[Federal Register Volume 85, Number 185 (Wednesday, September 23, 2020)]
[Notices]
[Pages 59785-59788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20987]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RM20-19-000]


Equipment and Services Produced or Provided by Certain Entities 
Identified as Risks to National Security

AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Notice of inquiry.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) seeks 
comments on the potential risks to the bulk electric system posed by 
the use of equipment and services produced or provided by certain 
entities identified as risks to national security. In addition, the 
Commission seeks comments on strategies to mitigate any potential risks 
posed by such telecommunications equipment and services, including but 
not limited to potential modifications to the Critical Infrastructure 
Protection Reliability Standards.

DATES: Initial Comments are due November 23, 2020, and Reply Comments 
are due December 22, 2020.

ADDRESSES: Comments, identified by docket number, may be filed in the 
following ways:
     Electronic Filing through http://www.ferc.gov. Documents 
created electronically using word processing software should be filed 
in native applications or print-to-PDF format and not in a scanned 
format.
     Mail/Hand Delivery: Those unable to file electronically 
may mail or hand-deliver comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE, 
Washington, DC 20426.
     Instructions: For detailed instructions on submitting 
comments, see the Comment Procedures Section of this document.

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

    1. In this Notice of Inquiry, the Commission seeks comments on the 
potential risks to the bulk electric system posed by using equipment 
and services produced or provided by entities identified as risks to 
national security. In addition, the Commission seeks comments on 
whether the current Critical Infrastructure Protection (CIP) 
Reliability Standards adequately mitigate the identified risks. 
Further, the Commission seeks comment on possible actions the 
Commission could consider taking to address the identified risks.
    2. On October 18, 2018, the Commission approved the first set of 
supply chain risk management Reliability Standards in Order No. 850.\1\ 
The Commission described the supply chain risk management Reliability 
Standards as ``forward-looking and objective-based and require each 
affected entity to develop and implement a plan that includes security 
controls for supply chain management for industrial control system 
hardware, software, and services associated with bulk electric system 
operations.'' \2\ In approving the supply chain risk management 
Reliability Standards, the Commission recognized that ``the global 
supply chain creates opportunities for adversaries to directly or 
indirectly affect the management or operations of companies with 
potential risks to end users.'' \3\
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    \1\ The Commission approved Reliability Standards CIP-013-1 
(Cyber Security--Supply chain Risk Management), CIP-005-6 (Cyber 
Security--Electronic Security Perimeter(s)), and CIP-010-3 (Cyber 
Security--Configuration Change Management and Vulnerability 
Assessments). Supply Chain Risk Management Reliability Standards, 
Order No. 850, 165 FERC ] 61,020 (2018).
    \2\ Id. P 2.
    \3\ Id.
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    3. Since the issuance of Order No. 850, there have been significant 
developments in the form of Executive

[[Page 59786]]

Orders, legislation, as well as federal agency actions that raise 
concerns over the potential risks posed by the use of equipment and 
services provided by certain entities identified as risks to national 
security. In particular, Huawei Technologies Company (Huawei) and ZTE 
Corporation (ZTE) have been identified as examples of such certain 
entities because they provide communication systems and other equipment 
and services that are critical to bulk electric system reliability.\4\
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    \4\ See e.g. John S. McCain National Defense Authorization Act 
for Fiscal Year 2019, Public Law 115-232, 889(f)(3) (2018) (2019 
NDAA).
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    4. Therefore, as discussed in this Notice of Inquiry, the 
Commission seeks comments on: (1) The extent of the use of equipment 
and services provided by certain entities identified as risks to 
national security related to bulk electric system operations; (2) the 
risks to bulk electric system reliability and security posed by the use 
of equipment and services provided by certain entities; (3) whether the 
CIP Reliability Standards adequately mitigate the identified risks; (4) 
what mandatory actions the Commission could consider taking to mitigate 
the risk of equipment and services provided by certain entities related 
to bulk electric system operations; (5) strategies that entities have 
implemented or plan to implement--in addition to compliance with the 
mandatory CIP Reliability Standards--to mitigate the risks associated 
with use of equipment and services provided by certain entities; and 
(6) other methods the Commission may employ to address this matter 
including working collaboratively with industry to raise awareness 
about the identified risks and assisting with mitigating actions (i.e., 
such as facilitating information sharing). The responses to these 
questions will provide the Commission with a better understanding of 
the risks to bulk electric system reliability posed by equipment and 
services provided by entities identified as risks to national security, 
as well as how the Commission may best address any identified risks.

I. Background

A. Executive Orders on Bulk-Power System Security

    5. On May 15, 2019, President Trump issued Executive Order 13,873 
on ``Securing the Information and Communications Technology and 
Services Supply Chain.'' \5\ Executive Order 13,873 declared a national 
emergency based on a finding that:
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    \5\ Executive Order No. 13,873, 84 FR 22689 (May 17, 2019).

foreign adversaries are increasingly creating and exploiting 
vulnerabilities in information and communications technology and 
services . . . in order to commit malicious cyber-enabled actions, 
including economic and industrial espionage against the United 
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States and its people.

    To address that risk, Executive Order 13,873 directs the Secretary 
of Commerce, in consultation with other agency heads, to identify ``any 
acquisition, importation, transfer, installation, dealing in, or use of 
any information and communications technology or service . . . where 
the transaction involves any property in which any foreign country or a 
national thereof has any interest.''
    6. Executive Order 13,873 directs the Secretary of Commerce, in 
consultation with other agency heads, to identify such prohibited 
transactions by determining whether: (1) The transaction involves 
information and communications technology or services designed, 
manufactured, or supplied, by persons owned by, controlled by, or 
subject to the jurisdiction or direction of a foreign adversary; and 
(2) the transaction poses an undue risk of sabotage to or subversion of 
the design or operation of information and communications technology or 
services in the United States or poses an undue risk of catastrophic 
effects on the security of United States critical infrastructure.
    7. On May 1, 2020, President Trump issued Executive Order 13,920 on 
``Securing the U.S. Bulk-Power System,'' declaring a national emergency 
based on the findings that ``foreign adversaries are increasingly 
creating and exploiting vulnerabilities'' in the Bulk-Power System and 
that the ``unrestricted foreign supply of bulk-power system electric 
equipment constitutes an unusual and extraordinary threat to the 
national security.'' \6\
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    \6\ Executive Order No. 13,920, 85 FR 26595 (May 4, 2020).
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    8. To address these risks, Executive Order 13,920 prohibits the 
acquisition, importation, transfer, or installation of any Bulk-Power 
System electric equipment where the transaction: (1) Involves Bulk-
Power System electric equipment designed, developed, manufactured, or 
supplied, by a foreign adversary; and (2) the transaction poses an 
undue risk of sabotage to the Bulk-Power System or poses an undue risk 
to U.S. critical infrastructure, economy or national security. In 
addition, Executive Order 13,920 establishes a Task Force on Federal 
Energy Infrastructure Procurement Policies Related to National Security 
(Task Force), chaired by the Secretary of Energy.\7\ The Task Force is 
directed to: (1) Develop energy infrastructure procurement policies for 
agencies; (2) evaluate methods to incorporate national security 
considerations into energy security and cybersecurity policymaking; (3) 
consult with the Electric Subsector Coordinating Council (and the oil 
and natural gas sector equivalent) in developing recommendations; and 
(4) conduct other studies and develop other recommendations as 
appropriate.
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    \7\ The Secretary of Energy has until September 28, 2020, to 
promulgate the necessary regulations. See Dept. of Energy, Request 
for Information, 85 FR 41023 (July 8, 2020) (the public comment 
period is open until Aug. 24, 2020).
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B. National Defense Authorization Acts

    9. Recently, Congress has addressed the risks posed by the 
procurement of equipment and services from entities identified as risks 
to national security in the annual National Defense Authorization Acts.
    10. The National Defense Authorization Act for Fiscal Year 2018 
bars the Department of Defense from using ``[t]elecommunications 
equipment [or] services produced [or] provided by Huawei Technologies 
Company or ZTE Corporation'' for certain critical programs, including 
ballistic missile defense and nuclear command, control, and 
communications.\8\
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    \8\ National Defense Authorization Act for Fiscal Year 2018, 
Public Law 115-91, 1656 (2017) (2018 NDAA).
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    11. In addition, the National Defense Authorization Act for Fiscal 
Year 2019 prohibits the Secretary of Defense from procuring or 
obtaining, or extending or renewing a contract to procure or obtain, 
equipment, systems, or services that use ``covered telecommunications 
equipment or services'' as a substantial or essential component of any 
system, or as critical technology as part of any system. Specifically, 
section 889(f)(3) of the 2019 NDAA defines ``covered telecommunications 
equipment or services'' as:

(1) telecommunications equipment produced by Huawei or ZTE or any 
subsidiary or affiliate of such entities; (2) video surveillance and 
telecommunications equipment produced by Hytera Communications 
Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua 
Technology Company or any subsidiary or affiliate of such entities; 
(3) telecommunications or video surveillance services provided by 
such entities or using such equipment; or (4) telecommunications or 
video surveillance equipment or services produced or provided by an 
entity that the Secretary of Defense . . . reasonably believes

[[Page 59787]]

to be an entity owned or controlled by, or otherwise connected to, 
the . . . People's Republic of China.\9\
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    \9\ John S. McCain National Defense Authorization Act for Fiscal 
Year 2019, Public Law 115-232, 889(f)(3) (2018) (2019 NDAA).
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C. Federal Communication Commission Orders on Communications Supply 
Chain

    12. On June 30, 2020, the Federal Communications Commission (FCC) 
issued two orders designating both Huawei and ZTE as covered entities 
that are prohibited from receiving Universal Service Fund moneys to 
support the purchase of any equipment or services provided by a company 
posing a national security threat to the integrity of communications 
networks or the communications supply chain.\10\ The FCC Orders 
determined that Huawei and ZTE pose a national security threat to the 
integrity of communications networks and the communications supply 
chain due to their close ties to the Chinese government. The FCC found 
that Huawei is susceptible to coercion, both legal and political, 
presenting profound risks to the security of affected communications 
networks. The FCC also found that Huawei's close ties to the Chinese 
government, both at the level of ownership and at the employee level, 
as well as its obligations under Chinese law, present too great a risk 
to U.S. national security to continue to subsidize the use of Huawei 
equipment and services.
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    \10\ Protecting Against National Security Threats to the 
Communications Supply Chain Through FCC Programs--Huawei 
Designation, PS Docket No. 19-351, Order (Jun. 30, 2020); Protecting 
Against National Security Threats to the Communications Supply Chain 
Through FCC Programs--ZTE Designation, PS Docket No. 19-352, Order 
(Jun. 30, 2020).
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    13. Likewise, with respect to ZTE, the FCC noted the company's 
obligations under Chinese law to permit Chinese government entities, 
including state intelligence agencies, to demand that private 
communications sector entities cooperate with governmental requests, 
including revealing customer information and network traffic 
information. The FCC also found that security risks and vulnerabilities 
in ZTE's equipment pose a threat to the integrity of communications 
networks and the communications supply chain. The FCC, furthermore, 
identified various reports that identify a wide range of 
vulnerabilities and cybersecurity risks found in ZTE equipment, which 
have led to an increase in restrictions placed upon its availability in 
the U.S. market.

D. The 5G Ecosystem: Risks and Opportunities for the Department of 
Defense

    14. A report by the Defense Innovation Board, titled ``The 5G 
Ecosystem: Risks and Opportunities for DoD,'' highlights the threats 
posed by China and other nation-state adversaries.\11\ The report notes 
that ``evidence of backdoors or security vulnerabilities have been 
discovered in a variety of devices globally'' and that many of those 
vulnerabilities ``seem to be related to requirements from the Chinese 
intelligence community pressuring companies to exfiltrate 
information.'' \12\ The report also highlights the need for the 
Department of Defense to ``consider options for defending against a 
compromised supply chain, where Chinese semiconductor components and 
chipsets are embedded across multiple systems.'' \13\
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    \11\ The 5G Ecosystem: Risks and Opportunities for DoD, Defense 
Innovation Board (Apr. 3, 2019), https://media.defense.gov/2019/Apr/03/2002109302/-1/-1/0/DIB_5G_STUDY_04.03.19.PDF.
    \12\ Id. at 25.
    \13\ Id. at 29.
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II. Discussion

A. Analysis

    15. Recent Executive Orders, legislation and federal agency 
decisions have identified Huawei and ZTE, as well as other entities 
identified as risks to national security, as potential risks to 
national security. The FCC has gone so far as to designate both Huawei 
and ZTE as national security threats to the integrity of communications 
networks and the communications supply chain. These actions raise 
concerns over the potential risks to bulk electric system reliability 
posed by the use of equipment and services provided by Huawei, ZTE, and 
other entities identified as risks to national security.
    16. The Commission has previously noted that responsible entities 
such as reliability coordinators, balancing authorities, and 
transmission operators must be capable of receiving and storing a 
variety of sensitive bulk electric system data from interconnected 
entities in order to adequately perform their reliability 
functions.\14\ The critical role played by communications networks in 
maintaining bulk electric system reliability by, among other things, 
helping to maintain situational awareness and reliable bulk electric 
system operations through timely and accurate measurement, collection, 
processing of bulk electric system status and information exchange 
among control centers makes it necessary for the Commission to 
understand the risk to bulk electric system reliability posed by the 
use of equipment and services provided by Huawei, ZTE, and other 
entities identified as risks to national security.
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    \14\ See Revised Critical Infrastructure Protection Reliability 
Standards, Order No. 822, 154 FERC ] 61,037, at P 54, order denying 
reh'g, Order No. 822-A, 156 FERC ] 61,052 (2016).
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    17. There are many manufacturers of networking and 
telecommunications equipment, but Huawei, ZTE, and their subsidiaries 
are gaining substantial shares of the market globally.\15\ A portion of 
this exposure to Huawei and ZTE stems from embedded Huawei or ZTE 
components in equipment produced by unaffiliated vendors. The 
probability that electric utilities now use a significant amount of 
telecommunications equipment with embedded components from Huawei or 
ZTE is greater in consideration of these facts, especially when 
factoring in components that are branded under a different vendor's 
label. If these obscured, or potentially unlabeled, components are 
present in an electric utility's infrastructure, the same risks may 
exist as if the hardware had been purchased directly from Huawei, ZTE, 
or one of their subsidiaries.
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    \15\ See, e.g., Investigative Report on the U.S. National 
Security Issues Posed by Chinese Telecommunications Companies Huawei 
and ZTE, 112th Cong., at 2 (Oct. 8, 2012) (finding ``Chinese 
telecommunications firms, such as Huawei and ZTE, are rapidly 
becoming dominant global players in the telecommunications 
market'').
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    18. In addition, the Commission notes that Executive Order No. 
13,920 on Securing the U.S. Bulk-Power System includes a definition for 
``bulk-power system electric equipment'' that covers a range of 
electrical equipment commonly used in substations, generating stations, 
and control rooms.\16\ Huawei or ZTE equipment or components that fall 
within these categories may also raise concerns over the potential 
risks to bulk electric system reliability posed by their use.
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    \16\ Executive Order No. 13,920 at section 4(b), 85 FR 26595 
(May 4, 2020).
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B. Request for Comments

    19. The Commission seeks comment on the potential risk to bulk 
electric system reliability posed by the use of equipment and services 
provided by entities identified in section 889(f)(3) of the 2019 NDAA 
(Covered Companies).\17\
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    \17\ See supra P 11.
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    20. Below, we pose questions that commenters should address in 
their submissions. However, commenters need not address every topic or 
answer every question identified below. Please

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do not include confidential or proprietary information, CEII, or other 
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sensitive or classified information in your responses.

    Q1. To what extent is the equipment (including components) and 
services provided by Covered Companies used in the operation of the 
bulk electric system?
    a. What methods could be used to ascertain the extent to which 
equipment and services provided by Covered Companies is used in the 
operation of the bulk electric system?
    b. Describe any potential complications to system operations 
that may result from implementing such methods (e.g., need to shut 
down certain activities to perform testing).
    Q2. Describe the risks to bulk electric system reliability and 
security posed by the use of equipment and services provided by 
Covered Companies?
    a. Describe the range of potential security impacts to bulk 
electric system reliability that could occur if a responsible entity 
uses the equipment and services provided by the Covered Companies 
within its real-time operations infrastructure and the equipment was 
compromised.
    b. If equipment and services provided by Covered Companies is 
installed in a responsible entity's real-time operations 
infrastructure, what controls are in place to prevent or detect 
compromise? What controls are in place to mitigate the potential 
effects of compromise?
    c. Describe the range of potential security impacts to bulk 
electric system reliability from a compromise of a responsible 
entity's systems related to non-real time bulk electric system 
operations (e.g., operations planning) resulting from the use of 
equipment and services provided by Covered Companies.
    d. If equipment and services provided by Covered Companies is 
installed in a non-real time environment (e.g. operations planning), 
what controls are in place to prevent or detect compromise? What 
controls are in place to mitigate the potential effects of 
compromise?
    e. Describe the potential range of security impacts to bulk 
electric system reliability from a compromise of responsible 
entity's systems related to non-bulk electric system communications 
and operations (e.g., business networks and systems not directly 
related to bulk electric system operations) resulting from the use 
of equipment and services provided by Covered Companies.
    f. If equipment and services provided by Covered Companies is 
installed in a non-bulk electric system communications and 
operations environment (e.g., business networks and systems not 
directly related to bulk electric system operations), what controls 
are in place to prevent or detect compromise? What controls are in 
place to mitigate the potential effects of compromise? What controls 
are in place to prevent compromise of business network or systems 
from migrating and impacting bulk electric system operations?
    Q3. Discuss the effectiveness of the current CIP Reliability 
Standards in mitigating the risks posed by equipment and services 
provided by Covered Companies used in the operation of the bulk 
electric system.
    a. Which requirements of the CIP Reliability Standards, 
including complementary requirements across the CIP Reliability 
Standards, require entities to take actions that detect and mitigate 
the risks associated with the use of equipment and services provided 
by Covered Companies?
    b. What modifications to the CIP Standards would minimize risks 
associated with equipment and services provided by the Covered 
Companies?
    Q4. Describe any strategies, in addition to compliance with the 
CIP Reliability Standards, entities have implemented or plan to 
implement to mitigate the risks associated with use of equipment and 
services provided by Covered Companies.
    Q5. What other methods could the Commission employ outside the 
CIP Reliability Standards, whether through regulatory action or 
through voluntary collaboration with industry and government, to 
further address the risks to bulk electric system reliability and 
security posed by the use of equipment and services provided by 
Covered Companies? For example, raising awareness about the risks 
identified in response to the previous questions, identifying 
potential solutions, and assisting with mitigating actions 
(including the facilitating information sharing)?
    a. Describe how your organization is informed of the risks to 
bulk electric system reliability and security posed by the use of 
equipment and services provided by Covered Companies and what could 
be done to improve this process.
    b. What actions has your organization taken to address these 
risks and what impediments exist to do so (i.e., such as procurement 
process requirements)?
    c. What challenges does your organization face when identifying, 
containing or removing equipment that presents supply chain threats 
from Covered Companies?

III. Comment Procedures

    21. The Commission invites interested persons to submit comments on 
the matters and issues proposed in this notice, including any related 
matters or alternative proposals that commenters may wish to discuss. 
Comments are due November 23, 2020, and Reply Comments are due December 
22, 2020. Comments must refer to Docket No. RM20-19-000, and must 
include the commenter's name, the organization they represent, if 
applicable, and their address.
    22. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's web site at http://www.ferc.gov. The Commission accepts most standard word-processing 
formats. Documents created electronically using word-processing 
software should be filed in native applications or print-to-PDF format 
and not in a scanned format. Commenters filing electronically do not 
need to make a paper filing.
    23. Commenters that are not able to file comments electronically 
must send an original of their comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE, 
Washington, DC 20426.
    24. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this proposal are 
not required to serve copies of their comments on other commenters.

IV. Document Availability

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

    By direction of the Commission.

    Issued: September 17, 2020.
Kimberly D. Bose,
Secretary.
[FR Doc. 2020-20987 Filed 9-22-20; 8:45 am]
BILLING CODE 6717-01-P