President Declares National Emergency to Secure U.S. Bulk-Power System: New Restrictions on Foreign-Made Grid Equipment

Executive Order 14421 (August 26, 2026)

Overview

On August 26, 2026, President Trump signed Executive Order 14421 (the “Order,” or “EO 14421”)^[1], “Declaring a National Emergency to Secure the United States Bulk-Power System.” Invoking the International Emergency Economic Powers Act (“IEEPA”), the National Emergencies Act (“NEA”), and Section 301 of Title 3 of the U.S. Code, the Order declares a national emergency over the foreign supply of bulk-power system (“BPS”) electric equipment and empowers the Secretary of Energy (the “Secretary”) to prohibit, condition, or unwind transactions involving that equipment when tied to a “Covered Foreign Entity.” The Order reinvigorates and expands the framework President Trump first established in Executive Order 13920 (“EO 13920”) (2020).

The Order is broadly targeted, reaching private-sector acquisitions, transfers, and installations of covered equipment across the BPS, not just suppliers to federal agencies. However, the prohibition operates only once the Department of Energy (“DOE”) identifies specific equipment and manufacturers posing the requisite risk—a process the Order requires DOE to begin now, with implementing rules due within 120 days (by December 24, 2026).

Who Is Affected

Directly affected parties include electric utilities and transmission owners; independent power producers and generation developers, particularly solar, storage, and hybrid projects given the express inclusion of inverters and battery storage; large-load and co-location customers (including data centers) that procure or host covered equipment; and equipment manufacturers and downstream suppliers. Engineering, procurement, and construction (“EPC”) contractors and lenders should also assess exposure before those rules issue.

Implementation Timeline and Key Dates

• August 26, 2026—Order effective. The prohibition applies to covered transactions initiated after this date.
• Within 120 days (on or about December 24, 2026)—DOE implementing rules. The Secretary of Energy must publish rules or regulations, which may designate Covered Foreign Entities, identify equipment or countries warranting particular scrutiny, and establish licensing procedures.
• As soon as practicable—installed equipment review. The Secretary must identify installed at-risk equipment and submit to the President, through the national security advisor, recommendations to identify, inventory, isolate, monitor, or replace it.
• Within 180 days (on or about February 22, 2027)—FAR recommendations. The Secretary must submit recommended Federal Acquisition Regulation (“FAR”) revisions.
• Within 90 days after receipt—FAR Council action. The FAR Council must consider proposing FAR amendments for notice and public comment.

Background

EO 14421 largely mirrors the framework President Trump established in May 2020 with EO 13920, “Securing the United States Bulk-Power System” (85 Fed. Reg. 26,595), which authorized the U.S. Government to prohibit transactions involving BPS equipment manufactured or supplied by China that pose an undue or unacceptable risk to the BPS, critical infrastructure, the economy, or national security. In December 2020, DOE issued a prohibition order barring certain China-sourced BPS equipment from serving certain critical defense facilities. The Biden Administration suspended EO 13920 in January 2021, revoked the DOE prohibition order in April 2021, and the same day issued a Request for Information on supply-chain vulnerability—observing that China “is equipped and actively planning to undermine the electric power system in the United States.” That RFI remained outstanding for years.

EO 14421 reinvigorates and expands this framework, grounding the national emergency in the risk that foreign-made grid equipment may contain exploitable vulnerabilities—including remote-access “digital backdoors”—and in supply-chain risks from continued reliance on foreign equipment. The Order emphasizes that load growth from advanced manufacturing, data centers, AI, and defense production has deepened the United States’ dependence on reliable electricity and heightened the consequences of an attack or supply disruption.

What the Order Does

The core prohibition. Section 2(a) prohibits any acquisition, importation, transfer, or installation of foreign-produced BPS electric equipment (a “BPS Transaction”) initiated after August 26, 2026, in which a foreign country or national has any interest (including through an equipment-supply contract), where the Secretary of Energy determines that (i) the equipment, or an associated critical component, software, firmware, digital service, maintenance service, or remote-access capability, is designed, developed, manufactured, or supplied by a person owned or controlled by, or subject to the jurisdiction or direction of, a Covered Foreign Entity; and (ii) the BPS Transaction poses an undue risk of sabotage, subversion, unauthorized access, malicious remote action, or supply disruption; an undue risk of catastrophic effects on U.S. critical infrastructure or the economy; or an otherwise unacceptable national security risk. The prohibition applies notwithstanding any pre-existing contract, license, or permit.

When the prohibition applies. The prohibition is not self-effectuating. No BPS Transaction is prohibited until the Secretary of Energy identifies specific equipment and manufacturers posing the requisite risk and satisfying the Covered Foreign Entity nexus. The Order directs DOE to implement that framework promptly—with rules due within 120 days (on or about December 24, 2026) and identification of at-risk equipment as soon as practicable.

“Covered Foreign Entity.” Section 5(e) reaches any country—or any person owned or controlled by, or subject to the jurisdiction or direction of, a foreign government—that is subject to a U.S. arms embargo or sanctions regime under the International Traffic in Arms Regulations or that the Secretary of Energy (with the Secretary of Defense, the Director of National Intelligence, and the National Security Advisor) determines is engaged in conduct detrimental to U.S. national security or foreign policy. This definition covers, at its core, Belarus, Burma, China, Cuba, Iran, North Korea, Syria, and Venezuela. We expect DOE to refine this definition in its implementing rules, and anticipate that it will include companies headquartered in these countries and their subsidiaries.

Foreign-produced equipment. Importantly, the prohibition applies only to “foreign-produced” equipment—equipment not manufactured, produced, or assembled in the United States. Equipment produced domestically, even by a company owned by an entity headquartered in a covered country such as China, falls outside the Order.

BPS. The Order defines “bulk-power system” as transmission facilities rated at 69 kV and above, but expressly excludes local distribution facilities. It is unclear whether the DOE, in issuing rules, will follow the Federal Energy Regulatory Commission’s seven-factor test for distinguishing transmission from distribution, or some other approach.

BPS electric equipment. The Order defines “bulk-power system electric equipment” expansively as “items used in bulk-power system substations, control rooms, or power generating stations,” and expressly including reactors, capacitors, and substation transformers; utility-scale and other grid-connected inverters; battery energy storage systems; uninterruptible power supply systems supporting critical infrastructure; generators (large, small, and backup); protective relaying and metering; high-voltage circuit breakers; generation turbines; industrial control systems (including remote terminal units, programmable logic controllers, and intelligent electronic devices); distributed control systems; and safety instrumented systems.

The Order excludes from the definition items that “have broader application beyond the bulk-power system,” provided they are unrelated to the concerns raised in the Order. Thus, for example, a thermostat that controls the temperature in a control room may be out of scope, but a security camera in that same control room may be in scope. Agencies may also consider associated software, firmware, remote-access capabilities, and lifecycle-maintenance dependencies. The express inclusion of grid-connected inverters and battery storage is significant for solar, storage, and hybrid developers, for whom coverage was ambiguous under the 2020 EO 13920.

Installed equipment. The Order authorizes the Secretary, after making the required determinations, to impose conditions on the continued use, operation, maintenance, servicing, or updating of already-installed equipment—up to and including requirements to identify, isolate, monitor, secure, disconnect, replace, or remove it. Before directing isolation, disconnection, replacement, or removal, the Secretary must weigh effects on reliability and safety, the availability of secure replacements, and continuity of essential service, and may set phased compliance. This reach-back to impose conditions on equipment installed prior to the Order could be among its most consequential restrictions.

Mitigation agreements. Section 2(c) permits the Secretary to design or negotiate mitigation measures as a precondition to approving a BPS Transaction, or class of BPS Transactions, that would otherwise be prohibited—a mechanism that may be similar to CFIUS mitigation.

Pre-qualified vendors and equipment. Section 2(e) authorizes the Secretary to establish criteria and procedures to pre-qualify particular equipment and vendors as exempt from the prohibition and to publish a pre-qualified list, though this is not a “safe harbor,” as the Secretary retains authority to regulate even qualified suppliers.

Anti-evasion. Section 2(f) separately prohibits any transaction that evades or avoids, or that attempts or conspires to violate, the Order’s requirements.

Federal procurement. Section 4 directs the Secretary, within 180 days, to recommend revisions to FAR to ensure national-security risks are considered in federal energy-infrastructure procurement and to prioritize acquisition of U.S.-manufactured energy infrastructure; the FAR Council then has 90 days to consider proposing amendments for notice and comment.

What Implementation Will Look Like

Much of the Order’s practical effect will be defined by the 120-day DOE rulemaking, which is expected to (i) designate the countries and persons constituting Covered Foreign Entities; (ii) identify BPS electric equipment subject to the prohibition; and (iii) create licensing procedures for covered transactions. Enforcement will run through IEEPA, which carries substantial penalties—civil penalties set at the greater of an inflation-adjusted per-violation amount exceeding $375,000 or twice the transaction value, and, for willful violations, criminal fines up to $1 million and imprisonment up to 20 years. For installed equipment, DOE’s identification effort and any subsequent conditioning orders will proceed against the Order’s reliability-and-continuity balancing test. The mitigation agreement mechanism offers a negotiated, transaction-specific path to clearance for equipment that would otherwise be prohibited. In practical terms, the Order converts largely dormant authority into an implementation mandate with a fixed near-term deadline, filling a gap in critical electric infrastructure supply-chain security regulation on which the Department of Energy has been focused for years.

^[1] Previously numbered 14420.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.