01-10262. Demand Side Management and Renewable Energy Systems

AGENCY:

Rural Utilities Service, USDA.

ACTION:

Proposed rule.

SUMMARY:

The Rural Utilities Service (RUS) is proposing to amend its regulations by removing subpart H of part 1710 in its entirety. The existing subpart H details separate policies and requirements for loans for renewable energy systems and demand side management. Many of these requirements overlap provisions found elsewhere in part 1710. Others do not seem well suited for the smaller scale projects of this type that are becoming increasingly common in the industry. RUS believes that it is more appropriate to consider such small scale projects in this rapidly developing segment of the energy industry by proceeding on a case-by-case basis. By contrast, the balance of part 1710 affords a useful framework for considering utility-scale energy projects without regard to whether they are for demand side management or renewable resources.

DATES:

Written comments must be received by RUS on or before May 25, 2001.

ADDRESSES:

Written comments should be addressed to F. Lamont Heppe, Jr., Director, Program Development and Regulatory Analysis, U.S. Department of Agriculture, Rural Utilities Service, Room 4026 South Building, Stop 1522, 14th & Independence Ave., SW., Washington, DC 20250-1522. RUS requests 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:

Georg A. Shultz, Chief, Energy Forecasting Branch, Electric Staff Division, Rural Utilities Service, U.S. Department of Agriculture, Stop 1569, 1400 Independence Ave., SW., Washington, DC 20250-1569. Telephone: [phone]. FAX: [phone]. E-mail: [e-mail].

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 12372

This rule is excluded from the scope of Executive Order 12372, Intergovernmental Consultation, which may require consultation with State and local officials. See the final rule related notice entitled “Department Programs and Activities Excluded from Executive Order 12372,” (50 FR 47034) advising that RUS loans and loan guarantees were not covered by Executive Order 12372.

Executive Order 12988

This rule has been reviewed under 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 section 212(e) of the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 6912(e)) administrative appeal procedures, if any are required, must be exhausted before an action against the Department or its agencies.

Regulatory Flexibility Act Certification

In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the Administrator of RUS has determined that this rule will not have significant impact on a substantial number of small entities. The RUS electric loan program provides loans and loan guarantees to borrowers at interest rates and terms that are more favorable than those generally available from the private sector. Small entities are not subjected to any requirements, which are not applied equally to large entities. RUS borrowers, as a result of obtaining federal financing, receive economic benefits that exceed any direct cost associated with RUS regulations and requirements.

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.

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 Superintendent of Documents, the United States Government Printing Office, Washington, DC 20402-9325, telephone number [phone].

Information Collection and Recordkeeping Requirements

This rule contains no information collection or recordkeeping requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

Unfunded Mandates

This rule contains no Federal mandates (under the regulatory provision of title II of the Unfunded Mandates Reform Act) 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.

Background

The Rural Utilities Service (RUS) is proposing to remove from part 1710 of its regulations entitled “General and Pre-Loan Policies and Procedures” subpart H thereof, which separately treats demand side management and renewable energy systems. Subpart H has seldom been used. Since it was first promulgated in 1994, RUS has averaged less than one of these loans a year. More recently, changes in the energy industry and technological advances have produced increased interest in utilizing these approaches for smaller scaled projects and projects employing innovative technologies. However, subpart H with its requirements for such things are integrated resource plans (IRP's) and demand side management plans present formidable barriers for the development of smaller projects. Furthermore, the usefulness of such traditional analytical devices in today's radically changed energy industry has become questionable. In addition, projects of this sort often possess unique attributes that make the application of detailed regulations impractical and sometimes even counterproductive. For example, subpart H precludes the use of innovative technologies. See 7 CFR 1710.351(a) and 1710.353. For all of these reasons, RUS believes that subpart H has become unjustified and unnecessary as a result of changed circumstances and should be removed or substantially revised.

After considering the low volume of loan requests RUS receives annually for these loans, the disparate nature of the projects that can be characterized as demand side management or renewable energy systems, and the rapidly evolving nature of this industry, RUS has determined that the removal of subpart H is the better alternative. Accordingly, RUS is proposing to proceed case-by-case in considering requests for demand side management and renewable energy system loans.

RUS expects that utility scale projects will continue to confirm to the remaining provisions of part 1710 establishing its general and pre-loan policies and procedures. RUS recognizes that the particular circumstances of an individual project may necessitate adjustments in the application or interpretation of its general policies and procedures to specific demand side management or renewable energy systems loans regardless of scale. The Administrator may, of course, waive or reduce any requirement imposed by part 1710 by resorting to the exception authority contained in the rule itself. See 7 CFR 1710.4. In light of their rarity so far, RUS anticipates that it may be necessary to interpret the application of part 1710 to utility scale demand side management and renewable energy system loans on a somewhat frequent basis at first. RUS will treat small-scale projects as pilot projects for which the remainder of part 1710 will serve merely as guidance. As used in this rule, “small scale project” refers to projects requesting loans less than $5 million or generating less than 10 MW (nameplate rating). “Utility scale project” refers to everything else.

As RUS acquires greater experience with loans for demand side management and renewable energy systems, it may reissue regulations on this subject in the event that the volume of loans requests or the number of recurring issues raised warrant it. Accordingly, subpart H is being reserved.

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 forth in the preamble, RUS proposes to amend 7 CFR chapter XVII by revising part 1710 to read as follows:

PART 1710—GENERAL AND PRELOAN POLICIES AND PROCEDURES COMMON TO INSURED AND GUARANTEED ELECTRIC LOANS

1. The authority citation for part 1710 continues to read as follows:

Authority: 7 U.S.C. 901 et seq., 1921 et seq., and 6941 et seq.

Subpart H—Demand Side Management and Renewable Energy Systems

2. Remove and reserve subpart H:

§§ 1710.350-1710.363

[Removed and Reserved]

Dated: February 13, 2001.

Blaine D. Stockton,

Acting Administrator, Rural Utilities Service.