[Federal Register Volume 62, Number 34 (Thursday, February 20, 1997)]
[Rules and Regulations]
[Pages 7663-7665]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3990]
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DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Part 1710
RIN 0572-AB30
Pre-Loan Procedures for Electric Loans
AGENCY: Rural Utilities Service, USDA.
ACTION: Direct final rule.
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SUMMARY: The Rural Utilities Service (RUS) is issuing a minor amendment
to its pre-loan procedures that will clarify that use of a conventional
utility indenture as a security instrument for loans to power supply
borrowers is permissible. This amendment will give these borrowers and
RUS the flexibility to address the complex issues surrounding power
supply loans in the rapidly changing electric industry. The rule will
also enhance loan security and, by conforming more closely to private
lending practice, allow easier access to private sector financing.
In the proposed rules section of this Federal Register, RUS is
proposing approval of and soliciting comments on this action. If
adverse comments are received on this action, RUS will withdraw this
final rule prior to its effective date and address the comments
recieved in response to this action in a final rule on the related
proposed rule, which is published in the proposed rules section of this
Federal Register. A second public comment period will not be held.
Parties interested in commenting on this action should do so at this
time.
DATES: This rule will become effective on April 7, 1997, unless we
receive written adverse comments or notice of intent to submit adverse
comments on or before March 24, 1997. If the effective date is delayed,
timely notice will be published in the Federal Register.
[[Page 7664]]
ADDRESSES: Submit any adverse comments or notice of intent to submit
adverse comments to F. Lamont Heppe, Jr., Director, Program Support and
Regulatory Analysis, Rural Utilities Service, U.S. Department of
Agriculture, Room 2230-S, 1400 Independence Avenue, SW., STOP 1522,
Washington, DC 20250-1522. RUS requires, in hard copy, a signed
original and 3 copies of all comments (7 CFR 1700.30(e)). Comments will
be available for public inspection during regular business hours at
Room 4034, South Building, U.S. Department of Agriculture, Washington,
DC 20250 between 8:00 a.m. and 4:00 p.m. (7 CFR part 1.27(b)).
FOR FURTHER INFORMATION CONTACT: F. Lamont Heppe, Jr., Director,
Program Support and Regulatory Analysis, Rural Utilities Service, U.S.
Department of Agriculture, Room 2230-S, 1400 Independence Avenue, SW.,
STOP 1522, Washington, DC 20250-1522. Telephone: 202-720-0736. FAX:
202-720-4120. E-mail: fheppe@rus.usda.gov.
SUPPLEMENTARY INFORMATION: This regulatory action has been determined
to be not significant for the purposes of Executive Order 12866,
Regulatory Planning and Review, and, therefore has not been reviewed by
the Office of Management and Budget (OMB). The Administrator of RUS has
determined that a rule relating to the RUS electric loan program is not
a rule as defined in the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.) for which RUS published a general notice of proposed rulemaking
pursuant to 5 U.S.C. 553(b), or any other law. Therefore, the
Regulatory Flexibility Act does not apply to this action. 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. 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 titled Department Programs and Activities Excluded from Executive
Order 12372 (50 FR 47034) exempts RUS electric loans and loan
guarantees from coverage under this Order. This rule has been reviewed
under Executive Order 12988, Civil Justice Reform. RUS has determined
that this rule meets the applicable standards provided in Sec. 3. of
the Executive Order.
The program described by this rule is listed in the Catalog of
Federal Domestic Assistance Programs under number 10.850 Rural
Electrification Loans and Loan Guarantees. This catalog is available on
a subscription basis from the Superintendent of Documents, the United
States Government Printing Office, Washington, DC 20402-9325.
Information Collection and Recordkeeping Requirements
The recordkeeping and reporting burdens contained in this rule were
approved by the Office of Management and Budget (OMB) pursuant to the
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35, as amended)
under control number 0572-0032.
Background
RUS recognizes that power supply borrowers (also known as
generation and transmission borrowers or ``G&T's'') generally have a
far more complex corporate structure and face more complex financing
issues than distribution borrowers. In order to meet the financing
needs of these borrowers more efficiently, RUS is amending its
regulations to specifically allow the use of a conventional utility
indenture in lieu of a mortgage as security instruments for loans to
these borrowers.
Although current RUS regulations do not preclude the use of trust
indentures as security instruments for RUS loans, the Agency believes
that it would be useful to clarify how RUS regulations in 7 CFR Chapter
XVII will be reconciled with any conflicting provisions contained in
conventional utility indentures and related loan contracts which the
Agency may accept in lieu of typical RUS mortgages and mortgages as
loan instruments. The Agency anticipates that otherwise some of the
provisions in such indentures and loan contracts might conflict with
provisions in this chapter that were developed to implement or
interpret the traditional standard forms of RUS loan instruments which
were designed for use under different circumstances.
On July 18, 1995, at 60 FR 36882, and December 29, 1995, at 60 FR
67396, RUS substantially revised the forms of loan instruments it uses
in making loans to electric distribution borrowers. Because of the
differing situations of power supply borrowers, RUS did not attempt to
prescribe corresponding forms of those new documents for power supply
borrowers. Nevertheless, RUS recognizes that many of the reasons
underlying the modernization effort apply to its power supply
borrowers. Thus, RUS believes that the option of using trust indentures
represents a balanced approach to increasing borrowers' access to
private capital markets and reducing RUS operational controls while
simultaneously enhancing RUS loan security by appropriately adapting to
the changing cooperative electric industry.
RUS is willing to consider the use of an indenture when RUS and the
power supply borrower mutually agree that it is appropriate. The terms
of each indenture and related loan agreement will be negotiated on a
case by case basis to best meet the needs of the individual borrower
and the Government as the electric industry undergoes a period of
drastic change. RUS believes that ultimately this approach will enhance
loan security by addressing the individual circumstances of each
borrower; will allow RUS greater flexibility in dealing with the more
complex structures of most power supply borrowers; and will allow these
borrowers easier access to private sources of credit, thus reducing
their dependence on RUS financing. RUS recognizes that this approach
may conflict from time to time with some provisions of 7 CFR Chapter
XVII. This regulation provides that the terms of any indenture or
associated loan contract control in such circumstances.
RUS is publishing this action without prior proposal because the
Agency views this as a noncontroversial amendment and anticipates no
adverse comments. However, in a separate document in the proposed rules
section of this Federal Register publication, RUS is proposing to amend
7 CFR part 1710 should adverse or critical comments be filed.
If RUS receives such comments, RUS will publish a subsequent
document that will withdraw this direct final rule before the effective
date. All public comments received will be addressed in a subsequent
final rule based on the proposed rule. RUS will not institue a second
comment period on this action. Any parties interested in commenting on
this action should do so at this time.
List of Subjects in 7 CFR Part 1710
Electric power, Electric utilities, Loan programs--energy,
Reporting and recordkeeping requirements, Rural areas.
For the reasons set out in the preamble, and under the authority of
7 U.S.C. 901 et seq., RUS amends 7 CFR Part 1710 as follows:
PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO
INSURED AND GUARANTEED ELECTRIC LOANS
1. The authority citation for part 1710 continues to read as
follows:
[[Page 7665]]
Authority: 7 U.S.C. 901-950(b); Pub. L. 99-591, 100 Stat. 3341;
Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).
2. Section 1710.113 is amended by redesignating the existing
paragraph (c) as paragraph (c)(1) and adding a new paragraph (c)(2) to
read as follows:
Sec. 1710.113 Loan security.
* * * * *
(c)(1) * * *
(2) The Administrator, at his or her discretion, may approve the
use of an indenture patterned after those indentures commonly used by
utilities engaged in private market financing, in lieu of a mortgage as
the security instrument for loans to power supply borrowers. The use of
an indenture will be by mutual agreement of the borrower and the
Administrator. The terms of each indenture and related loan agreement
will be negotiated on a case by case basis to best meet the needs of
the individual borrower and the Government. The provisions of the
indenture and loan contract shall control, notwithstanding any
provisions of 7 CFR Chapter XVII which may be in conflict therewith.
* * * * *
Dated: February 10, 1997.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 97-3990 Filed 2-19-97; 8:45 am]
BILLING CODE 3410-15-P