A Chinese transformer weighing more than 500,000 pounds arrived by ship at the Port of Houston last summer, en route to an electrical substation in Colorado that funnels electricity to Denver.
It never made it there.
Instead, federal officials commandeered the electrical transformer, built by closely held Jiangsu Huapeng Transformer Company, at the port and had it trucked under federal escort to Sandia National Laboratories in Albuquerque, N.M., according to people with knowledge of the matter.
What engineers at Sandia found still isn’t publicly known, nor why it was seized. The laboratory, operated by Honeywell International Inc., is under contract with the U.S. Energy Department and tasked with solving national-security threats.
Mike Howard, chief executive of the Electric Power Research Institute, a utility-funded technical organization, said that the diversion of a huge, expensive transformer is so unusual—in his experience, unprecedented—that it suggests officials had significant security concerns.
It also raises questions about whether more interventions could be ahead as the federal government begins to enforce an executive order President Trump signed on May 1 that gives federal officials authority to block utilities from using gear sourced from companies deemed influenced or controlled by “foreign adversaries” of the U.S. While the order didn’t identify these adversaries, it was widely seen as targeting primarily Russia and China.
Mr. Trump has used trade policy, including tariffs on Chinese goods, in his attempt to steer manufacturing back to the U.S. People familiar with these actions said the executive order is an extension of that effort, targeting growing imports of electrical equipment like large transformers from China.
These current and former federal officials and lobbyists said the Trump administration wants to improve grid security with trade barriers against large Chinese transformers, over concerns that they could wind up at choke points in the grid or near important military bases.
Jim Cai, U.S. representative for Jiangsu Huapeng in San Jose, Calif., said that for months he didn’t know where the enormous transformer had been hauled and learned it was taken to Sandia only when he was informed by The Wall Street Journal.
He said his company has “no intention of doing anything harmful to the U.S.” and he wants an opportunity to clear his company’s name. He said he hopes the U.S. government will disclose any concerns it had, so there can be an open dialogue and “transparency about what has happened.”
Sandia, the Energy Department and the utility that purchased the transformer all declined to answer questions. Other people, with more limited knowledge of the situation, said federal officials probably commandeered the transformer because they suspected its electronics had been secretly given malicious capabilities, possibly allowing a distant adversary to monitor or even disable it on command. But these people said they didn’t know whether any such alterations were found.
Energy Secretary Dan Brouillette, in comments early this month about the executive order, mentioned concerns about the security of transformers, which are critical to electrical-grid functioning, but he didn’t provide any specifics. The order gives him the power—in consultation with the directors of defense, national intelligence and other agencies—to prevent compromised gear from being installed in the nation’s transmission system and to root out any gear that is already installed if deemed hazardous.
The transformer that wound up at Sandia originally was headed for the Ault substation, owned by the Western Area Power Administration, which helps direct electricity to Denver. WAPA, a federally owned utility, supplies wholesale electricity to dozens of utilities scattered across 15 states in the western and central U.S., giving it one of the biggest footprints of any utility in the country. WAPA declined to comment.
Federal officials have long worried that foreign adversaries might hack into the utility computer networks that control power flows on transmission lines and cause blackouts.
However, transformers hadn’t typically been seen as products that could be easily isolated and hacked. That is because they don’t contain the software-based control systems that foreign actors could access. They are passive devices that increase or reduce voltages in switchyards, substations and on power poles according to the laws of physics.
Modern units do contain diagnostic electronics, though, typically with one-way communications. In fact, this particular transformer was supposed to have diagnostic electronics allowing WAPA to keep track of its temperature and look for problems like dissolved gases, in its gigantic oil-filled tank, that could pose a fire risk.
Mr. Cai said that even if someone had access to the transformer’s diagnostic data, it wouldn’t matter. “You couldn’t do anything,” he said.
But the fear, other experts said, is that malicious electronics might get added surreptitiously and wouldn’t be detected.
Tom Fanning, chief executive of Atlanta-based Southern Company, which owns several utilities in the Southeast, said transformers “have always been on the list of stuff we’re worried about” because they are expensive and hard to replace and are custom-built for specific locations. He said there was a general awareness that a foreign entity might install something that could “potentially damage it on command,” but he said he had never heard of an actual case.
Jiangsu Huapeng, also known as JSHP, says it has sold more than 7,000 power transformers globally in the past 20 years, including more than 100 big units to utilities in the U.S. and Canada in the past decade. In addition to WAPA, JSHP buyers include the New York Power Authority, EDF Renewables, B.C. Hydro and MidAmerican Energy Co.
Mr. Cai said the first hint of trouble came last June when WAPA abruptly changed the original $2.8 million contract for the 345/230 kV transformer. He said the utility said it didn’t want JSHP to haul the unit to Colorado and do the installation. Nor did it want the five-year equipment warranty. Instead, it wanted a $400,000 credit for services not provided. “Something like that never happened before,” said Mr. Cai.
He said he later heard from a port official that the transformer was taken to a federal facility, but didn’t know which one. He said he assumed they intended to tear the transformer apart and “that is why they don’t care about the warranty anymore.”
He said he had no idea what authorities thought they might find since the transformer had been built to WAPA’s exact specifications, down to the parts numbers for the electronics that were sourced from companies WAPA chose in the U.S. and U.K.
“They picked the brands, and we ordered and put it on,” he said.
—Timothy Puko contributed to this article.
Corrections & Amplifications
Dan Brouillette is the U.S. secretary of energy, and Sandia National Laboratories is operated by Honeywell International. An earlier version of this article misspelled his surname as Brouilette and incorrectly said Sandia is owned by Honeywell. (Corrected on May 27)
Write to Rebecca Smith at email@example.com