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FERC Approves Incentives for Advanced Cybersecurity Investment

On April 20, 2023, the Federal Energy Regulatory Commission (FERC) issued its final rule regarding incentives for advanced cybersecurity investment.

FERC’s News Release states in part:

Today’s rule follows Congress’ direction under the Infrastructure Investment and Jobs Act of 2021 that the Commission revise its regulations to establish incentive-based rate treatments to encourage utilities to invest in advanced cybersecurity technology and participate in cybersecurity threat information sharing programs for the benefit of consumers.

The final rule largely tracks the Notice of Proposed Rulemaking (NOPR) issued September 22, 2022, but includes some important additions:

  • The Commission expanded the definition of eligible cybersecurity investments to include not only a pre-qualified list of cybersecurity investments, but also those investments that are done on a case-by-case basis, allowing utilities to request incentives for a variety of solutions tailored to their specific situations.

  • The Commission will allow utilities to seek incentives for early compliance with new cybersecurity reliability standards.

The final rule adopts the NOPR’s proposed requirement that expenditures materially improve a utility’s cybersecurity posture. It also adopts the proposal to allow deferred cost recovery that would enable the utility to defer expenses and include the unamortized portion in its rate base but does not adopt the proposed return on equity adder of 200 basis points. The rule also states that approved incentives, with certain exceptions, will remain in effect for up to five years from the date on which expenses are incurred, provided that the investments remain voluntary.

The final rule will take effect 60 days after publication in the Federal Register.


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