99-15703. General and Pre-Loan Policies and Procedures Common to Insured and Guaranteed Electric Loans  

  • [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
    
    
    

Document Information

Effective Date:
8/6/1999
Published:
06/22/1999
Department:
Rural Utilities Service
Entry Type:
Rule
Action:
Direct final rule.
Document Number:
99-15703
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.
Pages:
33176-33178 (3 pages)
RINs:
0572-AB46: Construction Work Plans and Related Studies
RIN Links:
https://www.federalregister.gov/regulations/0572-AB46/construction-work-plans-and-related-studies
PDF File:
99-15703.pdf
CFR: (3)
7 CFR 6912(e))
7 CFR 1710.106
7 CFR 1710.250