale of electricity. 
TVA does not receive any annual congressional appropriations.
    I am pleased to note that earlier this week we observed the 75th 
Anniversary of TVA in Muscle Shoals, Alabama. As we have for 75 years, 
we remain focused carrying out our historic three-part mission in 
energy, economic development and environmental stewardship. Each part 
of our mission has contributed significantly to the progress of our 
80,000-square-mile service region, which is centered on the watershed 
of the Tennessee River.
    In performing our mission, the safety of our employees and the 
public is paramount in all of our operations, including the specialized 
security requirements to protect the computerized control systems 
involved in the generation and transmission of electricity.
    On behalf of TVA, we appreciate the substantial time and resources 
that the GAO allotted to examining and evaluating our computer 
security. As you know, the report made public today by the GAO listed 
19 recommendations for improving the security of our computer systems. 
We concur with all of those recommendations, and we have either 
completed or are aggressively moving to implement remedial actions for 
all 19.
    It is important to note that TVA was already in the process of 
addressing 17 of the 19 recommendation areas when GAO's field work 
began at TVA last October. We also initiated several actions to address 
other aspects of our security while the field team was conducting its 
evaluation. These actions were the result of on-going assessments by 
TVA staff and the independent TVA Office of Inspector General, which 
had initiated planning for an audit of our Information Technology 
Security by Science Applications International Corporation. GAO's work 
has been very helpful in affirming and focusing the need for these and 
other measures that we are taking.
    Some of the security issues identified by the GAO report involved 
instances that have been addressed by the centralization of our cyber 
security policy, its administration and its oversight activities into a 
corporate-level organization. The centralization of this responsibility 
was completed in February, which now gives TVA uniform security 
procedures to be followed by all of its organizations and covers all 
control systems.
    In conjunction with our implementation of additional measures to 
strengthen our defense-in-depth security posture, we commissioned a 
third-party consultant to perform penetration testing of our 
infrastructure to identify any immediate weaknesses. The testing 
involved both ``informed'' and ``uninformed'' circumstances in which 
this third party made attempts to penetrate our networks. We are 
pleased to note that the consultant's team was unable to gain access to 
any of the targeted Process Control Networks in either type of test. 
While the tests failed to penetrate our control network security, the 
process identified several opportunities to further insulate and 
protect the security of our systems. We are now implementing those 
additional measures.
    In closing, TVA fully understands that it has a solemn 
responsibility to ensure the safety and security of systems that are 
vital to the Nation's critical infrastructure, our region and Nation's 
economy, and the health and safety of the public. As the Chief 
Operating Officer, one of my responsibilities is ensuring that we 
embrace safety as a value in all aspects of our operations to protect 
the health and well-being of our work force and the public. We are 
moving as quickly as possible to complete remedial measures for all 19 
of GAO's recommendations, along with other steps we have identified, to 
elevate every level of our computer and network security.
    As a Federal entity, we are cognizant of our special responsibility 
to provide leadership in this important aspect of electric system 
operations. We assure the subcommittee and the public at-large that TVA 
is committed to assuring that the infrastructure entrusted to our 
responsibility meets or exceeds the best accepted practices in 
government and in the electric utility industry.
    Thank you for this opportunity to provide our perspectives and 
experiences as you continue the subcommittee's important work in 
assessing the adequacy of security measures within the Nation's 
critical electric power infrastructure.

    Mr. Langevin. Thank you, Mr. McCollum.
    I want to thank the witnesses for their testimony.
    I remind each member that he or she will have 5 minutes to 
question the panel, and I now recognize myself for questions.
    Last October, this committee was told that 75 percent of 
the transmission grid has either taken appropriate actions or 
is in the process of implementing those actions for Aurora. In 
NERC's testimony today, they suggest 94 percent of the short 
midrange mitigation measures have been completed or in 
progress. Yet, on the other hand, Chairman Kelliher is telling 
us in testimony that there is a broad range--there is a broad 
range of compliance based only on individual interpretations of 
the threat and the application of the recommended mitigation 
measures.
    My question for the panel is, who is right? What are we--
what do these varying assessments tell us about the industry's 
readiness or ability to comply with the reliability standards?
    Mr. Kelliher. I think both answers might be true and that 
we are actually asking different questions. So we are coming to 
somewhat different answers. We are conducting a subjective 
review of some of the utility plans in response to the 
advisory, whereas NERC is really asking a different question. 
So I think, actually, both can be true at the same time.
    Mr. Sergel. Chairman, there are three different sources for 
that information. The first would have been done immediately 
after our advisory last year. It involved going out and doing 
interviews and gathering information with respect to the 
status. We did that at that time because we did not have in 
place a data base to get the entirety of the users and owners 
and operators, and I know that was some source of confusion. 
For that we apologize. The responsibility, to be clear, is ours 
and ours entirely; and we will do better the next time.
    The second data that you refer to, the 94 percent, is from 
a written survey that we sent out. It is the data that came 
back from it. But I will tell you that we recognized and the 
Commission recognized and took action that that type of survey 
was limited, and we provided it to you with that knowledge.
    I think the third that has been done and is ongoing is 
being done by the Commission. It is both the most recent, it is 
the most comprehensive, and it is the one that is the best 
information at this point in time.
    Mr. Langevin. I am surely troubled by the last time that 
NERC appeared before us; and, you know, at best, the answers 
that were given were confusing. At worst, it was highly 
misleading. I am glad to hear that you have worked to clarify 
some of that today, but I hope never to hear that kind of 
testimony or lead us to be misled ever in the future.
    I mentioned in my opening statement that I have real doubts 
about NERC's ability to regulate these new reliability 
standards. From where I sit, I would say that NERC seems either 
not to take their authority as the electric reliability office 
seriously--for instance, NERC was responsible for following up 
with industry to see how they implemented the Aurora 
mitigation, but, according to FERC, the NERC survey was much 
too limited in scope to make a real determination about how far 
the industry had come in mitigating the Aurora vulnerability. 
It is hard to understand why the regulatory body responsible 
for the security and the safety of the bulk power system would 
take such a laissez faire approach to this critical issue.
    Chairman Kelliher, based on your findings, do you think 
that NERC will, in fact, be able to carry out its duty as the 
ERO and how are you working with them to fix the shortcomings?
    Mr. Sergel, given this first halfhearted effort to oversee 
the industry, how does your organization plan on fulfilling its 
enforcement authority role and what specific lessons have you 
learned and what structures are in place to address my 
concerns?
    Chairman Kelliher, please.
    Mr. Kelliher. I think NERC is doing a job under a law that 
is very imperfect, particularly with regard to this kind of 
threat. As I already said, there are two means to address to 
defend the grid against cyber attacks. The only quick means is 
an advisory. It is purely voluntary. I think a voluntary by its 
nature is always going to produce inconsistent results.
    That is what led Congress to legislate on reliability 2\1/
2\ years ago. The industry historically has relied on voluntary 
compliance with unenforceable standards. Congress ultimately 
concluded--correctly, in my judgment--that that was 
fundamentally flawed, that you needed to have mandatory 
standards.
    Now, we can develop mandatory standards on cybersecurity, 
but it takes time. It can take years. That is the dilemma that 
we have right now. We have a threat just by whose nature 
requires quick action and mandatory action, mandatory 
compliance with that action. We actually have to choose one or 
the other right now. We can choose quick action, where 
compliance is purely voluntary, or we can go down the path of 
mandatory standards that can take years.
    I think NERC realized there was a need for quick action in 
response to Aurora and took the only course that it had 
available, an advisory. The results haven't been consistent, 
but I actually think that is predictable and perhaps 
unavoidable.
    Mr. Sergel. Mr. Chairman, again, the responsibility for 
being clear is entirely ours, and our failure to do that is 
noted, and we intend to do better going forward.
    With respect to lessons learned, talk about two things. The 
first is that we have put in a formal system of advising the 
industry. That system has been approved by the Commission. It 
comes in levels. We have--the first level is simply an 
advisory. Then we have a second level, which is a 
recommendation; and the third is an essential action. Each of 
those we notify the Commission in advance and coordinate with 
them before we issue it. We would coordinate with any other 
appropriate government agency if it was on a topic relative to 
them.
    We now have in place the list of 1,800 users, owners and 
operators to communicate with. They understand the system. They 
have been notified in advance. They understand what an advisory 
is and a recommendation. We didn't have that before. So we are 
in a much better position going forward to communicate better 
and be more effective within the limited authority that we 
have. It is limited.
    Then, with respect to enforcement of these standards, we 
now have a standard. We will enforce it. We have been very 
active in the last few months. We have put out a guidance on 
what it means, the fact that it is effective beginning in July 
for those for whom the voluntary standards were in place, and 
they understood those. We will enforce the standard up to the 
parameters included in the law.
    Mr. Langevin. In our last hearing, we discussed the 
standards problem. NIST standards which apply to Federal 
entities are much more robust than the NERC standards which 
apply to private entities. Unfortunately, publicly and 
privately owned infrastructure on the grid are so 
interconnected weak security controls in one utility can pose a 
harm to another utility that shares a connection.
    My question is, Mr. McCollum, you are required to implement 
NIST, yet you are connected to folks who implement NERC; and 
are you concerned that a weakness on a NERC-compliant 
infrastructure can affect your network?
    Mr. McCollum. We are moving aggressively to be in 
compliance and remain in compliance or exceed the requirements 
of all of those standards in terms of the security of our 
critical infrastructure and networks. This is going to be an 
increasing challenge going forward. As you noted in your 
opening testimony, the deployment of technology has resulted in 
increased interconnectivity; and we are moving aggressively to 
stay ahead of this issue and skate to where the puck is going 
to be in the future in terms of implementing sufficient 
controls.
    I believe that through a defense-in-depth posture and 
compliance with all of these controls and protocols which meet 
or exceed these standards, we will provide adequate protection 
for all of the critical infrastructure.
    Mr. Langevin. Finally, Mr. Sergel, could you please tell us 
what steps are being taken to transition the NERC reliability 
standards toward NIST and why should the scope of CIP-002 be 
changed to include all equipment that is electronically 
connected?
    Mr. Sergel. Let me deal with the second part of that first, 
which is that standard two requires that the users, owners and 
operators identify the critical assets that they have on the 
system and then those become the ones that are then accountable 
to the remaining standards.
    The identification of critical assets is a requirement, and 
I want to begin with that. It is often you hear that, well, 
that means someone can just not identify any and they are in 
compliance. Doesn't meet my test of what it means to identify 
your critical assets. So the identification of critical assets 
is one in which we expect the list to be inclusive of all those 
that are, in fact, critical.
    So going to the question of, well, why then didn't we just 
start with all assets, I think the answer to that is there are 
so many in the industry at this point in time, the challenge is 
so great, that we believe that the priority is to start with 
those that are critical, identify those, and move forward. We 
will continuously evaluate the standard and continuously 
evaluate whether more is required; and if it is, we will do 
that. But it is a matter of prioritization.
    Mr. Langevin. But specifically to NIST, do you see that as 
the--do you recognize that, as most of us do, as being the gold 
standard of standards and are you--tell me about your 
transition efforts.
    Mr. Sergel. Well, we have a process in place--it has been 
done already--to review and propose new standards that will 
incorporate any of the NIST requirements that are appropriate 
to real-time power system operating systems.
    We have been directed to do that by the Commission, and we 
will do that. We have begun that work. We, in fact, have 
accelerated it by a year. So what you are looking for is now 
part of our work plan, but, beyond that, it has been directed 
to us that we it be done by the Commission.
    Mr. Langevin. Thank you, and as far as I am concerned the 
sooner the better.
    With that, at this time I would yield to the ranking 
member, but he has asked me to yield to the gentlelady from 
Florida, first, Ms. Ginny Brown-Waite, which I will do at this 
time, to pose some questions.
    Ms. Brown-Waite. Thank you very much, Mr. Chairman.
    Actually, I am following up on the questions of the 
chairman.
    There was an article in today's Washington Post. Now 
everyone up here knows and we regularly tell our constituents 
don't believe everything you read in the paper, but let me just 
kind of summarize something that should be of concern.
    It says, security experts, however, contend that existing 
NERC standards contain loopholes and don't adequately protect 
critical power systems. For example, telecommunication 
equipment is excluded, even though there are documented cases 
of computer worms shutting off service from control systems to 
substations.
    It goes on to say, you have got a whole bunch of utilities 
who claim they have no critical cyber assets, which means they 
don't have to do anything else to secure their current cyber 
system.
    The person also went on to say, we have some very big 
electric utilities who claim they just have 10 cyber assets, 
when most companies have more critical relays like that in a 
single substation.
    Mr. Sergel, if you could respond to that, and perhaps Mr. 
Kelliher.
    Mr. Sergel. That is a specific statement on the issue I 
just mentioned before, and it is an interpretation of the 
standard which requires that they identify their critical 
assets, and it implies that someone can merely say I don't have 
any and now they don't have to comply with the standards, all 
of the other standards.
    As of July 1, for the most important parts of that industry 
and all those that have been subject to the voluntary standards 
in the past, they will have a requirement to have identified 
the critical assets. I can assure you if they have critical 
assets and put down zero that we will begin to evaluate whether 
they are in compliance with that standard, and their audit 
would identify that.
    So I believe that there is not a weakness in these 
standards with respect to the notion that the identification of 
critical assets simply leaves it to them to decide they don't 
have any. I just disagree with that.
    The second issue is that we at NERC by statute are limited 
to the bulk power system. Now to the extent that those 
telecommunications providers are part of the protection 
mechanisms that they are relying on to meet the standards, then 
we have some reach for those. But I can't understand why 
someone would say you have not gone far enough. There are 
telecommunications issues you should direct.
    Those are beyond the scope of the law that we have. We are 
restricted to the users, owners and operators of the bulk power 
system. We do not have any jurisdiction to require a 
telecommunications company to make a change, for example, or to 
set a standard for them.
    Ms. Brown-Waite. Mr. Kelliher, do you think that 
telecommunications should be included?
    Mr. Kelliher. The SCADA systems are so interrelated that it 
is hard to draw a line if you were to--FERC only has the 
authority that the Congress gave us. We have the authority to 
oversee reliability of the bulk power system. That is a defined 
term, and it typically does not extend into the telecom 
industry.
    I do, though, with respect to the issue about critical 
facilities, I think the industry is doing a faithful job 
implementing and respecting reliability standards. I don't see 
widespread noncompliance in that kind of approach. But we don't 
necessarily accept the representation of a company. If the 
company were to come in and say we have zero critical 
facilities, we don't have to accept that representation.
    Ms. Brown-Waite. I have one more question for Mr. Sergel; 
and that is, could you share with the committee some examples 
of when an expedited process has been used in an urgent 
situation?
    Mr. Sergel. Probably the best example is the original 
establishment of the cyber standards. Now this is before my 
time as the CEO, so it is difficult for me to answer that. But 
the cyber ones were put in under a process of moving, of 
expediting the schedule.
    We have three levels of speed at which we operate. The 
first is the normal speed, and typically in that category we 
are operating in an environment in which all of the information 
is well-known, and it is a significant process of bringing 
together the technical talent to evaluate the standards so 
there is no horizons of time. We can expedite it, which means 
it is important enough that we ought to do it more quickly; and 
there are rules, procedure that do that. Then we can also 
establish it in an emergency period of time. So we can speed up 
the time that we can create a standard.
    But what we can't do is we can't speed it up and not have 
it be a public process; and that is why the chairman is here 
asking for additional authority, I believe, more fundamentally 
than the time. Because we can act quickly, but we can't act 
quickly and confidentially. Everything we do has to be posted 
in an opportunity for notice and evaluation and comment. We can 
ask people to do that very quickly, right, but we can't do that 
quickly and confidentially simultaneously, and therefore I see 
that as a significant reason why they are asking for additional 
authority.
    Ms. Brown-Waite. Thank you very much; and, with that, I 
yield back the balance of my time.
    Mr. Langevin. I thank the gentlelady for her very 
insightful questions. I think that it raises a lot of questions 
in my mind and poses some challenges, given the fact of how 
interrelated SCADA--it really is and how do we, in fact, tie in 
the regulation of telecom in this area. It is going to pose a 
challenge for us.
    With that, the Chair now recognizes the gentleman from 
Texas, Mr. Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Wilshusen, is that correct?
    Mr. Wilshusen. Yes.
    Mr. Green. You mentioned a total, I believe, of 92 
recommendations that were made to TVA, is that correct?
    Mr. Wilshusen. That's correct.
    Mr. Green. And the representative from TVA, I think you 
responded to 19 of the 92.
    Mr. Wilshusen. Yes. The difference is because we are 
issuing two reports to them, one that is publicly available, 
and that report has 19 recommendations in it. We are also 
issuing a limited official-use-only report which contains more 
details and specifics about the individual findings that we 
identified, and in that report we are making 73 
recommendations.
    Mr. Green. My assumption is that you believe that all 92 of 
them should be addressed.
    Mr. Wilshusen. Yes, sir.
    Mr. Green. Okay, so let me go over to Mr. McCollum. Is that 
correct, sir?
    Mr. McCollum. That's correct.
    Mr. Green. Mr. McCollum, if there is something about this 
that you can't say publicly, I understand, but you addressed 
only 19 of the 92?
    Mr. McCollum. In my opening statement, I referred to the 19 
recommendations in the public report. However, we have 
responded to and are addressing or have already addressed all 
of the recommendations in both of those reports that were just 
referred to.
    Mr. Green. Could you kindly define ``addressed'', please? 
``Addressed'' could simply mean that you looked at it and you 
decided that it was something that you will get around to, or 
it could mean that you completely corrected the situation. 
There are 73 recommendations concerning specific information 
security weaknesses that should be corrected. So how do you 
address them?
    Mr. McCollum. We have an action plan in place. A number of 
those recommendation actions have already been closed on those 
to complete the actions necessary to remediate those 
recommendations. We have others in progress that will be 
complete shortly. By the end of this fiscal year and calendar 
year, we will have completed a majority of the actions.
    Some of the recommendations address items in the standards 
that relate to longer-term assessments and documentation and 
other actions that will take a little longer. But we have an 
action plan in place to address and remediate all of those 
recommendations on a priority basis, as noted in some of the 
earlier testimony in responses to questions. It is important 
that we address those most important----
    Mr. Green. If I may, let me go back to Mr. Wilshusen.
    Sir, have you had an opportunity to see the proposed action 
plan?
    Mr. Wilshusen. Not the specific action plans. We have 
received responses from TVA that they made in response to our 
report, which is included in our reports. But as a matter of 
GAO policies and, of course, the government auditing standards 
we will go back later to verify the corrective actions that TVA 
has taken or will take on these actions on our recommendations.
    Mr. Green. Are these actions that should be taken with the 
next 10 years?
    Mr. Wilshusen. I would hope so. I think many of them should 
be taken immediately. As Mr. McCollum indicated some already 
have been taken and they have been completed actions on some of 
them already.
    Mr. Green. Should they all be finished within the next 10 
years?
    Mr. Wilshusen. I would think so, yes.
    Mr. Green. Should they be finished within the next 5 years? 
Within the next 3 years?
    Mr. Wilshusen. Probably so, the recommendations we are 
making.
    Mr. Green. Will you, in continuing your audit, provide 
information as to how the action plan is progressing? Is that 
information that we can receive?
    Mr. Wilshusen. We can certainly work with your staff to 
provide that information, yes.
    Mr. Green. Those things that should be done immediately, I 
assume will make them priority No. 1. I assume that they are 
priority No. 1 for a reason. Are you finding that any of these 
priority No. 1 items are not being addressed what we will call 
timely?
    Mr. Wilshusen. At this point, we have not gone back to 
verify the actions taken by TVA on our recommendations. So I 
can't comment as to whether or not the actions have been 
completed. All we have at this point are assertions by TVA that 
they have taken action or plan to take actions.
    Mr. Green. I have about 8 seconds. How long do you think it 
will take you to verify what has been indicated has been done 
currently?
    Mr. Wilshusen. It would not take us too long if we were to 
go out and conduct our tests.
    Mr. Green. It is not too long, 2 weeks; or is it 2 months?
    Mr. Wilshusen. It could be 2 weeks to do the work, but we 
would not necessarily be able to go out in 2 weeks to do that, 
given our other workload and activities and commitments that we 
have.
    Mr. Green. Thank you.
    I yield back, Mr. Chairman.
    Mr. Langevin. I thank the gentleman.
    The chairman now recognizes the ranking member, the 
gentleman from Texas, Mr. McCaul, for 5 minutes.
    Mr. McCaul. I thank the chairman.
    This is really kind of a follow-up hearing to the hearing 
that we had after the story of Aurora broke on national 
television on CNN. We had had closed briefings on that, and it 
raised kind of a specter of what could happen if we had a cyber 
attack on our power grids. It revealed a major vulnerability in 
this Nation to our security, the idea that the power grid could 
be shut down by the use of intrusions through computer 
networks. Of course, everything is tied to computer networks. 
This raises a broader specter.
    I think the Commission that Chairman Langevin and I formed 
to study this issue hopefully will provide good recommendations 
for the next administration.
    But I have just a couple of questions. One is, in your 
dealings--and this is directed to Mr. Kelliher and Mr. Sergel. 
In your dealings with the private sector, how serious do you 
think they are really taking this threat, which so many of us 
in Congress believe is a serious threat to the not only 
economic viability but security of this Nation?
    Mr. Kelliher. I think they are taking it very seriously.
    Mr. McCaul. Mr. Sergel.
    Mr. Sergel. I believe they are taking it very seriously as 
well.
    I do believe that understanding the complexity of the 
threat, you described one part of it, which is that somebody 
could attack the grid itself. I think many of us are 
increasingly concerned that the attack would come from the grid 
to a private facility, to a critical facility, which is an 
entirely different issue. I think for that reason, as we 
wrestle with the complexity of it, we often find that folks 
say, well, I have taken care of it, and then learn that they 
haven't. It is not they aren't working at it hard and taking it 
seriously, but, rather, it is because, as we dig deeper, we 
find more. It doesn't make our concern go away. It makes our 
concern go up.
    Mr. McCaul. I appreciate that response.
    Mr. Sergel, do you believe that you have enough authority 
to adequately address this issue in the private sector?
    Mr. Sergel. So, at NERC, we are a not-for-profit. We are 
designated by the Federal Energy Regulatory Commission as the 
ERO, subject to our application and subject to their continuing 
jurisdiction. As such, we are limited to the bulk power system. 
We do not have authority over distribution, so there is a 
limitation there. We do not have authority over 
telecommunications. There is a limitation there. The structure 
of the law and because we are not a government agency suggests 
that we do everything publicly. We post for comment, and we 
evaluate it and then take action. So all of those are 
limitations on what we can do.
    What I can assure you is that we have a great challenge in 
this area, but we will continue to do everything we can within 
the jurisdiction that we do have, and that includes within the 
standards. We will push as far as we can to get as much done on 
the telecommunications side within the standard, and we will 
push as hard as we can to get as much of the bulk power system 
covered and protected.
    Mr. McCaul. Thank you.
    My understanding is you have jurisdiction over the bulk 
power system, as you said.
    With respect to telecom and oil and gas and banking and all 
of the other sectors in the private sector, that would be 
within the jurisdiction of the Department of Homeland Security?
    Mr. Kelliher. And other agencies, yes.
    Mr. McCaul. And other agencies.
    What is your relationship with DHS? Do you have a good 
working relationship with them?
    Mr. Kelliher. Yes, it is a very cooperative relationship, 
in part because we realize we are not in the best position to 
assess the nature of a cyber threat, particularly if it is a 
threat posed by a foreign country or an organized group. That 
is really the province of the national security or intelligence 
agency. So we think they are the ones best suited to identify 
the threat, and we might be the best suited to actually act 
upon that threat.
    Mr. McCaul. So they are in the best position to deal with 
the nature of this type of threat.
    Is the coordination positive and productive?
    Mr. Kelliher. Yes, it has been very positive and 
productive. I am tempted to say ``seamless,'' but there are 
probably always some seams between government agencies.
    Mr. McCaul. Mr. Sergel, do you have a response?
    Mr. Sergel. We also have a very positive relationship with 
both the Department of Homeland Services and the Department of 
Energy.
    Mr. McCaul. Okay.
    I yield back. Thank you.
    Mr. Langevin. I thank the ranking member.
    I wanted to clarify something. You know, we are talking 
about not the entire telecommunications industry; we are 
talking about telecommunications equipment on the bulk power 
system. I think that that is an important distinction to be 
made, and there has got to be a mechanism to allow for some 
oversight or regulation in that area with respect to FERC and 
NERC, and we are going to explore those avenues with you. If it 
requires involvement of other committees and jurisdictions, we 
will involve them as well.
    With that, Ms. Jackson Lee, a member of the full committee, 
has asked to participate in the hearing. I ask unanimous 
consent that she be allowed to participate.
    Hearing none, Ms. Jackson Lee will be recognized for 
questions after the members of the subcommittee are recognized.
    We welcome you here to the participation, and we appreciate 
the work that you are doing on your subcommittee with respect 
to infrastructure protection.
    With that, the Chair now recognizes the gentleman from New 
Jersey for 5 minutes, Mr. Pascrell.
    Mr. Pascrell. Thank you, Mr. Chairman.
    Mr. Chairman, this is an issue of compliance. We had the 
same pushback from the chemical industry when we were deciding 
in a bipartisan fashion how we can protect the chemical 
industry and, hence, protect our families because that is what 
it comes down to, homeland security. Knowing what the mission 
of this committee--this subcommittee--is, its having been 
formed from two previous committees, our mission is pretty 
clear, Mr. Chairman, as far as I am concerned. We are not the 
enemy, this committee. The enemy are those who wish to attack 
America and to put our families in jeopardy.
    So, Mr. Sergel, I have some questions to ask of you. I have 
to clarify something for the record. We are trying to figure 
out who has mitigated the Aurora vulnerability. We have gone 
through all of the nomenclature--CIP, NERC, FERC, BPS, ERO. I 
am frustrated because your organization has provided this 
committee with so many conflicting and inaccurate statements 
that I have to question how seriously NERC takes its 
responsibility as the electric liability organization.
    I was here on October 17 last year when your colleague 
David Whiteley testified before the subcommittee. The Chairman 
asked Mr. Whiteley to describe the survey that your 
organization claimed to have sent to the owners and the 
operators of the grid. Mr. Whiteley stated for the record that 
approximately 75 percent of the transmission grid either took 
or was in the process of implementing mitigation. When asked if 
these were anecdotal numbers, Mr. Whiteley told us that these 
were hard numbers. After the hearing, we asked you to provide 
us a copy of the survey.
    Mr. Chairman, this is exhibit A, electric sector 
transmission owner-operators, generation owner-operators.
    This is what you submitted on October 19, 2007.
    I want to enter this into the record with your permission, 
Mr. Chairman.
    Mr. Langevin. Without objection.
    [The information referred to follows:]
    
    
    
    
    Mr. Pascrell. That is what we got back. So I have a copy of 
this survey, and it is dated October 19. It was 2 days, I 
think, after the hearing. So you misled this committee back in 
October by claiming that you sent a survey out and received 
hard numbers back. That did not happen.
    Unfortunately, this was not the last time, Mr. Chairman, 
that this committee was misled.
    When we got a copy of the survey back, we asked the staff 
how you could have hard numbers at the hearing when you had not 
sent the survey out yet. I think that is a pretty reasonable 
question. The story changed. We were told that NERC received 
detailed information about the industry's efforts during a 
meeting in St. Louis back in September. Having been misled 
once, the committee requested information from all of the 
participants at that meeting. This is exhibit B.
    Exhibit B, which I have in my hand, Mr. Chairman, has 
almost 20 response letters from the attendees at that meeting. 
Each one of them was asked to provide a narrative of the 
conversation they had with NERC, the North American Energy 
Reliability Corporation, the organization which has the job of 
endorsing the regulations. None of them claim to have discussed 
these mitigation efforts with you. None of them.
    Mr. Chairman, I ask unanimous consent to enter these 
letters into the record as well as exhibit B.
    Mr. Langevin. Without objection.
    [The information referred to follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Pascrell. So let us get to the bottom of this.
    I want you, the CEO of NERC, to clarify for all of us what 
you have been doing since June 21 of last year when the initial 
advisory went out. As you explain to us what happened, please 
tell us in answers to these two following questions:
    Why did your company provide false and misleading 
information to this committee?
    Second, if you did not send a survey out until 2 days after 
the hearing and you did not talk to the folks at the St. Louis 
meeting, which you claimed, where did you get the numbers that 
you cited in October?
    Mr. Sergel. As I indicated to the subcommittee, first, the 
responsibility for being clear is entirely ours, and we have 
failed to do that. That is clear. Going forward, we will do 
better. Let me take you back----
    Mr. Pascrell. Excuse me. This is not a question of doing 
better. This is not a question of doing better. This is a 
question of telling the truth as to the best of your knowledge 
like any human being on the face of this Earth. We are all 
fallible. Only God is perfect. But you and your company two 
times told us fibs. Why?
    Mr. Sergel. In June, we sent out the initial advisory. 
Between that time and the committee hearing, we conducted a 
series of oral interviews. I will have to get to the bottom of 
whether they took place in St. Louis or in other locations, but 
I do believe that those interviews took place, but I will have 
to go back and look at that.
    Mr. Pascrell. Mr. Sergel, you are the electrical 
reliability organization for this country; is that not correct?
    Mr. Sergel. Yes, sir.
    Mr. Pascrell. In listening to your answer, how is this 
committee supposed to believe that you are taking the job 
seriously? FERC had to do a new survey because they thought 
yours was inadequate. Do you think NERC is really ready to 
carry out such duties?
    We are talking about, Mr. Chairman, life and death. We are 
not talking about misplaced adverbs here. We are talking about 
serious business as we were talking about serious business when 
we looked at the chemical industry.
    We want to be friends. We want to be partners with the 
electrical companies, with the utilities. We want to be 
partners, but you are not going to sit there and waste my time 
and tell me that we are doing the job that we were directed to 
do. At the same time, you have no real answer for these two 
documents that you sent us. What do you think we are, a bunch 
of jerks?
    Now, let me tell you. I am from Paterson, New Jersey. It is 
not the most perfect place in the world, but the one thing we 
do not tolerate on the streets is people telling fibs. If I ask 
you a question and you do not know what the answer is, fine. 
That is fair. It is very fair.
    Mr. Chairman, considering what we already know about these 
misleading statements, I think we should look into the 
processes for holding the--let me get it straight, Mr. 
Chairman--the North American Energy Reliability Corporation. 
``Slowly I turn.'' Do you remember that one? ``Slowly I turn.'' 
I would like to look into the process for holding this 
organization in contempt of this committee. I am serious about 
this, Mr. Chairman. I was just as serious when we went after 
truth in the chemical industry, and we should be just as 
serious today because the American people deserve no less.
    Would you agree with me or disagree with me?
    Mr. Langevin. Well, I certainly agree with the gentleman. I 
share his anger and frustration over not getting accurate 
information. I will certainly look into the gentleman's request 
and recommendation about contempt.
    As I have made clear, I do not ever want to hear that kind 
of testimony, that unclear or misleading testimony, before this 
subcommittee or the full committee ever, ever again. When 
someone does not know an answer, the proper response is, ``We 
will take that for the record,'' or ``I am unsure,'' but not to 
just, it seems, make up information or to present unclear 
information as fact.
    I heard the gentleman, Mr. Sergel, in his testimony today 
say that they will do better in the future. They have 
acknowledged the mistake. Again, it does not change the fact 
that there was unclear information that was presented as fact 
to this committee. I will certainly look into the gentleman's 
request.
    With that, the Chair now recognizes the gentleman from 
North Carolina, Mr. Etheridge, for 5 minutes.
    Mr. Etheridge. Thank you, Mr. Chairman. Thank you for 
holding this hearing today.
    Let me ask a question. All of us remember in 2003 when the 
blackout covered much of northeastern United States. We have 
been fortunate we have not had that in recent years, but that 
blackout was from causes that are still not totally clear but 
which seem to come to rest on the failure of three transmission 
lines in Cleveland. We have pretty much come to that 
realization.
    My question is, with utility uses and prices likely to hit 
record peaks this year, we really cannot afford disruptions 
that could create additional burdens on business, and all of us 
know what happens if we lose power with all of the major 
computer systems that we have. The interconnected nature of our 
electric grid means that a single point of failure can cause a 
cascading event that can be devastating, and that certainly 
shows us what could happen.
    So my question is, how likely is it that a single cyber 
attack on a controlled system could cause a massive disruption 
of our electrical grid?
    Let me go ahead and get a couple more questions in the loop 
so we will have it all out there.
    Second, how would you compare the cyber risks to the 
electrical sector to other risks?
    Finally, are public utilities--this has been touched on a 
little bit earlier. Are public utilities and private companies 
taking this threat as seriously as they should before people 
start paying attention to it? People always pay attention to it 
when they have a problem. Then once the problem is over with, 
they figure it is solved, and they move on to something else.
    It is in whatever order you want to take those three. How 
likely is it to cause a massive disruption? No. 2, compare the 
risks to the electrical sector to other risks. Then public-
private utilities in working together.
    Mr. Kelliher. There is some risk that you could be faced 
with a large regional blackout like we saw in August 2003. 
August 2003 really was, at least by one count, one of eight 
large regional blackouts. It was the one that affected the most 
number of people, but there were blackouts in the summer of 
2002 and in the summer of 1996, and they really stretched back 
to the 1960's. So that is always a risk.
    Now, the cyber risk, I am not sure we could qualitatively 
say the consequence of a cyber attack would be greater than 
other reliability risks, but the nature of it is very 
different. It is a national security risk, a national security 
threat. So the origin of threat is fundamentally different from 
the other reliability threats. That is why we think at FERC we 
need to have a different statutory tool, a different way to 
guard against that specific risk. We do think current law is 
adequate to address other reliability threats and that it 
should not be amended. Section 215 of the Federal Power Act, I 
do not think, should be amended.
    Mr. Etheridge. Let me interrupt you for a moment, please, 
since you have raised that issue.
    What additional authority does FERC need in order to ensure 
that the utilities and private companies do, in fact, take it 
seriously and deal with it? That is what this committee is 
really all about.
    Mr. Kelliher. On your third point, I do think utilities are 
and utilities and others are taking reliability standards 
seriously. They are making great efforts to comply, and they 
are positively trying to comply. We do have enforcement 
authorities. FERC has penalty authority that Congress gave us 
just 2\1/2\ years ago, and that allows us to impose penalties 
of up to $1 million a day, and that applies to reliability 
violations as well as others. So I think utilities are taking 
it seriously currently, but we do think we need legislative 
authority that, I think, would operate, roughly, in the 
following way:
    If a national security or intelligence agency identifies a 
threat, only then could FERC act to establish on its own an 
interim reliability standard to guard against that national 
security threat such as a cyber threat. That interim standard 
would stay in place until the threat disappears or until a 
permanent standard is developed under the 215 process. I view 
that as a limited grant because I do not think it would be used 
very often, and I think it recognizes that 215 is adequate to 
deal with other reliability threats.
    Mr. Etheridge. Mr. Sergel and Mr. McCollum, how do you 
think the industry should react to FERC's having this 
additional authority?
    Mr. Sergel. I think there is a gap in what we can do. We 
are limited to doing things in public. We are not confidential. 
We are limited to the bulk power system. We cannot act quickly 
enough in those kinds of circumstances, so there is clearly a 
gap. I see the Commission as kind of our authorizing agency, 
and therefore, they would be the appropriate ones, at least 
with respect to NERC, to have that authority despite the fact 
that we have a very good relationship with Homeland Security 
and with the Department of Energy. We have a tighter 
relationship with the FERC. I think there is a last part of 
this, which is public policy, which is not kind of a NERC 
responsibility to comment on.
    Mr. Etheridge. So I take that as supportive.
    Mr. Sergel. On the two things that we are responsible for, 
on those two.
    Quickly, to your other question on kind of measuring this 
risk to the others in the system, they are just fundamentally 
different. You know, we spend a lot of time on trees and on 
maintenance and on training and on all the kinds of things that 
are essential to a reliable bulk power system. It is not the 
same as someone attacking you, and as a consequence, it is just 
fundamentally different, fundamentally different.
    Mr. McCollum. TVA is committed to the security of our 
networks and control systems, and we have moved aggressively to 
increase the security and to make those controls even more 
robust, and we certainly will continue to move ahead to 
strengthen our defense in depth on our networks to meet or to 
exceed the requirements of any standards or authority that 
Congress chooses to put in place.
    Mr. Etheridge. So that is an affirmative?
    Mr. McCollum. Yes.
    Mr. Etheridge. Okay. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Mr. Langevin. I thank the gentleman.
    The Chair now recognizes the gentlelady from Texas, Ms. 
Jackson Lee, for 5 minutes.
    Ms. Jackson Lee. Mr. Chairman, thank you so very much for 
the courtesies of this committee and to the ranking member, Mr. 
McCaul, my colleague from Texas.
    I think it is important that our respective committees--the 
Transportation Security and Critical Infrastructure--continue 
to cross-pollinate on these very crucial issues, and I thank 
you for your leadership.
    I think it is important to note whether or not the 
witnesses respectively feel that they are on an ongoing hot 
seat. We are very much aware that intelligence, classified and 
nonclassified, suggest that terrorists will not act the same, 
that they will not be redundant, that they will not be 
repetitive. To a certain extent, they will look for new and 
creative ways.
    We are well aware of the complete shock and collapse of our 
intelligence communications that generated the horrific tragedy 
of 
9/11. As one of the early members of the Select Committee on 
Homeland Security, I am reminded of the constant chatter about 
what we did not do and how we did not follow up with the 
linkage of our intelligence to know the potential of these 19 
terrorists who did this dastardly act.
    So we find ourselves here in 2008 with a new, enormous and 
growing loophole that has been evidenced by the GAO, which 
found that the Tennessee Valley Authority had significant 
problems with cybersecurity, with the Aurora loophole. The idea 
of this hearing--I hope and view as very important--is to not 
put your finger in the dam for what could be a horrific and 
devastating act equaling and surpassing the tragic earthquake 
that just occurred in China and the horrible cyclone in Burma. 
This is about life and death. This is about Americans' dying. I 
know that there is a thought that this may be about the idea of 
lights going out, but it may also be about the ability to, in 
essence, shut down a system that would impact the very lifeline 
of this country.
    So I am disturbed as well as a nonmember of this committee 
to hear of the misrepresentation of materials, and it causes me 
to think, Mr. Chairman, as we did in chemical security--and I 
think we worked together on that legislation. There were 
components of both of our committees as we moved on the 
chemical security legislation out of the Transportation 
Security committee and out of this committee. That legislation 
is imperative. I know that there are initiatives that we have 
spoken about, but let me raise this question as I raise it for 
all of the witnesses.
    To the Tennessee Valley Authority: Can you tell me why--and 
forgive me if you have answered it, and I would love a brief 
answer--you are called the Nation's largest power company, and 
we are quite proud of the technology of the Tennessee Valley 
Authority. In fact, we are probably, on the floor of the House, 
discussing this question of hydropower. Can you tell me why it 
seems that you have not fully implemented security measures 
that would operate against a catastrophic event for your 
entity?
    For the other witnesses, speak to the point of legislation 
with punitive measures--criminal and fines--as an incentive in 
what is, I think, a very challenging question.
    Mr. McCollum, I believe, for the Tennessee Valley 
Authority, where are you in the implementation of these 
security measures?
    Mr. McCollum. We have been taking and are taking aggressive 
action to maintain the security of our networks and 
infrastructure and to improve those on an ongoing basis. We, in 
fact, had many actions underway in areas associated with the 
recommendations of the GAO report prior to the GAO's audit, and 
we are continuing to move ahead and to take actions on those 
areas. So we are committed to strengthening on an ongoing basis 
in a continuous improvement fashion and in a prioritized 
fashion all of the defense in-depth approach and infrastructure 
to guard against cybersecurity threats.
    Ms. Jackson Lee. Mr. McCollum, do you think you are going 
fast enough?
    Mr. McCollum. Yes, I do. I believe that we have taken much 
action on this issue, and we continue to move ahead.
    As Chairman Kelliher noted in his testimony, in order to 
aggressively move against these threats, we have to understand 
the threats, understand the issues involved and the mitigation 
strategies and move quickly to implement those, and that is 
what I believe we are doing. The GAO report is beneficial to us 
in terms of clarifying some of the issues around compliance and 
mitigation strategies, and that is very helpful to us.
    Ms. Jackson Lee. Let me thank you because I have the three 
witnesses, and I must move quickly, but I do not think, from my 
perspective, we are moving fast enough and you are moving fast 
enough.
    I know that the representative from the GAO probably does 
not want to comment--and if you do, please do, but let me just 
say, do you see the landscape of utilities moving fast enough, 
from your perspective?
    Mr. Wilshusen. Overall, I cannot really comment on that 
because the scope of our work dealt with just TVA.
    Ms. Jackson Lee. Do you see them moving fast enough?
    Mr. Wilshusen. We have received the responses to our 
recommendations and the actions that we recommend they do. We 
have not yet verified their assertions. What we have at this 
point are assertions.
    Ms. Jackson Lee. And you will provide us a report on that. 
Was the response timely?
    Mr. Wilshusen. Yes.
    Ms. Jackson Lee. Thank you.
    Mr. Sergel, in light of the unfortunate misstatements that 
have occurred from the reliability corporation, do we need--
well, I am not going to ask whether you need it.
    Wouldn't it be helpful to have incentives that were fairly 
strong, that were fairly harsh about compliance?
    Mr. Sergel. We have standards that we have put in place, 
and we will enforce them up to the $1 million a day per 
violation, so we will do that.
    I think what is clear to me--and it was clear before, but 
it is even more so after today--is that, as to the particular 
nature of our organization, setting standards in an industry 
public way is not adequate to deal with the issues that have 
been presented by this committee.
    Ms. Jackson Lee. Maybe your enforcement is not adequate as 
well.
    Mr. Sergel. Our enforcement of what we have will be as it 
is limited by the law. Today, it is limited by the law.
    Ms. Jackson Lee. Maybe the law needs to be expanded.
    I will conclude, Mr. Chairman, by asking the FERC chairman, 
and will thank him for his presence here.
    Give me a little bit more detail on how you work closely 
with the Department of Homeland Security. Are you all in 
periodic dialog? Is there oversight that is done in a combined 
method? What is your assessment of the grid from your 
regulatory perspective?
    Would you see the value, if you will--and I guess I am 
asking a regulator because you are civil, if you will--for 
criminal penalties for those who violate and/or for those who 
are not adhering to the urgency of this matter?
    Mr. Kelliher. We coordinate with the national security 
agencies, including Homeland Security, the Department of 
Defense, the Department of Energy, and others, really, more in 
the area that is the focus of the hearing today--in the area of 
cybersecurity--than on other reliability issues.
    I just want to reassure you that we can impose penalties 
for violations of cyber standards as well as other reliability 
standards. We can impose civil penalties up to $1 million per 
day per violation. I do not think maximum penalties will be the 
norm for all reliability violations. I think we would tend to 
reserve them for the most serious violations. We also want to 
know not just whether a violation occurred but why it occurred. 
We are really in the first stages.
    Reliability standards became enforceable on June 18 of last 
year. So we have had less than 1 year of experience with 
mandatory reliability standards. I think we are developing 
enforcement programs at the regional level. We have a process 
that is slow, but it is designed to be slow, frankly, by 
Congress in the 215 process. That is what we think does not 
work so well with this cyber threat, and there is the 
possibility of criminal penalties as well for violations of the 
Federal Power Act.
    Ms. Jackson Lee. Mr. Chairman, I will yield back with a 
commitment to review with you these standards that you have 
brought to our attention. I, frankly, believe that there is the 
framework of reliability, and then there is the framework of 
piercing the system by those who would desire to do us harm. 
That, I guess, is the question I raise, which is whether or not 
the system is secure enough to rebuff that and whether or not 
we need to expand the concept of reliability to the concept of 
rebuffing and intrusion through cybersecurity and otherwise and 
whether or not the penalties, whether by the Federal Power Act, 
are criminal.
    I am not trying to lasso you in, but I am trying to 
emphasize the urgency and the importance of such as to whether 
or not they are sufficient, as to whether or not the industry 
is listening, as to whether or not the industry is moving fast 
enough, and as to whether or not the industry realizes that 
their challenge is alongside of reliability. It is life and 
death for Americans who are impacted by your industry.
    With that, Mr. Chairman, I yield back. Thank you, and thank 
you to the ranking member for your courtesies.
    Mr. Langevin. I thank the gentlelady for her questions and 
for her input.
    Clearly, this is an area where, I believe, stronger 
authorities, more comprehensive authorities are needed. I 
certainly look forward to working with you and with the members 
of this subcommittee and with the members of the full committee 
to see how we strengthen those authorities. It is not just 
enough to have some standards in place; they have to be the 
right standards. If they are not broad enough or if they are 
not strong enough--and that is what I believe is the case 
here--then they do not go far enough. That is why I have 
stronger confidence in this, in these standards, and the sooner 
we can move in that direction in adopting those standards, the 
better off we will be.
    These are the kinds of things that keep me up at night, our 
electric grid, which we all rely on for our way of life, for 
our national security. Our families depend on the reliability 
of the electric grid. When we identify a vulnerability such as 
has been identified in this data threat and particularly in the 
Aurora threat, it is something that we need to move 
aggressively to close. This is, again, one of those things of 
many that this subcommittee deals with that keeps me up at 
night, and I am not going to be satisfied until we have 
aggressively moved to close the vulnerability and that our 
electric grid is 100 percent secure.
    With that, the vote has been called. I want to thank the 
members for their questions. I want to thank the witnesses for 
their testimony.
    Members of the subcommittee may have additional questions 
that they would ask of the witnesses, and we would ask that you 
respond expeditiously in writing.
    Hearing no further business, the subcommittee stands 
adjourned.
    [Whereupon, at 3:40 p.m., the subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              

   Questions From Chairman James R. Langevin for Honorable Joseph T. 
    Kelliher, Chairman, Federal Energy Regulatory Commission (FERC)
    Question 1. One of our witnesses from the October panel, Joe Weiss, 
recently commented in the press that ``some generation managers 
considered NERC Reliability Standard compliance a `game' to remove 
assets from the standards definition without addressing the reliability 
threat.'' For instance, according to Weiss, one manager of a coal-fired 
power plant was specifically charged by his upper management to ensure 
that his plant was not considered a critical cyber asset. Another plant 
manager whose plant had black start capability was subject to CIP-002; 
however, the company considered it more cost-effective to simply remove 
its black start capability. They determined that the cost of NERC 
Reliability Standard compliance, and possible fines, was too much for 
their facilities. Is there concern on your part that this is becoming a 
compliance game? What are you preparing to do to address this problem?
    Answer. In Order No. 706, issued in January 2008, the Commission 
directed two actions to ensure proper identification of critical 
assets. First, we believe that a lack of uniformity in the performance 
of risk-based assessments of critical assets could make it difficult to 
compare companies and to check for adequate critical asset lists. 
Therefore, the Commission directed NERC to develop guidance on the 
development of a risk-based assessment methodology to identify critical 
assets. NERC has that effort underway and is expected to post a draft 
for comments in the fourth quarter of 2008. Second, we directed NERC to 
revise the reliability standards to require an oversight mechanism for 
an entity with a wide-area perspective to examine the critical asset 
lists in order to ensure critical assets were listed. Upon identifying 
a missing critical asset, the oversight entity could require that the 
missing asset be added to the list and protected according to the CIP 
reliability standards. This review procedure will be developed through 
NERC's reliability standards development process and is expected to be 
filed for the Commission's review in the second quarter of 2011. Also, 
the Commission intends to spot check critical asset lists and their 
determinations by actively participating in some compliance audits of 
the CIP reliability standards. This is the most direct way for the 
Commission to not only examine the specific details for the company 
under consideration, but also to assess the effectiveness of the 
critical asset identification requirement.
    Question 2. Are you familiar with the Aurora mitigation technology 
that is manufactured by Cooper Industries? Do you know how many 
companies have purchased this technology? In conversations with 
industry owners and operators, have you gathered an understanding of 
how many people have purchased this technology?
    Answer. The Commission is aware of the Cooper technology. Based 
upon discussions with industry members, Commission staff believes that 
the technology is not being widely used by industry. Their use is 
limited by industry's need to test the reliability and operation of the 
devices, as well as by supply issues.
    Question 3. Under the Cyber Initiative, all Federal agencies will 
use a service provided by the US-CERT known as EINSTEIN to monitor 
their connections to the Internet. EINSTEIN is an automated process for 
collecting, correlating, analyzing, and sharing computer security 
information across the Federal civilian government. As a Federal 
entity, the TVA already deploys several EINSTEIN boxes on its networks 
to monitor traffic. TVA also reports computer incidents to the US-CERT. 
In the future, do you envision a role for the Federal Government to 
provide a similar monitoring service for the private sector? To what 
extent has FERC had these conversations with NERC, DHS, or other 
intelligence agencies?
    Answer. To date, FERC has not been involved with the EINSTEIN 
project and has not had discussions with NERC, DHS, other intelligence 
agencies, or TVA about the subject. I note, however, that during the 
course of the Commission's rulemaking regarding proposed Critical 
Infrastructure Protection reliability standards and during our attempts 
to assess industry's mitigation steps regarding the Aurora 
vulnerability, industry has expressed very strong concerns about 
sharing sensitive security-related information with Federal entities, 
since the latter have limited legal authority to ensure that 
information is disclosed only to those who have a need to know the 
information.
    Question 4. Please elaborate on your request for new authority. 
Would this require legislation? What intelligence agencies would be 
involved? What is the next step for requesting or establishing this 
authority?
    Answer. I believe new legislation is needed to protect the grid 
against cyber security threats, given the nature of these threats. I 
anticipate that the Commission would coordinate with other Federal 
agencies, as appropriate, such as the Department of Energy, the 
Department of Defense, the Department of Homeland Security, the Central 
Intelligence Agency, the National Security Agency, or the Federal 
Bureau of Investigation. We have been engaging in discussions with 
affected entities to get input as we consider how to craft legislation 
appropriately. We have received constructive input from these 
discussions and are incorporating that input into draft legislative 
text.
    Question 5. In your opinion, do America's intelligence agencies 
have adequate situational awareness throughout the public and private 
sector to provide FERC with the appropriate intelligence that would 
allow FERC to immediately issue temporary mandatory reliability 
standards to prevent or mitigate a cyber attack launched against the 
Nation's bulk power system? If not, what could be done to better 
improve this situational awareness?
    Answer. I believe that the intelligence agencies are best suited to 
assess adversaries, their capabilities, and their intents. The 
Commission has the knowledge and experience necessary to issue orders 
addressing needed reliability measures or actions. To the extent 
feasible, the Commission plans to consult with the relevant entities in 
order to gain their input regarding the design and implementation of 
any measures or actions needed to prevent or mitigate a cyber attack 
launched against the Nation's bulk power system.
    Question 6. An article in the National Journal dated May 31, 2008 
suggests that the Chinese government may have been responsible for the 
2003 New York City blackout and the 2008 Florida Power and Light 
blackout. Please provide a detailed narrative explaining your position 
on this article. Please also explain whether such an attack could 
potentially be carried out. Please explain the cause of the 2008 
Florida Power and Light blackout.
    Answer. The Commission took part in the investigation and 
subsequent report on the 2003 blackout. In summary, the Security 
Working Group analysis provided no evidence that a malicious cyber 
attack was a direct or indirect cause of the August 14, 2003, power 
outage.\1\ The Commission has no reason to think otherwise today. As 
for the 2008 Florida blackout, on March 19, 2008, the Commission 
initiated a non-public, formal investigation into whether any mandatory 
Federal reliability standards were violated during the Florida 
blackout. Because the investigation is ongoing and the information 
gained during the investigation is still non-public, I cannot discuss 
any causes of the Florida blackout at this time.
---------------------------------------------------------------------------
    \1\ U.S.-Canada Power System Outage Task Force, Final Report on the 
August 14, 2003 Blackout in the United States and Canada: Causes and 
Recommendations, April 2004, page 132.
---------------------------------------------------------------------------
    Question 7. A common criticism of the NERC standards is that there 
is not an adequate definition of critical cyber assets for CIP-002, 
and, as a result, many companies are struggling to determine exactly 
what is/is not covered under the reliability standards. To what extent 
has FERC engaged industry in this discussion? What is your guidance to 
the industry?
    Answer. NERC's Glossary of Terms Used in Reliability Standards 
defines critical cyber assets as cyber assets ``essential to the 
reliable operation'' of critical assets. Cyber assets are defined as 
``[p]rogrammable electronic devices and communication networks 
including hardware, software, and data.'' As a result of these 
definitions, the identification of critical cyber assets involves a 
two-step process. First, the critical assets must be identified. Then, 
the associated critical cyber assets must also be identified. Most of 
the discussions between industry and the Commission on this process 
have focused on identifying critical assets. See the response to 
question one above. Regarding the second step, most of the discussions 
on that aspect of the process have been about the ``data'' component. 
That discussion culminated in the Commission's direction in Order No. 
706 that NERC consider the designation of various types of data as a 
critical asset or a critical cyber asset. We also directed NERC to 
develop guidance on the steps that would be required to apply the CIP 
reliability standards to such data and to consider whether this also 
covers the computer systems that produce the data. The Commission also 
expects that best practices used to identify critical cyber assets will 
be identified during the process of auditing responsible entities for 
compliance with CIP-002. At that point, the Commission will consider 
whether additional guidance is called for, or whether the reliability 
standard needs to be modified.
    Question 8. Does FERC have the authority to require companies 
operating on the bulk power system to undergo ``red team'' efforts 
involving remote or onsite attackers? Does FERC have any, operational 
authority to run ``red team'' exercises against these companies?
    Answer. The CIP reliability standards require responsible entities 
to conduct vulnerability tests, but not actual ``red team'' efforts. In 
theory, a reliability standard could require a ``red team'' exercise, 
but there would be associated reliability risks with conducting such 
exercises. The Commission does not have authority to run such ``red 
team'' exercises against industry companies.
    Question 9. The Nuclear Regulatory Commission documents all unusual 
cyber-related events, in contrast to non-nuclear electric facilities 
that do not make these events public. Does FERC intend to create a 
catalogue of events on grid facilities to allow for the monitoring of 
this kind of activity? If not, why not?
    Answer. The Commission has no plans at this time to create a public 
catalog of cyber security incidents. The CIP reliability standards do 
require responsible entities to report cyber security incidents to the 
electricity sector information sharing and analysis center (operated by 
the North American Electric Reliability Corporation), but that 
information is not all public. At this point, the Commission is more 
focused on having incidents reported rather than making them public. In 
fact, the Commission's Order No. 672 indicated a preference for keeping 
proceedings involving a cybersecurity incident nonpublic because it is 
possible that bulk-power system security and reliability would be 
further jeopardized by the public dissemination of information 
involving incidents that compromise the cybersecurity of a specific 
user, owner or operator of the bulk-power system. If such information 
is made public, careful attention will be necessary to be sure 
sensitive information that could jeopardize the reliability of the 
bulk-power system is not disclosed.
Questions From Chairman James R. Langevin to Richard Sergel, President 
        and CEO, North American Electric Reliability Corporation
                             June 23, 2008
    Question 1. For the record, please provide a detailed timeline that 
explains the steps that you took to distribute the industry survey 
regarding the Aurora mitigation. Please note the discrepancies that 
were discussed during the hearing, and provide explanations for those 
discrepancies.
    Answer. The responsibility to provide consistent, coordinated, 
clear and effective communication lies entirely with NERC. We apologize 
for the confusing, unclear, and misleading communications with the 
subcommittee. A detailed timeline that describes the steps taken by 
NERC to distribute the October 19, 2007 written survey to the industry 
regarding the implementation of the mitigation measures contained in 
the June 21, 2007 ES-ISAC Advisory is attached (Attachment 1).
    The discrepancies discussed during the May 21 hearing appear to us 
to fall into two categories: (1) the timing and means by which NERC 
assessed the industry's compliance with the June 21 Advisory, and (2) 
the representation to the subcommittee of NERC's assessments of 
compliance with the Advisory. These are discussed below, beginning with 
the October 17 hearing.
A. The October 17, 2007 testimony of David Whiteley regarding NERC's 
        assessment of the industry's implementation of the mitigation 
        measures identified in the Advisory.
    At the October 17 hearing, Chairman Langevin told Mr. Whiteley that 
staff of the Department of Homeland Security had described to committee 
staff ``a survey that NERC sent out in August 2007 to determine how 
many owners and operators were implementing the mitigation efforts'' 
identified in the June 21 Advisory. Mr. Langevin then asked Mr. 
Whiteley to ``describe the survey and tell us its findings.''
    Mr. Whiteley failed to inform Mr. Langevin that the Chairman's 
understanding was incorrect and that NERC had NOT sent out a formal 
written survey of the industry's compliance with the Advisory in August 
2007. As depicted on the timeline, NERC had prepared a formal survey 
that was approved by NERC senior management. NERC received FERC's 
assent to distribute that survey in August. However, the survey had not 
been sent out at the time of the hearing. By not advising the 
subcommittee that no written survey had been sent out, Mr. Whiteley's 
testimony was inaccurate and misleading.
    Mr. Whiteley responded as though the survey had been distributed, 
stating that it was a follow-up to the ``guidance that was issued 
earlier in the spring,'' and that ``we've determined that 
approximately, at this point, 75 percent of the transmission grid has 
either taken appropriate actions or is in the process of implementing 
those actions.'' This discussion of ``75 percent of the transmission 
grid'' appears to have been misunderstood by the subcommittee. Mr. 
Whiteley's use of the 75 percent number referred to the portion of the 
transmission grid owned by companies that had been contacted by NERC 
staff and for which Mr. Whiteley believed that mitigation measures had 
been implemented, based on information provided to Mr. Whiteley by 
NERC's Manager, Situation Awareness and Infrastructure Security (NERC 
SAIS Manager). Mr. Whiteley did not intend by use of this number, as 
the subcommittee may reasonably have assumed, to state that 75 percent 
of all transmission users, owners or operators had implemented 
mitigation measures.
    In response to a further question from Chairman Langevin at the 
October 17 hearing, Mr. Whiteley stated that NERC had ``hard data'' 
showing the extent of the industry's compliance with the June 21 
Advisory.\1\ The basis for Mr. Whiteley's response to Chairman 
Langevin's inquiry was an e-mail sent to NERC management on October 10 
by the NERC SAIS Manager that reported on the status of implementation 
of the short- and mid-term mitigation measures recommended in the 
Advisory. That e-mail stated that the ``data'' gathered from voluntary 
submissions and from discussions with NERC Critical Infrastructure 
Protection Committee (CIPC) contacts at ``the large transmission owners 
and operators'' ``covers at least 75 percent of the BPS in the U.S.''
---------------------------------------------------------------------------
    \1\ ``Mr. Langevin: . . . 75 percent you say is in compliance, . . 
. this is not just anecdotal? You are talking about this as hard 
answers to the issue of having implemented all the mitigation 
strategies?'' ``Mr. Whiteley: This is a follow-up with most of the 
large utilities in the country and many of the intermediate-size 
utilities as well. And it is hard evidence or hard data that we've 
asked, and they've explained what's been done. So we have direct 
information.''
---------------------------------------------------------------------------
    Because the only information NERC had at the time of the October 17 
hearing was the information the NERC SAIS Manager obtained in a few 
voluntary written submissions and his informal discussions with company 
representatives, it was inaccurate to characterize the information as 
``hard'' or ``direct.'' A complete answer would have described what had 
been done, i.e., to tell the subcommittee that NERC staff conducted 
discussions with industry representatives that collectively own or 
operate 75 percent of the total transmission grid. The response also 
should have said that NERC had not verified the reports received in 
these discussions regarding the status of mitigation measures.
B. Responses to follow-up inquiries from the committee.
    In responding to follow-up questions for the record of the October 
17 hearing on November 20, NERC submitted a copy of the formal written 
survey sent out on October 19 to assess the status of compliance with 
the mitigation measures recommended in the Advisory. On December 5, 
NERC provided a narrative overview of the implementation of the 
mitigation measures recommended in the June 21 Advisory, along with the 
survey responses themselves (with the identity of the specific 
respondents concealed), in response to a further request of the 
subcommittee.\2\
---------------------------------------------------------------------------
    \2\ This further request was made on November 16 in a letter from 
Chairman Langevin to Mr. Sergel. The narrative overview document was 
entitled ``Assessment of the Implementation of the Mitigation Measures 
recommended in the June 21, 2007 ES-ISAC Advisory.''
---------------------------------------------------------------------------
    The narrative overview provided on December 5 stated that:

    The ES-ISAC conducted both an initial assessment of the 
        implementation of the recommended measures and a formal, 
        written survey to measure industry progress in completing the 
        mitigation measures. The initial assessment was conducted in 
        September and early October and was performed by gathering 
        information with sector entities in phone conversations and at 
        meetings. No formalized survey instrument was used. In 
        addition, a small number of entities submitted unsolicited 
        reports on their progress to the ES-ISAC.
    Based on the information gathered in the discussions, the submitted 
        reports, and expert knowledge of the ownership and geography of 
        the bulk power system, the ES-ISAC concluded that approximately 
        75 percent of the transmission grid had received mitigation 
        measures or such measures were in progress.

    Following this submission to the subcommittee, the subcommittee 
counsel contacted NERC on December 6 to schedule a face-to-face meeting 
and request further detail regarding the September/October ``initial 
assessment'' of the industry compliance with the mitigation measures in 
the June 21 Advisory. On December 20, NERC representatives met with 
subcommittee staff and provided a letter in response to the staff's 
request for ``a list of phone conversations and meetings that these 
individuals had with sector entities. Please include dates and any 
information/notes prepared.''
    The December 20 letter, submitted by NERC's SAIS Manager, stated 
that ``[a]fter issuance of the Advisory on June 21, 2007, I 
communicated regularly with industry representatives to explain and 
discuss the Advisory. Beginning in September and October, my 
communication efforts shifted from explanation of the Advisory to 
determination of how well the Advisory was being implemented. A 
reconstructed list of the discussions, to the best of my recollection, 
is listed below.'' Contacts made at the September 27-28 CIPC meeting in 
St. Louis were listed in this letter, as well as phone calls with other 
individuals conducted in September and October. The letter also 
provided copies of the three voluntary written submissions that NERC 
received. In addition to this written response, NERC representatives 
and subcommittee staff discussed the nature of the information 
gathering process prior to the distribution of the written survey on 
October 19.
    Committee Chairman Thompson and subcommittee Chairman Langevin sent 
letters on January 8, 2008 to attendees at the September 27-28 CIPC 
meeting identified in the December 20 letter. The letter from Messrs. 
Thompson and Langevin said:

    ``The committee recently requested and received documentation from 
        the North American Electric Reliability Corporation (NERC) to 
        help determine the extent of the sector's efforts to implement 
        the security recommendations contained in the June 21, 2007 
        NERC Advisory. According to these documents, NERC staff met 
        with you individually at the NERC Critical Infrastructure 
        Protection Committee meeting, held from September 27-28 in St. 
        Louis, Missouri, to discuss your company's implementation 
        efforts.
    ``During this meeting with NERC staff, you answered questions 
        regarding the clarity of the recommendations contained in the 
        NERC Advisory, the extent of your company's efforts to mitigate 
        the Aurora vulnerability, and existence of your company's 
        cybersecurity training program for employees. Please provide 
        the committee with a detailed narrative explaining this 
        discussion with NERC.''

    The January 8 letter reveals the subcommittee's view that the 
discussions at the CIPC meeting in St. Louis were more formal than they 
were. As NERC's December 5 submission indicated, no formal survey was 
conducted. Although NERC's December 5 narrative overview indicated that 
information was gathered from sector entities ``in phone conversations 
and at meetings,'' NERC understands from subcommittee counsel that the 
subcommittee's January 8 inquiry was sent only to the CIPC meeting 
attendees.
    The responses provided to the subcommittee's January 8 letter do 
not support Mr. Whiteley's reference to ``hard data'' showing 
compliance by 75 percent of the transmission grid in his response to 
Chairman Langevin at the October hearing. However, several of the 
responses sent to the subcommittee do describe company interactions 
with NERC staff at the CIPC meeting and discussions of company 
compliance with the recommended mitigation measures:
   One company stated the Aurora advisory was discussed during 
        the general CIPC meeting in September, not in an individual 
        meeting. It stated that at the initiation of NERC there was 
        discussion by many attendees in the open forum about the 
        response of their companies to the NERC advisory; details of 
        the response to the advisory were not provided at the meeting 
        due to the sensitive nature of the information on mitigation of 
        the vulnerability.
   Another company submitted detailed affidavits, which 
        reported, among other things, that the company representative 
        recalled talking to NERC staff about the Aurora vulnerability 
        and the company's efforts to address it. The company 
        representative also told NERC that the company had taken action 
        to eliminate the Aurora vulnerability.
   Another company stated it told NERC it had addressed the 
        vulnerability.
   A few companies reported that there was some (limited) 
        discussion of the Aurora vulnerability at the CIPC meeting.
    Taken together, the responses the subcommittee received to its 
January 8 letter would not lead to a conclusion that there was ``hard 
data'' for David Whiteley to rely on at the October 17 hearing.
C. Other missed opportunities to correct the record and clarify the 
        status of the implementation of the mitigation measures 
        contained in the Advisory.
   October 15.--NERC received a request from subcommittee staff 
        for information about the August 2007 survey. NERC failed to 
        advise the staff that a survey was NOT sent in August 2007.
   November 20.--NERC submitted responses to the subcommittee's 
        follow-up questions from the October 17 hearing. The first 
        question asked, ``What were the results of the August 2007 NERC 
        survey sent to owners and operators regarding the status of the 
        sector's implementation of the Aurora mitigation efforts,'' and 
        also requested a copy of the survey and a narrative of the 
        results. The NERC response enclosed a copy of the October 19 
        survey and a narrative of the results, as requested, but failed 
        to advise the subcommittee that a formal written survey was NOT 
        sent out in August. By letter dated December 12, 2007 and 
        delivered on December 14, NERC clarified its responses for the 
        record of the October 17 hearing and stated definitively that 
        no survey was sent in August 2007.
   December 5.--NERC's response to Chairman Langevin's November 
        16 letter requesting a copy of the survey and its results 
        failed to clarify that the reference to 75 percent of the grid 
        having mitigation measures completed or in progress was a 
        reference to the percentage of the physical transmission grid, 
        by ownership, not to the percentage of users, owners or 
        operators that had completed mitigation measures.
    In summary, NERC did not rigorously survey the implementation of 
the mitigation measures it had recommended and did not accurately 
communicate with the subcommittee about what NERC had done. As I 
testified on May 21, 2008, NERC now has a structure in place--with a 
formal FERC-approved, three-level system of alerts; a comprehensive 
list of owners, operators and users of the bulk power system; and 
mandatory reporting regarding implementation of recommendations and 
essential actions--to assure that a rigorous and timely analysis of the 
implementation of recommended measures in future Advisories will be 
conducted.
    Question 2. Publicly and privately owned infrastructures on the 
grid are so interconnected, weak security controls in one utility can 
pose harm to another utility that shares a connection. Yet publicly and 
privately owned infrastructures are subject to different security 
standards. According to a NIST-sponsored review published in March 
2007, an organization conforming to the baseline set of security 
controls in PS 800-53 will also comply with the management, operational 
and technical security requirements of the NERC Reliability Standards, 
though the converse may not be true. For instance, the NERC Reliability 
Standards allow for the exclusions of telecommunications and 
distribution equipment from the ``critical assets'' list. Under the SP 
800-53 requirements, however, there is no similar exclusion. This 
committee--along with NIST and GAO--has suggested that the NERC 
standards should be more aligned with the NIST 800-53 standards that 
apply to federally owned infrastructure. What steps are being taken to 
transition the NERC Reliability Standards toward NIST? Why shouldn't 
the scope of CIP-002 be changed to include ``all equipment that is 
electronically connected''?
    Answer. In Order 706, FERC directed NERC to consult with Federal 
agencies on the effectiveness of NIST standards and implementation 
issues, and using the standards development process, address any 
provisions that would better protect the bulk power system.
    In response to this direction, a Standard Authorization Request 
(SAR) was initiated and posted for a 30-day public comment period from 
March 20 to April 19, 2008. A SAR drafting team comprised of well 
regarded subject matter experts from a broad range of industry segments 
was assembled to review and respond to the comments received during 
that initial SAR posting. This team includes a representative from a 
Federal agency that must comply with both NERC and NIST standards.
    Presently, the drafting team is considering all comments on the 
SAR, including those submitted by NIST. The drafting team must prepare 
written responses to all comments. The end work product will be a SAR 
that specifies the work scope for the Standard Drafting Team that will 
ultimately develop the revisions to the standards.
    NERC management has formally invited NIST to continue its 
participation in the standards drafting effort as a formal team member. 
NIST has agreed.
    Regarding the scope of CIP-002, it does not include ``all equipment 
that is electronically connected'' for jurisdictional as well as 
reliability reasons.
   Section 215 of the Federal Power Act limits the ERO's 
        jurisdiction to bulk power system users, owners, and operators. 
        By definition, the bulk power system excludes distribution 
        assets. Similarly, telecommunications common carriers are not 
        users, owners or operators of the bulk power system.
   Section 215 of the Federal Power Act also defines a 
        reliability standard as a requirement that provides for the 
        reliable operation of the bulk power system. The process 
        required in CIP-002 determines which assets of the bulk power 
        system provide for its reliable operations. Those assets are 
        identified through an analysis of the impact that the loss of 
        an asset poses to reliable operation of the bulk power system. 
        Those assets found to provide for the reliable operation of the 
        bulk power system are critical assets.
   The CIP-002--CIP-009 standards drafting team intentionally 
        focused requirements on cyber assets that were: (1) Essential 
        to the reliable operation of critical assets; (2) whose impact 
        to reliable operation of the bulk power system, if compromised, 
        could be significant; and, (3) had a great number of attack 
        vectors. Cyber assets meeting these criteria are critical cyber 
        assets.
    An electronic perimeter, as required in CIP-005, shields critical 
        cyber assets from potential adverse impacts from external 
        sources such as non-critical cyber assets.
    NERC's CIP standards represent the first set of reliability 
standards requiring a uniform level of cyber security for all users, 
owners, and operators of the bulk power system. These standards 
intentionally focus the efforts of those users, owners, and operators 
on assets most critical to the reliable operation of the bulk power 
system. The CIP standards expanded the scope of assets beyond those 
addressed in Urgent Action 1200. The process of focusing resources on 
those assets with the greatest impact on reliable operations, and 
protecting them as required in the remaining standards (specifically 
including the provision of electronic security perimeters), mitigates 
the need for protection of every other asset that is connected to them. 
Subsequent cyber security standards may include other assets within the 
scope of the ERO's jurisdiction.
    Question 3. In April 2000, Vitek Boden, an employee at an 
Australian firm that installed SCADA radio-controlled sewage equipment, 
packed his car with stolen radio equipment attached to a computer. He 
drove around issuing radio commands to the sewage equipment that 
resulted in sewage spills. This is the first widely known example of 
someone maliciously breaking into a control system. Please explain how 
a company demonstrating auditable compliance with the NERC CIP 
standards prevents this incident from occurring, when they are not 
required to follow any mandatory reliability standards for 
telecommunications equipment.
    Answer. If the referenced event had occurred on the North American 
bulk power system, it would represent a breach of the ``electronic 
security perimeter,'' which is required by present NERC Cyber Security 
standard CIP-005-1. In this particular instance, communications from an 
invalid source were allowed to be transmitted to, received by, and 
acted upon by the control equipment for the sewage system. As required 
by the NERC standards, the system control equipment would be contained 
within an electronic security perimeter. Any communications across that 
perimeter (wireless or not) would have to pass through the protections 
of the electronic security perimeter prior to being sent to the system 
control equipment.
    The electronic security perimeter is implemented using the concept 
of ``mutual distrust'', as described in the requirements of CIP-005, 
which includes requirements to implement a ``deny by default'' stance, 
and requires ``specific access permissions be specified''. It also 
requires ``only ports and services required for operations and 
monitoring'' be allowed to cross the perimeter. In the Boden example, 
had CIP-005 been implemented, the perimeter controls would have been 
implemented to disallow control actions from being delivered from 
addresses not associated with the control center, and would therefore 
be flagged as suspicious, requiring investigation and reporting of said 
suspicious activities following the requirements of NERC Standard CIP-
008-1.
    In this particular case, if the entity in the Boden example 
followed the change management procedures required by CIP-003-1, the 
equipment disposal procedures required by CIP-007-1, and the access 
control review and revocation requirements required by CIP-003-1, CIP-
004-1, CIP-005-1, CIP-006-1, and CIP-007-1, the stolen equipment used 
by Mr. Boden would have been removed from the valid access list, and 
the illicit communications would have been disallowed at the perimeter.
    Question 4. You stated during the hearing that NERC ``will push as 
far as we can to get as much done on the telecommunications side within 
the standard.'' However, as it currently stands, the NERC reliability 
standard excludes telecommunications and non-routable protocols and 
does not explicitly address wireless systems in the definition of 
``critical cyber assets.'' What steps is NERC taking to ensure that 
telecommunications equipment is covered in the next revision of the 
standard?
    Answer. Section 215 of the Federal Power Act limits the scope of 
FERC's and the ERO's jurisdiction to only the bulk power system. FERC 
and NERC standards cannot enforce requirements upon telecommunications 
providers and their equipment.
    However, a Standard Authorization Request (SAR) drafting team is 
currently considering alternative approaches to address how data and 
information are received through wired and wireless telecommunications 
equipment owned or operated by owners, operators and users of the bulk 
power system. Specifically, it is discussing the merits of protecting 
the data being transmitted, rather than protecting the transmission 
media. This change in philosophy from the initial set of standards will 
extend the protections to wireless data transmission, will lessen the 
need for requirements for protecting the transmission media itself, and 
allow the standards to be enforced regardless of whether the 
telecommunications system is owned by the jurisdictional entity or a 
telecommunications provider.
    The draft SAR was posted for a 30-day public comment period from 
March 20 to April 19, 2008. The SAR drafting team met on May 5-6, 2008 
to consider comments and refine the SAR. Further refinement took place 
during a conference call and WebEx on May 30, 2008. Continued 
refinement is scheduled to take place on a July 2, 2008 conference call 
and WebEx. The end work product will be a SAR that specifies the work 
scope for the Standard Drafting Team that will ultimately develop the 
revisions to the standards.
    Question 5. Are you familiar with the Aurora mitigation technology 
that is manufactured by Cooper Industries? Do you know how many 
companies have purchased this technology?
    Answer. Yes, NERC is aware of this technology. The U.S. Department 
of Homeland Security informed NERC of the development of the device. 
NERC subsequently invited Richard Hein of Cooper Industries to 
participate in a panel discussion during the December 13, 2007 Critical 
Infrastructure Protection Committee meeting in Orlando, Florida, where 
he presented information about the rotating equipment isolation device 
(REID). NERC has supplied Cooper Industries' Web site information to 
Ameren Corporation who had asked for assistance to learn more about the 
device.
    According to Cooper Industries, only the Department of Defense, to 
date, has purchased REID devices. The number of devices sold was not 
disclosed to NERC staff.
    Question 6. Under the Cyber Initiative, all Federal agencies 
(including, for instance, the TVA) will use a service provided by the 
US-CERT known as EINSTEIN to monitor their connections to the Internet. 
EINSTEIN is an automated process for collecting, correlating, 
analyzing, and sharing computer security information across the Federal 
civilian government. As a Federal entity, the TVA already deploys 
several EINSTEIN boxes on its networks to monitor traffic.
    TVA also reports computer incidents to the US-CERT. In the future, 
do you envision a role for the Federal Government to provide a similar 
monitoring service for the private sector? To what extent has NERC had 
conversations with either DHS or FERC about this issue? To what extent 
have you discussed this possibility privately with your members?
    Answer. Neither the Department of Homeland Security, of which US-
CERT is a part, nor FERC has briefed NERC management or ES-ISAC staff 
about a service named EINSTEIN. NERC has not consulted subject matter 
experts within industry on the subject of EINSTEIN or the potential 
benefits this government-run monitoring service could provide for the 
electricity sector.
    NERC is aware that in 2004 DHS sponsored a project involving 
several ISO/RTOs to evaluate intrusion detection system (IDS) tools and 
analytical capabilities. The 1-year pilot, called the Cyber Log 
Analysis Project, was conducted by EWA-Canada and Dartmouth College. 
The results suggested that aggregation of IDS log data could be useful 
in improving the incident and warning (I&W) capability in the 
electricity sector and recommended that DHS continue developing more 
sophisticated and automated shared information analysis techniques and 
develop open source software for this purpose.
    NERC's Reliability Standard CIP-005 requires monitoring of network 
traffic across the electronic security perimeter to provide early 
warning of possible unauthorized access attempts. As such, NERC would 
be open to exploring with FERC and DHS the benefits of implementing an 
EINSTEIN-like project within the electricity sector.
    Question 7. To what extent has NERC involved either NIST or the ISA 
in the standards-setting process? Will you be inviting individuals from 
both entities to participate in the new CIP-706 Standard Drafting Team 
(SDT)?

   Answer. ISA became involved with the standards development 
        effort in 2005 through review and comment on draft three of 
        CIP-002--CIP-009.
    The co-chair of ISA SP99 is a named, formal member of the drafting 
        team charged with scoping the future development of the CIP 
        standards pursuant to FERC Order 706. NERC management has 
        formally invited the co-chair to continue ISA SP99's 
        involvement in the CIP standards drafting process. He has 
        agreed to participate.
   NIST's participation in NERC's standards-setting process 
        began this year. NIST has contributed comments to the current 
        scoping effort, which must be considered and responded to in 
        accordance with the NERC process. Those comments are attached 
        (Attachment 2).
    NERC management has formally requested NIST's continued involvement 
        in the CIP standards drafting process. NIST has agreed to 
        participate.
   Federal agencies required to follow both NIST guidance and 
        NERC Standards have been involved in the Cyber Security 
        standards setting process since 2003.
     An employee of Western Area Power Administration was a 
            named, formal member of the CIP-002--CIP-009 standards 
            drafting team.
     Bonneville Power Administration, Tennessee Valley 
            Authority, United States Bureau of Reclamation, and the 
            Western Area Power Administration have participated in the 
            review and comment process for CIP-002--CIP-009. The United 
            States Army Corps of Engineers provided comments, as well.
     An employee of the U.S. Bureau of Reclamation is a named, 
            formal member of the drafting team charged with scoping the 
            future development of the CIP standards pursuant to FERC 
            Order 706. NERC management has formally requested the 
            Bureau's continued participation in the CIP standards 
            drafting process.

   ATTACHMENT 1.--TIMELINE OF STEPS TAKEN BY NERC (AS THE ES-ISAC) TO
         DISTRIBUTE THE INDUSTRY SURVEY OF THE AURORA MITIGATION
------------------------------------------------------------------------
              2007
------------------------------------------------------------------------
June 7.........................  FERC issues order on NERC compliance
                                  filing that states, ``the Commission
                                  believes that NERC should issue an
                                  operations and equipment alert
                                  requiring specific actions only under
                                  NERC's remedial power.''
June 21........................  NERC acting as the ES-ISAC issues
                                  advisory regarding the Aurora
                                  Demonstration Test following
                                  discussions with Department of Energy
                                  and Department of Homeland Security.
                                  At the direction of DOE and DHS, the
                                  advisory is designated ``For Official
                                  Use Only''. The Advisory states the ES-
                                  ISAC would be distributing a follow-up
                                  survey to measure the progress made in
                                  the electricity sector in implementing
                                  the recommended mitigation measures.
July 9.........................  NERC files request for clarification or
                                  rehearing of FERC's June 7 order
                                  stating that NERC should issue an
                                  operations and equipment alert
                                  requiring specific actions only under
                                  NERC's remedial power.
July 30........................  NERC General Counsel (GC) prepares
                                  draft cover letter for survey.
August 1.......................  Discussions between NERC staff and FERC
                                  staff regarding the survey.
                                 NERC agrees to coordinate with FERC
                                  before sending out the survey.
August 3.......................  NERC GC sends a copy of a draft follow-
                                  up survey and cover letter to FERC (to
                                  the Director, Office of Electric
                                  Reliability (Director), and to the
                                  then-General Counsel) via e-mail. NERC
                                  proposes that the ES-ISAC would
                                  distribute the survey and the cover
                                  letter, to be signed by the NERC
                                  President and CEO. The draft survey
                                  proposes a response date of August 24;
                                  NERC informs FERC of its desire to
                                  send the survey out ``by the middle of
                                  next week'' [week of August 6].
                                 The e-mail implemented NERC's
                                  commitment made August 1 to coordinate
                                  with FERC before sending out the
                                  follow-up survey. NERC solicited
                                  FERC's suggestions on the draft letter
                                  and the survey. NERC also asked FERC
                                  staff ``if you have had further
                                  thoughts about whether the ES-ISAC
                                  should send this letter.''
Sometime after August 3 and      The Director of the FERC Office of
 before August 15.                Electric Reliability and the NERC CEO
                                  discussed the draft ES-ISAC cover
                                  letter and survey.
August 16......................  NERC's GC sends an e-mail to FERC's GC
                                  following up on the Director-CEO
                                  discussion.
August 21......................  NERC's GC and FERC's GC discuss FERC
                                  staff concerns with the proposed cover
                                  letter and survey.
August 21......................  E-mail from NERC GC to FERC GC
                                  acknowledges the Director's concerns
                                  regarding ``the penultimate paragraph
                                  on the instruction sheet to the
                                  survey'' dealing with the
                                  circumstances under which the ES-ISAC
                                  would make information available about
                                  the status of the mitigation efforts
                                  to government agencies.
August 21......................  NERC GC and FERC GC further discuss the
                                  survey/cover letter, and NERC GC
                                  recommends a modification to the
                                  confidentiality language in the survey
                                  instructions. According to an e-mail
                                  from the NERC GC to the CEO, the FERC
                                  GC said that the ``edit solved the
                                  immediate problem and we can get the
                                  letter out.'' NERC's GC said that he
                                  would work with NERC's Manager,
                                  Situation Awareness and Infrastructure
                                  Security (SAIS Manager) on getting the
                                  survey out.
August 21......................  NERC's GC transmits the change in
                                  language worked out with the FERC GC
                                  to the NERC SAIS Manager via e-mail.
                                  The NERC GC advises the NERC SAIS
                                  Manager that the FERC GC ``said that
                                  with the change, we can send out the
                                  letter.'' The NERC GC also advises
                                  that the proposed August 24 due date
                                  for the survey responses would need to
                                  be extended by a reasonable amount to
                                  account for the delay in distribution
                                  of the survey.
August 21......................  CEO comments on wording of the
                                  instructions to the survey in an e-
                                  mail to the NERC SAIS Manager, and
                                  approves the letter.
August 21......................  The NERC GC advises the NERC SAIS
                                  Manager that ``I'm leaving this with
                                  you, unless you have further
                                  questions, or something else comes
                                  up.''
September......................  NERC SAIS Manager has informal, off the
                                  record telephone conversations with
                                  representatives of major bulk power
                                  system entities regarding the
                                  implementation of the Advisory. No
                                  notes of the discussions were taken.
September 20...................  FERC issues order granting NERC's
                                  request for clarification that NERC
                                  has the authority to issue industry
                                  alerts in a broader set of
                                  circumstances than just violations of
                                  reliability standards. FERC requires
                                  NERC to change the term ``Required
                                  Actions'' to something else and
                                  imposes requirements that NERC must
                                  give notice to the Commission prior to
                                  issuing alerts and must report back to
                                  the Commission on the status of
                                  implementing the recommendations of
                                  the alerts.
September 27-28................  CIPC meeting in St. Louis. One agenda
                                  item during the meeting was a
                                  discussion of the June 21 advisory:


October 8......................  NERC SAIS Manager has an informal, off
                                  the record discussion of the
                                  implementation of the Advisory on a
                                  call with ERCOT. No notes of the
                                  discussion were taken.
October........................  NERC SAIS Manager has informal, off the
                                  record telephone conversations with
                                  representatives of major bulk power
                                  system entities regarding the
                                  implementation of the Advisory. No
                                  notes of the discussions were taken.
October 10.....................  NERC SAIS Manager sends an e-mail to
                                  NERC's CEO, NERC's General Counsel,
                                  NERC's Executive Vice President, and
                                  NERC's Chief Information Officer
                                  setting forth the status of the
                                  mitigation measures contained in the
                                  Advisory. The e-mail reported:

                                 ``Mitigation         Status
                                  Measure
                                ----------------------------------------
                                 Short Term--0 to 60
                                  days:

                                 1. Plan for taking   100%
                                  immediate, drastic
                                  action.
                                 2.1.1 Security for   100%
                                  remote access.
                                 2.1.2 Personnel      85%
                                  Security.
                                 2.1.3 Sensitive      90%
                                  Information.
                                 2.1.4 Seal Off open  99%
                                  ports.

                                 Mid Term--60 to 180
                                  days:

                                 3.1 Authentication.  65%
                                 3.2 Situation        30%
                                  Awareness.

                                 Long Term--180 days
                                  plus:

                                 4.1 Remote Monitor.
                                 4.2 Vendors........
                                 4.2.1 Separate
                                  Functionality.
                                 4.2.2 Seal Breaker
                                  Close Function.
                                 4.2.3 Secure
                                  Firmware and
                                  Software.
                                 5. Superfast
                                  Protective Device.
                                 6. Shadow Device...
                                 7. Government
                                  Intelligence
                                  Agencies.
                                 8. CIP 002-009''

                                 The NERC SAIS Manager further advises
                                  in the e-mail that this information
                                  ``has been gathered from voluntary
                                  submission by 10 entities (all major
                                  players) and from discussions with
                                  CIPC contacts at the large
                                  transmission owners and operators. The
                                  data is current as of last week. The
                                  data covers at least 75 percent of the
                                  BPS in the U.S.''
                                 The NERC SAIS Manager's e-mail also
                                  states that no written survey had yet
                                  been sent out to assess the
                                  implementation of the measures in the
                                  Advisory:
                                 ``I have not sent out the formal survey
                                  for the following reasons:
                                 1. I do not have a good list to send
                                  this kind of survey to.
                                 2. NERC received a great deal of
                                  criticism for how the initial advisory
                                  was distributed to and who it was not
                                  distributed to. Many key entities did
                                  not receive it until several weeks
                                  afterward.
                                 3. I have been working with the
                                  [Regional Reliability Entities] and
                                  the trade associations to compile a
                                  list but it has not been successful.
                                  At the last CIPC meeting in late
                                  September, a consensus was reached to
                                  use the NERC Compliance Registry and I
                                  have been pursuing that option.''
October 17.....................  Subcommittee Hearing.
October 19.....................  NERC, acting as the ES-ISAC, sends the
                                  Follow-up Survey to ``Electric Sector
                                  Transmission Owner/Operators and
                                  Generation Owner/Operators,'' asking
                                  for a response by November 2. The
                                  survey was sent to ``major entities in
                                  the bulk power system.''
                                 The cover letter accompanying the
                                  survey recommends that a ``coordinated
                                  effort be made at each entity to
                                  compile a single response rather than
                                  multiple responses from the same
                                  entity.'' The letter stated further
                                  that ``The ES-ISAC is working with the
                                  regional reliability organizations,
                                  EEI, and the [Canadian Electricity
                                  Association] to deliver the survey
                                  instrument to the right people in the
                                  right entities.''
October 23.....................  FERC requests approval from the Office
                                  of Management and Budget to send its
                                  own survey requesting detailed
                                  information on the status of
                                  implementation of the Aurora
                                  mitigation measures by owners,
                                  operators, and users of the bulk power
                                  system.
                                 NOTE: NERC did not learn of this
                                  request by FERC until December 5.
November 2.....................  Deadline for responses to the October
                                  19 survey. A total of 133 entities
                                  respond to the survey.
November 8.....................  NERC circulates questions for the
                                  record submitted to David Whiteley as
                                  follow-up to the October 17 hearing.
                                  NERC GC designates responsibility for
                                  the draft responses among NERC staff.
November 9.....................  Chairman Kelliher replies to an October
                                  17 letter from the subcommittee. The
                                  letter notes that FERC had directed
                                  NERC to report to FERC on the level of
                                  compliance with future Advisories
                                  within 30 days. The letter discusses
                                  FERC's views of NERC's October 19
                                  survey: ``[a]lthough we support NERC
                                  taking the actions it believes are
                                  necessary as ES-ISAC, we do not
                                  believe NERC's survey provides
                                  sufficient information for the
                                  Commission to determine whether
                                  further action is appropriate. For
                                  example, it does not provide
                                  information on what facilities are the
                                  subject of the mitigation plans, what
                                  steps to mitigate the cyber
                                  vulnerability are being taken, when
                                  those steps are planned to be taken,
                                  and, if certain actions are not being
                                  taken, why not. Nor is it clear to the
                                  Commission that NERC has received a
                                  complete set of responses to its data
                                  request.'' FERC therefore planned to
                                  conduct its own survey that would
                                  ``supplement NERC's action and provide
                                  more detailed information on which to
                                  assess the status of mitigation
                                  efforts.''
                                 NOTE: NERC did not become aware of this
                                  letter until December 5.
November 15....................  NERC staff sends an e-mail reporting on
                                  a call on November 14 from
                                  subcommittee counsel requesting a face-
                                  to-face meeting and ``a copy of all
                                  the docs we sent re: esisac cyber recs
                                  and surveys.''
November 16....................  Chairman Langevin sends a letter to
                                  NERC CEO requesting the results from
                                  the ES-ISAC Advisory follow-up survey,
                                  with the response due by November 28.
                                 NOTE: The letter did not come to light
                                  until the CEO returned to the office
                                  on November 28. NERC subsequently
                                  received an extension of the deadline
                                  to submit the materials until December
                                  5.
November 20....................  NERC submits responses to questions for
                                  the record to the subcommittee.
December 5.....................  NERC GC prepares draft cover letter for
                                  a second survey of the status of
                                  industry efforts to implement the
                                  Aurora mitigation measures, in
                                  preparation for coordination with FERC
                                  staff.
December 5.....................  While edits were still being made on
                                  the NERC response to Mr. Langevin's
                                  November 16 letter, NERC staff obtains
                                  a copy of the letter dated November 9
                                  from FERC Chairman Kelliher to the
                                  subcommittee in response to the
                                  October 17 letter [see November 9
                                  entry above].
December 5.....................  Based on information in Chairman
                                  Kelliher's November 9 letter, NERC
                                  General Counsel obtains a copy of
                                  FERC's request to OMB seeking approval
                                  to send survey to owners, operators,
                                  and users of the bulk power system
                                  requesting detailed information on the
                                  status of implementation of the Aurora
                                  mitigation measures. After discussions
                                  between NERC GC and FERC staff
                                  regarding the status of FERC's request
                                  to OMB, NERC's plans to send a second
                                  follow-up survey in December are put
                                  on hold, and references in the NERC
                                  response to the November 16 letter to
                                  the second survey are deleted.
December 5.....................  NERC submits the final response to
                                  November 16 letter to the House
                                  Subcommittee, signed by David
                                  Whiteley:
                                 ``Following the issuance of the
                                  Advisory, many of the larger
                                  transmission owners and operators were
                                  contacted by an ES-ISAC representative
                                  to help the ES-ISAC make an assessment
                                  of the response to the June 21
                                  Advisory and measure the progress in
                                  completing mitigation. Additional
                                  entities made unsolicited information
                                  submissions to the ES-ISAC. Through
                                  this process, the ES-ISAC determined
                                  that approximately 75 percent of the
                                  transmission grid had mitigation
                                  measures completed or in progress.
                                  This was the basis for my testimony at
                                  the October 17 subcommittee hearing.
                                 ``A follow-up written survey to
                                  formally measure the progress in
                                  implementing the recommended
                                  mitigation measures was distributed to
                                  major entities in the bulk power
                                  system on October 19 and responses
                                  were requested by November 2. The
                                  following information regarding the
                                  October 19 survey is enclosed: (1) an
                                  overview of the implementation
                                  assessment process, which summarizes
                                  the survey responses; (2) a blank copy
                                  of the survey; (3) the forms supplied
                                  by the respondents; and (4) an
                                  alphabetical listing of the
                                  respondents. To preserve the security
                                  and confidentiality of this
                                  information, which is a commitment
                                  made to the respondents by the ES-
                                  ISAC, all entity identification was
                                  removed from these forms and a
                                  separate listing of the respondents
                                  was created. The information submitted
                                  confirms the conclusion reached by the
                                  ES-ISAC that 75 percent of the
                                  transmission grid has implemented the
                                  recommended mitigation.''
December 6.....................  Subcommittee staff sends an e-mail to
                                  NERC staff requesting times for a face-
                                  to-face meeting and asking NERC to
                                  bring to the meeting: ``1. The name
                                  and position of the individual/s who
                                  conducted the `initial assessment' on
                                  behalf of NERC in September/October;
                                  2. A list of phone conversations and
                                  meetings that these individuals had
                                  with sector entities. Please include
                                  dates and any information/notes
                                  prepared; 3. The unsolicited reports
                                  issued to the ES-ISAC during this
                                  time, including the names of the
                                  sector entities who submitted the
                                  unsolicited reports.''
December 14....................  Letter dated December 12, 2007 sent to
                                  the subcommittee by NERC Executive
                                  Vice President clarifying the question
                                  of when NERC's survey was sent
                                  (October 2007 not in August 2007) and
                                  apologizing for any misimpression that
                                  the November 20 response may have
                                  given regarding the timing of the
                                  written survey.
December 20....................  At a meeting with NERC representatives,
                                  subcommittee staff is given a letter
                                  from the NERC SAIS Manager formally
                                  responding to the 3 questions set out
                                  in subcommittee staff's December 6 e-
                                  mail. In response to question 2 (list
                                  of phone conversations and meetings
                                  that these individuals had with sector
                                  entities, including dates and
                                  information/notes prepared), the
                                  letter stated:
                                 ``After issuance of the Advisory on
                                  June 21, 2007, I communicated
                                  regularly with industry
                                  representatives to explain and discuss
                                  the Advisory. Beginning in September
                                  and October, my communication efforts
                                  shifted from explanation of the
                                  Advisory to determination of how well
                                  the Advisory was being implemented. A
                                  reconstructed list of the discussions,
                                  to the best of my recollection, is
                                  listed below.'' The list identified
                                  contacts made at the September 27, 28
                                  CIPC meeting as well as phone calls
                                  with other individuals conducted in
                                  September and October.
December-January 2008..........  NERC learns from FERC staff that FERC
                                  has changed its plan to send the
                                  formal written survey regarding the
                                  status of Aurora mitigation measures
                                  to all owners and operators; instead,
                                  FERC teams are conducting interviews
                                  in the field with selected utilities
                                  to learn the status of their efforts
                                  to mitigate the Aurora
                                  vulnerabilities.
------------------------------------------------------------------------

   Attachment 2.--NIST Comments on Standards Development for Future 
                        Version SAR (06/11/2008)
    NIST agrees with the proposed changes in FERC Order 706 and 
proposes several additional items for consideration listed in the 
comments section of Question 5 of this comment form.
                        general comments summary
    NIST believes that if the changes specified in FERC Order 706 and 
the recommendations below are implemented, NERC will have made a 
positive step toward making the CIPs commensurate with the NIST SP 800-
53, Rev 2 moderate baseline. However, there are still differences in 
coverage and in the level of specificity of the security requirements 
that need to be addressed. NIST would also like to point out that many 
of the Federal agencies that own/operate industrial control systems in 
the bulk electric sector are classifying their systems as High impact 
systems that implement the High baseline requirements in SP 800-53. 
NIST is willing and has the resources to work on the NERC standards 
team in developing the next revision to the standard.
                                approach
    Critical Assets vs. Information System.--NIST understands that in 
the electric sector, protecting critical assets has been the 
predominant paradigm, but recommends for future revisions of the 
standards that an information systems approach rather than critical 
asset approach be considered.
    Our rationale for this suggestion is as follows: While it is 
important to identify critical assets using a risk-based assessment 
methodology, NIST suggests that NERC consider applicability of the CIPs 
at an information system level rather than at the critical asset level. 
An information system view provides a more natural context for the 
application of information technology security across an industrial 
control system composed of multiple components, where some subset of 
the components is supported by information technology.
    Under the current scope of the CIPs, all of the CIP security 
requirements would be applied to every critical cyber asset. In some 
cases, application of all of the CIP security requirements to a 
critical cyber asset may not make sense or may be excessive due to the 
nature of the asset. When an information system view is adopted, the 
CIP security requirements would be applied at the information system 
level, resulting in the allocation of CIP requirements to specific 
components. All components of the information system are not required 
to support every information system security requirement? Just those 
that are identified as a result of the requirement allocations; thus 
resulting in significant cost savings.
    Using the information system view, there is no need to distinguish 
between cyber assets and critical cyber assets as all cyber assets 
within the information system are protected. Comments on Specific 
Requirements CIP 002 R3.1 NIST strongly recommends that a clear 
unambiguous definition of ``routable protocol'' be developed and, based 
on that definition, all routable protocols currently within the scope 
of the CIPs should be identified. All data encapsulated within a 
routable protocol should also be within the scope of the CIPs. CIP 002 
R3.2 NIST recommends that ``control center'' should be replaced by 
``electronic security perimeter.''
    Nuclear Facility Exemption.--In reference to section 4.2.1 of each 
CIP, NIST observes that the electric side of nuclear power plants can 
have an impact on the bulk electric sector. NIST suggests that the 
continuity of power aspects of nuclear facilities should be included in 
the scope of these standards. Therefore NIST recommends that the 
exemption statement: ``Facilities regulated by the U.S. Nuclear 
Regulatory Commission or the Canadian Nuclear Safety Commission be 
changed to--Specific systems that are regulated by the U.S. Nuclear 
Regulatory Commission or the Canadian Nuclear Safety Commission (e.g., 
safety systems).''
    Wireless.--NIST observes that the CIPs do not sufficiently address 
the security of wireless technologies, which include, but are not 
limited to, microwave, satellite, packet radio (UHF/VHF), 802.11x, and 
Bluetooth. There appears to be an assumption in the CIPs that 
communication occurs solely over media. Consequently, NIST recommends 
that a clear, unambiguous definition of wireless technology be 
developed and security requirements for wireless technologies be 
included in the CIPs.
    Media Protection.--NIST recommends that the CIPs media protection 
requirements be expanded to cover all types of media. Because of the 
miniaturization and increased portability of digital media, protection 
of this media by a physical security perimeter is no longer adequate. 
Information system media includes both digital media (e.g., diskettes, 
magnetic tapes, external/removable hard drives, flash/thumb drives, 
compact disks, digital video disks) and non-digital media (e.g., paper, 
microfilm). Information system media are also components of portable 
and mobile computing and communications devices (e.g., notebook 
computers, personal digital assistants, cellular telephones). The 
organization should have policy and procedures to protect and control 
information system media during transport outside the physical 
perimeter and restrict the activities associated with transport of such 
media to authorized personnel. For example, many organizations today 
prohibit removing laptop computers with unencrypted hard drives from 
the physical protection perimeter, and enforce this policy with 
unannounced inspection at the exits. Information system media is also a 
component of telephone systems that have the capability to store 
information (e.g., voice-mail systems). Since telephone systems do not 
have, in most cases, the identification, authentication, and access 
control mechanisms typically employed in other information systems, 
policy should address the types of information stored on telephone 
voice-mail systems that are accessible outside of physically protected 
areas.
   Questions From Chairman James R. Langevin to Mr. Greg Wilshusen, 
Director, Information Security Issues, Government Accountability Office 
                                 (GAO)
    Question 1. Please verify that, since the hearing, you have had the 
opportunity to review TVA's proposed action plan.
    Answer. We have not yet received TVA's formal action plan for 
review. In its written comments to our draft reports, TVA informed us 
of several actions that it plans to take to address our recommendations 
to strengthen the security of its control systems but we have not 
performed audit work to verify that these actions are under way or 
effective. Agencies are permitted 60 days from the date of an audit 
report's issuance to submit their action plan to us.
    Question 2. Explain the process you will undertake to verify that 
the corrective actions are underway.
    Answer. As part of our audit responsibilities under generally 
accepted government auditing standards, after conducting and reporting 
the results of an audit, we follow up with the audited entity to 
determine the extent to which it has implemented our recommendations. 
In doing so, we request that the agency provide a copy of the agency's 
statement of action to serve as preliminary information on the status 
of open recommendations and we discuss the status of the 
recommendations with cognizant agency officials; we obtain copies of 
agency documents supporting the recommendations' implementation or 
information from the agency's Office of the Inspector General; and we 
perform sufficient audit work to verify that the recommended actions 
are being taken and, to the extent possible, that the desired results 
are being achieved.
    We track the status of agency efforts to implement our 
recommendations in a publicly available database, which is updated 
routinely and made available to all Members of Congress, their staffs, 
and audited agencies. A recommendation is closed when it has been 
implemented, when actions have been taken that essentially meet the 
recommendation's intent, or when circumstances have changed and the 
recommendation is no longer valid.
 Questions From Chairman James R. Langevin to Mr. William R. McCollum, 
     Jr., Chief Operating Officer, Tennessee Valley Authority (TVA)
    Question 1. Publicly and privately owned infrastructures on the 
grid are so interconnected, weak security controls in one utility can 
pose harm to another utility that shares a connection. Yet publicly and 
privately owned infrastructures are subject to different security 
standards. According to a NIST-sponsored review published in March 
2007, an organization conforming to the baseline set of security 
controls in SP 800-53 will also comply with the management, operational 
and technical security requirements of the NERC Reliability Standards, 
though the converse may not be true. For instance, the NERC Reliability 
Standards allow for the exclusions of telecommunications and 
distribution equipment from the ``critical assets'' list. Under the SP 
800-53 requirements, however, there is no similar exclusion. This 
committee--along with NIST and GAO--has suggested that the NERC 
standards should be more aligned with the NIST 800-53 standards that 
apply to federally owned infrastructure. Are you concerned that a 
weakness on a privately owned infrastructure would affect your network?
    Answer. TVA understands the importance of protecting its systems 
and takes that responsibility seriously. Good security practice 
requires that the higher security zone consider connections to other 
security zones as potentially hostile.
    Accordingly, we treat all external connections as potentially 
hostile in order to appropriately protect our systems.
    TVA does not believe that a security weakness at other electric 
utilities could impact the security or integrity of TVA's control 
systems. Computer network connections to control systems require 
multiple layers of security, as addressed by both NIST and NERC 
standards. The security controls in these layers must be, and in TVA's 
case are, sufficiently strong to compensate for any weaknesses in the 
other network.
    Question 2. As control systems are becoming more connected, the 
more vulnerabilities are exposed. For instance, several months ago, a 
penetration-testing consultant named Ira Winkler gave a presentation at 
a conference describing an attack that he performed on a power company. 
Winkler was hired by the company to test the security of its network 
and the power grid it oversees. He set up an attack that paired social 
engineering with corrupting browsers on a power company's desktops. By 
the end of a full day of the attack, they had taken over several 
machines, giving the team the ability to hack into the control network 
overseeing power production and distribution. According to GAO, the 
interconnections between your control system networks and the corporate 
network mean that security weaknesses on the corporate network could 
affect control systems networks. As a result, TVA's control systems 
were at an increased risk of unauthorized access or disruption via 
access from the corporate network. Why shouldn't all control systems be 
isolated from the business network? How is TVA addressing this issue?
    Answer. TVA agrees that control systems should be isolated from the 
business network. To the largest possible extent, this isolation should 
be a physical separation. In cases where there is a strong business or 
regulatory basis for interconnection with other networks, segmentation 
must be implemented through network architectural schemes that include 
layered security controls and effective intrusion detection systems.
    TVA has implemented and will continue to strengthen a defense in 
depth strategy. This plan includes isolation and/or levels of 
segmentation that meet or exceed NIST, NERC, and other applicable 
standards.
    Question 3. What specific efforts are underway to address the GAO 
report? Please provide the committee with a timeline for completing the 
recommendations.
    Answer. TVA will continue to remediate the GAO recommendations 
according to our scheduled commitments in our response to the GAO 
report. Effective February 2008, cyber security is positioned at the 
enterprise level and is responsible for all management, administration, 
and control of cyber security at TVA including control systems. The GAO 
report made 19 recommendations that focused on our need to improve and 
extend our existing security program for process control systems. TVA 
was already addressing 17 of the 19 recommendations prior to the GAO 
audit. The other two were completed in April. The LOUO GAO report 
identified 73 additional recommendations. Fifty percent of those 
recommendations will be complete by September 30, 2008. Seventy-five 
percent will be complete by December 31, 2008. Most of the remaining 
recommendations will be complete by September 30, 2009.
    Question 4. Has the TVA performed all mitigations recommended by 
the ES-ISAC advisory for the Aurora vulnerability? Have you met with 
FERC staff to discuss these mitigations?
    Answer. TVA has implemented all the mitigations from the ES-ISAC 
advisory that were determined to be necessary, based on a June 2007 
assessment. Given that it has been a full year since TVA responded to 
the ES-ISAC advisory, we have conducted a fresh, zero-based assessment 
and have validated that currently digital relays on TVA's generation 
units either have no wiring installed for reclosing or have no remote 
communications connections. In accordance with the ES-ISAC advisory, 
TVA completed an emergency plan in August 2007. TVA's Nuclear Power 
Group (NPG) completed the required assessments consistent with these 
requirements on August 20, 2007.
    TVA and FERC representatives spoke via conference call prior to the 
hearing to discuss the mitigations. At the conclusion of the call, both 
agencies agreed that a good next step is to meet in person. TVA is 
working with FERC to schedule this meeting.
    Question 5. There is at least one company that manufactures a 
device that specifically mitigates the Aurora vulnerability. Has the 
TVA purchased this protective device?
    Answer. No, TVA has not purchased this protective device, which is 
designed for those systems in which relays are capable of reclosing 
breakers, thereby damaging generation units. Since TVA relays dedicated 
to generation units have remote communication disconnected or are 
configured in a way that cannot reclose breakers, TVA has no need for 
this particular device.
    TVA believes the best general solution is that digital relays, like 
the one used in the Aurora experiment, must be protected by strong 
cyber security controls if they must be connected to a computer 
network.
    Question 6. Has DHS provided you with more EINSTEIN boxes since 
your previous discussions with the committee? How many boxes are you 
deploying in total?
    Answer. TVA has four primary external connections and has installed 
or will be installing a device at each connection in support of the 
EINSTEIN initiative. DHS has provided TVA with the four EINSTEIN boxes 
with the exception of a card for one of these boxes. The installation 
of three of the four boxes is complete and the final installation will 
be scheduled based on the arrival of the necessary card.
    Question 7. The committee is concerned not only with the security 
of the electric sector, but also the nuclear sector. Brown's Ferry 
nuclear plant is operated by the TVA. In August 2006, two circulation 
pumps at Unit 3 failed, forcing the unit to be shut down manually. The 
failure of the pumps was traced to an unintended incident involving 
excessive traffic on the control system's network. In 2007, the 
committee wrote to the NRC requesting an investigation into the source 
of this data storm; unfortunately, to this day, the NRC has been unable 
to conclusively determine the cause. Why don't we know what happened at 
Brown's Ferry? What has TVA done to determine what happened?
    Answer. Consistent with our Nuclear Power Group (NPG) procedures, a 
root cause analysis using the Kepner-Tregoe methodology was performed 
by a multi-disciplinary team at the Browns Ferry following the 
incident.
    The root cause analysis determined that excessive network traffic 
on the Unit 2 and 3 Integrated Computer System network caused the pumps 
to fail. TVA had network intrusion devices monitoring the connection 
between the business network and the internet at the time of the 
incident. Examination of logs from those devices for the August 2006 
event showed no indication of outside influence. As stated in the NRC's 
letter to Chairman of the Committee on Homeland Security dated July 20, 
2007, ``The licensee [TVA] determined that the cause of the event was a 
malfunction of the recirculation pump variable frequency drive (VFD) 
microprocessor-based controller. The controller failure was attributed 
to excessive traffic on the internal network. Since the control network 
is physically and electrically independent of networks that interface 
outside the plant, the NRC is confident that the failure was not the 
result of a cyber attack.''
    TVA will continue to strengthen the security of our control 
systems. In performing our mission, the safety of our employees and the 
public is paramount in all of our operations.

                                 
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