97-3990. Pre-Loan Procedures for Electric Loans  

  • [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
    
    
    

Document Information

Effective Date:
4/7/1997
Published:
02/20/1997
Department:
Rural Utilities Service
Entry Type:
Rule
Action:
Direct final rule.
Document Number:
97-3990
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.
Pages:
7663-7665 (3 pages)
RINs:
0572-AB30
PDF File:
97-3990.pdf
CFR: (1)
7 CFR 1710.113