by Yana A. St. Clair, Esq.
The legal frameworks governing the critical assets of the power grids must evolve to address the emerging vulnerabilities.
In our last issue we began to discuss the legal challenges in digital transformation of the electric power systems and critical infrastructure protection. As previously mentioned, this transformation brings immense efficiency and flexibility to the energy infrastructure, but it also introduces complex legal challenges to cybersecurity, privacy, and regulatory compliance. As power grids become increasingly connected through smart meters, IoT sensors, and automated control systems, the legal frameworks governing these critical assets must evolve to address the emerging vulnerabilities and responsibilities. We now turn our attention to some specific areas of concern to the power industry, from a legal standpoint.
One legal issue arises with regards to Cybersecurity Regulatory Compliance. Electric utilities face a patchwork of cybersecurity regulations that vary by jurisdiction. In the US, the North American Electric Reliability Corporation Critical Infrastructure Protection (NERC CIP) standards establish baseline security requirements for most electric systems. Utilities must navigate compliance with these standards while also addressing requirements from other authorities, such as FERC, the Federal Energy Regulatory Commission, as well as state public utility commissions. It is challenging for a utility to comply with multiple regulatory agencies, and it must be of great importance to legal departments in their attempt to ensure compliance, and when communicating with technical teams in this endeavor.
Another issue is Liability for Security Breaches. As digital systems become more integrated into the power infrastructure, determining liability for security breaches grows increasingly complex. Traditional tort law may apply when a utility fails to implement reasonable security measures, on negligence grounds, but defining what constitutes “reasonable” in rapidly evolving technological landscapes, remains challenging. Courts recognize that perfect security is unattainable, focusing instead on whether organizations implemented appropriate protective measures aligned with industry standards and requirements. Utilities must document their risk assessment processes and security decisions to demonstrate due diligence if a breach occurs.
Cross-Border Data Flows bring up some additional legal issues. Many utilities operate across multiple jurisdictions, necessitating careful attention to laws governing cross-border data transfers. Legal departments must develop strategies for compliance with varying requirements while maintaining operational efficiency. This may involve data localization measures, implementing standard contractual clauses, or pursuing certification under recognized cross-border data transfer frameworks.
Utilities also face legal challenges in developing procurement processes that adequately evaluate vendor security practices, establishing contractual provisions that allocate security responsibilities appropriately, and implementing ongoing monitoring programs to detect potential compromise of third-party systems. Digital transformation typically involves integration with numerous technology vendors and service providers. Recent legislation, such as the Securing the Information and Communications Technology and Services Supply Chain executive order in the U.S., imposes more stringent requirements on critical infrastructure operators to assess supply chain risks.
Intellectual Property and Technology Licensingare also exponentially growing in importance. As utilities deploy advanced technologies, intellectual property issues gain prominence. Legal teams must navigate complex licensing agreements for operational technology, evaluate open-source software risks, and protect proprietary innovations developed in-house. Patent infringement claims related to smart grid technologies have increased, requiring careful due diligence during technology acquisition.
Traditional force majeure clauses may provide insufficient protection as cyber threats blur the line between natural disasters and human-caused disruptions. Legal departments are revising contractual provisions to clarify responsibilities during cyber incidents while complying with regulatory requirements for continuation of critical services. The digital transformation of electric power systems presents a complex legal landscape that continues to evolve as technology advances and threat landscapes shift. Effective legal strategies require cross-disciplinary collaboration between legal experts, cybersecurity professionals, and operations teams. By proactively addressing these legal challenges, utilities can advance their digital transformation initiatives while maintaining the security and reliability of critical infrastructure that underpins modern society.
While we touched upon many of the main topics which are of substantial legal concern to the industry for various reasons, we have intentionally left out one of the most important ones, Data Privacy Considerations. In addition to its importance with respect to the topic at hand, Data Privacy deserve its own issue regardless, and will thus be enjoyed in detail in the June article of PACWorld. In the meantime, Happy Spring, and until next time!
Biography
Yana is an American attorney licensed to practice in all State and Federal courts of California. Yana holds a Bachelor of Arts Degree in Political Science specializing in International Relations from UCLA, the Degree of Juris Doctor from Loyola Law School, and a Master of Business Administration Degree from Ashford University. Since the beginning of her undergraduate studies, Yana has been involved in various aspects of the field of Electrical Engineering, where she employs her business and legal knowledge to consulting and advising businesses and individuals on relevant topics of concern. Yana also serves as Editor for PAC World magazine, having been with the publication since its inception. As an attorney, Yana specializes in criminal defense, where she devotes her talents and expertise to fighting for her clients’ rights and freedom.
