[Federal Register Volume 64, Number 119 (Tuesday, June 22, 1999)]
[Rules and Regulations]
[Pages 33176-33178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15703]
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DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Part 1710
RIN 0572-AB46
General and Pre-Loan Policies and Procedures Common to Insured
and Guaranteed Electric Loans
AGENCY: Rural Utilities Service, USDA.
ACTION: Direct final rule.
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SUMMARY: The Rural Utilities Service (RUS) is amending its regulations
to: revise the method of determining loan fund eligibility for
``ordinary replacements'' and authorize the use of guaranteed financing
for ``minor projects''.
DATES: This rule will become effective August 6, 1999 unless we receive
written adverse comments or written notice of intent to submit adverse
comments on or before July 22, 1999. If we receive such comments or
notice, we will publish a timely withdrawal of the Direct Final Rule in
the Federal Register stating that the rule will not become effective.
We will address the comments received and publish a final rule. A
second public comment period will not be held. Parties interested in
commenting on this action should do so at this time.
ADDRESSES: Submit adverse comments or notice of intent to submit
adverse comments to F. Lamont Heppe, Jr., Director, Program Development
and Regulatory Analysis, Rural Utilities Service, U.S. Department of
Agriculture, Stop 1522, 1400 Independence Avenue, SW, Washington, DC
20250-1522. Telephone: (202) 720-9550. RUS requires a signed original
and three copies of all comments (7 CFR 1700.4). Comments will be
available for public inspection during regular business hours (7 CFR
1.27(b)).
FOR FURTHER INFORMATION CONTACT: Alex M. Cockey, Jr., Deputy Assistant
Administrator, Electric Program, Rural Utilities Service, U.S.
Department of Agriculture, Stop 1560, 1400 Independence Avenue, SW,
Washington, DC 20250-1560. Telephone: (202) 720-9547. FAX (202) 690-
0717. E-mail: acockey@rus.usda.gov.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be not significant for the
purposes of Executive Order 12866 and, therefore, has not been reviewed
by the Office of Management and Budget (OMB).
Executive Order 12988
This rule has been reviewed in accordance with Executive Order
12988, Civil Justice Reform. RUS has determined that this rule meets
the applicable standards provided in section 3 of the Executive Order.
In addition, all state and local laws and regulations that are in
conflict with this rule will be preempted. No retroactive effect will
be given to this rule and in accordance with Sec. 212(e) of the
Department of Agriculture Reorganization Act of 1994 (7 USC
Sec. 6912(e)) administrative appeal procedures, if any, must be
exhausted before an action against the Department or its agencies may
be initiated.
Regulatory Flexibility Act Certification
The Administrator of RUS has determined that a rule relating to RUS
electric loan program is not a rule as defined in the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) and, therefore, the Regulatory
Flexibility Act does not apply to this rule. RUS borrowers, as a result
of obtaining federal financing, receive economic benefits that exceed
any direct economic costs associated with complying with RUS
regulations and requirements.
Information Collection and Recordkeeping Requirements
The Office of Management and Budget (OMB) has approved the
reporting and recordkeeping requirements contained in 7 CFR Part 1710
under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) and
assigned control number 0572-0032. This rule contains no additional
information collection or recordkeeping requirements.
Catalog of Federal Domestic Assistance
The program described by this rule is listed in the Catalog of
Federal Domestic Assistance Programs under No. 10.850, Rural
Electrification Loans and Loan Guarantees. This catalog is available on
a subscription basis from the United States Government Printing Office,
Washington, DC 20402-9325, telephone number (202) 512-1800.
Executive Order 12372
This rule is excluded from the scope of Executive Order 12372,
Intergovernmental Consultation, which may require consultation with
State and local officials. A Notice of Final Rule entitled ``Department
Programs and Activities Excluded from Executive Order 12372'', (50 FR
47034), exempted RUS loans and loan guarantees from coverage under this
order.
Unfunded Mandates
This rule contains no Federal Mandates (under the regulatory
provision of Title II of the Unfunded Mandates Reform Act of 1995) for
State, local, and tribal governments or the private sector. Thus, this
rule is not subject to the requirements of sections 202 and 205 of the
Unfunded Mandates Reform Act of 1995.
[[Page 33177]]
National Environmental Policy Act Certification
The Administrator of RUS has determined that this rule will not
significantly affect the quality of the human environment as defined by
the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
Therefore, this action does not require an environmental impact
statement or assessment.
Background
RUS is amending its regulations to change the manner in which it
categorizes electric plant replacements for the purpose of clarifying
financing eligibility for replacements. RUS financing is presently
based upon the accounting and engineering classifications of new
construction, system improvements, and ordinary replacements. These
procedures are established in 7 CFR Part 1710, General and Pre-Loan
Policies and Procedures Common to Insured and Guaranteed Electric
Loans, including Sec. 1710.106, Uses of Loan Funds, establishing the
extent of funding for new construction, system improvements, and
ordinary replacements, as well as RUS Bulletin 1767B-2, Work Order
Procedure (Electric).
At present, RUS financing is provided as follows: (a) for new
construction based on cost of construction (amount capitalized), (b)
for system improvements based on cost of construction plus removal cost
less applicable salvage, and (c) for ordinary replacements based on
cost of construction less original cost of units removed.
In each case above, non-refundable contribution amounts by the
ultimate customer are deducted from the amount financed.
Section 1710.2, Definitions, provides the following definitions:
(a) system improvement means the change or addition to electric plant
facilities to improve the quality of electric service or to increase
the quantity of electric power available to RE Act beneficiaries; (b)
ordinary replacement means replacing one or more units of plant, called
``retirement units,'' with similar units when made necessary by normal
wear and tear, damage beyond repair, or obsolescence of facilities.
With these definitions, RUS has experienced problems as to which
projects should appropriately be classified as either system
improvements or ordinary replacements. As a result, there has been
confusion and inconsistency in the determination of loan fund
eligibility. While the determination does not significantly affect the
amount of loan funds provided by RUS, the determination nevertheless is
an unnecessary burden for RUS borrowers, their engineering consultants,
and RUS staff, who often apply the definitions differently.
This rule change combines the classifications of system
improvements and ordinary replacements into a single category.
Financing will be based on the process presently used to finance system
improvements. This process will provide funding to cover the cost of
construction, plus the cost of removal, less any salvage value. No
change is being made in the manner in which new construction or system
improvements are classified or financed by RUS. It merely changes the
manner in which ordinary replacements are categorized and financed by
RUS.
RUS has previously authorized certain types of ordinary
replacements, including underground cable replacements, to be financed
as system improvements. Furthermore, Sec. 1710.106 (3) presently
permits RUS to finance the total cost of ordinary replacements, if
specifically authorized by the Administrator.
Potentially, the requests for RUS financing assistance may be
slightly increased by combining these two methods of accounting for
system improvements and ordinary replacements into a single category.
However, the overall benefits to the borrowers and RUS outweigh the
possible increase in requests for loan funds. This rule change is being
made in order to: (a) simplify classifications of construction and
eliminate the judgments necessary as to whether a project is considered
an improvement or replacement; and (b) avoid creating any new method of
financing while still generating necessary information from which RUS
can determine appropriate funding eligibility.
It should be further noted that factors other than the amount of
construction eligible for financing under the present concepts of
system improvements and ordinary replacements impact the amount of
funding actually requested from RUS. Generally, RUS borrowers do not
request financing assistance for all capital improvements because of
desired equity goals. Typically, borrowers utilize internally generated
funds from as little as 20 percent to more than 50 percent of total
construction costs. The overall effect of this is that borrowers
presently borrow funds in amounts which are significantly less than
that for which they would be eligible under either present loan
concepts (with system improvements and ordinary replacements) or those
concepts provided under this rule change.
Benefits of this rule change include: (a) simplified RUS financing
and engineering analysis which avoids conflicting interpretations of
what is a system improvement and what is an ordinary replacement; (b)
expedited close-out and audit processes; (c) little or no change in the
application for available loan funds; and (d) elimination of additional
analysis in electric plant accounting to determine amount capitalized.
With this rule change, Inventories of Work Orders, RUS Form 219,
covering completed construction projects that are closed out after the
effective date of this rule, will be subject to these new procedures
for ``ordinary replacements.'' During the period while revised RUS Form
219's are being prepared and distributed, RUS borrowers may utilize
existing supplies of forms bearing an issue date of 10/88 and include
all plant rebuilds and replacements as system improvements. The columns
on RUS Form 219 that are currently dedicated to ordinary replacements
would, therefore, not be used under this rule change.
The second aspect of this rule change concerns ``minor projects''
and guaranteed loan funds. Minor projects are defined in 7 CFR Part
1721, Post-Loan Policies and Procedures for Insured Electric Loans,
Subpart A, Advance of Funds, Sec. 1721.1(a) as ``a project costing
$25,000 or less.'' Section 1721.1(a), further states that: ``With the
exception of minor construction, insured loan funds will be advanced
only for projects in an RUS approved Borrower's construction work plan
or approved amendment and in an approved loan, as amended.'' Also
related to this matter is 7 CFR Part 1710, Subpart F, Construction Work
Plans and Related Studies. Section 1710.250(e) states that:
``Applications for a loan or loan guarantee from RUS...must be
supported by a current CWP. . . .'' Since part 1721 only covers insured
loans, no mechanism is presently in place to authorize minor projects
under an RUS loan guarantee. Part 1710, subpart F, would, therefore,
presently require inclusion of all projects in either a work plan or an
amendment to a work plan and preclude authority for and funding of
``minor projects'' under an RUS loan guarantee. The purpose of this
rule change is to clarify that minor projects may, in fact, be funded
through an RUS loan guarantee, just as they are done under insured loan
procedures without being specifically approved in a work plan or
amendment.
[[Page 33178]]
List of Subjects in 7 CFR Part 1710
Electric power, Loan programs, Reporting and recordkeeping
requirements, Rural areas.
Accordingly, 7 CFR part 1710 is amended as follows:
PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO
INSURED AND GUARANTEED ELECTRIC LOANS, SUBPART C--LOAN POLICIES AND
BASIC POLICIES
1. The authority citation for part 1710 is revised to read as
follows:
Authority: 7 U.S.C. 901 et seq., 1921 et seq., and 6941 et seq.
2. Amend Sec. 1710.106 by removing paragraph (a)(3), redesignating
paragraphs (a)(4) through (a)(6) as (a)(3) through (a)(5), and revising
paragraphs (a)(1)(i) and (a)(2)(i) to read as follows:
Sec. 1710.106 Uses of loan funds.
(a) * * * * *
(1) Distribution facilities. (i) The construction of new
distribution facilities or systems, the cost of system improvements and
removals less salvage value, the cost of ordinary replacements and
removals less salvage value, needed to meet load growth requirements,
improve the quality of service, or replace existing facilities.
* * * * *
(2) Transmission and generation facilities. (i) The construction of
new transmission and generation facilities or systems, the cost of
system improvements and removals, less salvage value, the cost of
ordinary replacements and removals less salvage value, needed to meet
load growth, improve the quality of service, or replace existing
facilities.
* * * * *
3. Amend Sec. 1710.250(f) by adding the following sentence to the
end of the paragraph to read:
Sec. 1710.250 General.
* * * * *
(f) * * * Provision for funding of ``minor projects'' under an RUS
loan guarantee is permitted on the same basis as that discussed for
insured loan funds in 7 CFR part 1721, Post-Loan Policies and
Procedures for Insured Electric Loans.
* * * * *
Dated: June 14, 1999.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 99-15703 Filed 6-21-99; 8:45 am]
BILLING CODE 3410-15-P
