Renewable Energy Production Incentives

DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 451

[Docket No. EE-RM-94-301]

Renewable Energy Production Incentives

AGENCY: Office of Energy Efficiency and Renewable Energy, DOE.

ACTION: Notice of proposed rulemaking and public hearing and request

for public comment.

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SUMMARY: The Department of Energy (DOE) Office of Energy Efficiency and

Renewable Energy (EE) today proposes a rule to implement a program in

response to the requirements of section 1212 of the Energy Policy Act

of 1992 to make incentive payments to qualified renewable energy

facilities. The proposed rule covers application procedures,

qualification requirements, calculation of incentive payments, and

administrative remedies.

DATES: Written comments on the proposed rule (12 copies) must be

received by the Department on or before July 12, 1994. A public hearing

will be held on June 16, 1994, beginning at 9:30 a.m. at the address

listed below. Requests to speak must be received by the Department on

or before June 9, 1994. The length of each oral presentation is limited

to 10 minutes.

ADDRESSES: All written comments (12 copies), as well as requests to

speak at the public hearing are to be submitted to: U.S. Department of

Energy, Office of Energy Efficiency and Renewable Energy, EE-10/REPI

NOPR, Docket No. EE-RM-94-301, 1000 Independence Avenue SW.,

Washington, DC 20585, (202) 586-3012. FAX comments will not be

accepted. The public hearing will be held at the U.S. Department of

Energy, Forrestal Building, room 1E-245, 1000 Independence Avenue, SW.,

Washington, DC. 20585. Copies of the transcript of the public hearing

and public comments received may be read at the DOE Freedom of

Information Reading Room, U.S. Department of Energy, Forrestal

Building, Room 1E-190, 1000 Independence Avenue, SW., Washington, DC,

20585, (202) 586-6020 between the hours of 9 a.m. and 4 p.m. Monday

through Friday, except Federal holidays. A copy of comments concerning

information collection requirements of the proposed rule should also be

directed to the Office of Information and Regulatory Affairs, Office of

Management and Budget, Attention: Desk Officer for the Department of

Energy, 725 17th Street, NW., Washington, DC, 20503.

FOR FURTHER INFORMATION CONTACT:

Kurt Klunder, Office of Energy Efficiency and Renewable Energy, Mail

Station EE-10, U.S. Department of Energy, 1000 Independence Avenue SW.,

Washington, DC 20585, (202) 586-4564.

Josephine B. Patton, Esq., U.S. Department of Energy, Office of General

Counsel, Forrestal Building, Mail Station GC-72, 1000 Independence

Avenue SW., Washington, DC 20585, (202) 586-9507.

SUPPLEMENTARY INFORMATION:

I. Background

Section 1212 of the Energy Policy Act of 1992, 42 U.S.C. 13317,

requires the Department of Energy to make, subject to the availability

of appropriations, incentive payments to the owners or operators of

qualified renewable energy facilities for the production and sale of

electric energy from certain renewable energy sources. With certain

exceptions, qualified renewable energy facilities are renewable energy

conversion facilities (solar, wind, geothermal, or biomass) owned by

States, subdivisions of States, or nonprofit electrical cooperatives

that generate electric energy for sale. The goal of the incentive

program is to advance the use of renewable energy conversion systems in

the United States, particularly those systems that use emerging

technologies.

The payment rate begins at 1.5 cents per kilowatt-hour, adjusted

for fiscal year 1994 inflation over fiscal year 1993, for energy

produced in fiscal year 1994. For energy produced in subsequent years,

payment rates will be similarly adjusted annually to account for

inflation. Payments may be made for 10 years only to owners or

operators of qualified facilities first put in service during the

period beginning on October 1, 1993, and ending on September 30, 2003.

The stated purposes of title XII of the Energy Policy Act of 1992,

of which section 1212 is a part, are promotion of: `` (1) Increases in

the production and utilization of energy from renewable energy

resources; (2) further advances of renewable energy technologies; and

(3) exports of United States renewable energy technologies.'' 42 U.S.C.

13311.

Section 1212 appears to be complementary to sections 1914 and 1916

of the Energy Policy Act of 1992. Section 1914 amended the Internal

Revenue Code to provide a tax credit of 1.5 cents per kilowatt-hour

adjusted for inflation for electricity produced from wind or from

biomass derived from organic matter grown exclusively for use in

generating electricity. 26 U.S.C. 45. Section 1916 amended the Internal

Revenue Code to make permanent the energy investment tax credit for

non-utility investors in solar and geothermal property. 26 U.S.C.

48(a)(2). Sections 1914 and 1916 are designed to assist in making

certain emerging renewable energy technologies cost competitive.

Section 1212 appears to have a similar objective with regard to State

instrumentalities and nonprofit electric cooperatives neither of which

can benefit from tax credits because they do not pay Federal income

taxes.

II. Description of Proposed Rule

Proposed Section 451.1

Proposed Sec. 451.1 defines the purpose and scope of part 451 as

setting policies and procedures governing the administration of the

renewable energy production incentive program and the process for the

payment of incentives. This proposed section states that determinations

with regard to incentive payments are not subject to the Department's

general financial assistance regulation in 10 CFR part 600. Those

regulations deal with grants and cooperative agreements that are

awarded to stimulate assistance recipients to undertake certain future

activities with Federal funds. In contrast, the incentive payments

under section 1212 are a reward for activities that have already taken

place and there is no stated restriction with regard to what the

recipient does with the Federal funds received.

Proposed Section 451.2

Proposed Sec. 451.2 sets forth the definitions for part 451. The

first defined term is ``closed-loop biomass'' which is based on the

definition of the same term in section 1914. For reasons discussed in

greater detail below, closed-loop biomass energy facilities, in

contrast to other eligible biomass energy facilities, would receive

priority payment in the event that Congress has not appropriated enough

funds to make all incentive payments in any given fiscal year.

Proposed Sec. 451.2 defines the term ``fiscal year'' as the

standard Federal fiscal year which runs from October 1 of any given

year to September 30 of the next year. Section 1212 refers to fiscal

years, but does not provide a definition. In the absence of any

legislative history to the contrary, Congress is assumed to have

intended use of the standard Federal fiscal year.

Proposed Sec. 451.2 defines the term ``nonprofit electrical

cooperative,'' which is one category of eligible owners named in

section 1212. The proposed definition is based on the provisions of the

Internal Revenue Code dealing with tax exempt organizations and on

information provided by the National Rural Electric Cooperative

Association. The Department invites comments on the adequacy of this

definition and related suggestions for editing.

Although section 1212 does not use the term ``renewable energy

source,'' or any other term, to characterize the eligible energy

sources, the Department has found it useful at various points in the

proposed rule. The definition is based on the list of energy sources in

paragraph (b) of section 1212 which refers to ``solar, wind, biomass,

or geothermal energy.'' 42 U.S.C. 13317(b). It is also based on the

list of excepted (and therefore ineligible) energy sources in

subparagraphs (b)(1) (municipal solid waste) and (b)(2) (certain dry

steam geothermal energy). 42 U.S.C. 13317(b) (1), (2). Wind and biomass

are indirect forms of solar energy. The specification of those two

indirect forms as well as the word ``solar'' suggests that Congress

meant the word ``solar'' to include only direct forms of solar energy,

namely, solar heat (concentrated solar insulation for a solar thermal

electric facility) and solar light (concentrated or unconcentrated

solar insulation for a solar photovoltaic electric facility). That

reading is supported by the facts with regard to indirect forms of

solar energy. Indirect forms of solar energy other than wind and

biomass (e.g., hydropower) are either fully competitive with fossil

fuels without need of an incentive payment or are at a development

stage such that an incentive payment could not make them cost

competitive with fossil fuels.

Proposed Sec. 451.2 defines the term ``renewable energy facility''

which appears in section 1212. The key part of the definition is the

reference to ``a system or an integrated set of components'' which

makes it clear that the facility is mostly equipment such as heat

exchangers or turbines and that the facility does not include the land

on which it is located. In addition, for geothermal facilities it does

not include the geothermal field, and for biomass facilities it does

not include the biomass farm. The proposed definition also omits any

reference to equipment for transmission or use of electricity because

the text of paragraph (b) of section 1212 which defines the term

``qualified renewable energy facility,'' does not state that such a

facility must include such equipment. It is important to note that the

definition refers to electric energy ``in whole or in part'' from a

renewable energy source. That language takes account of the likelihood

that some facilities will produce electric energy in part from a non-

renewable energy source such as fossil fuel.

Finally, proposed 451.2 defines the term ``State'' which is not

defined in the text of section 1212. However, given the above-quoted

stated purpose of title XII of the Energy Policy Act of 1992, it is

reasonable to conclude that Congress meant for incentive payments to be

available for power generation in any of the 50 States, the District of

Columbia, Puerto Rico, and any other territory or possession of the

United States. This qualification is explicitedly set forth in proposed

Sec. 451.4(g)

Proposed Section 451.3

Proposed Sec. 451.3 deals with who is eligible to apply. Consistent

with section 1212, it states that any owner or operator of a qualified

renewable energy facility may apply. However, it qualifies the word

``operator'' to make clear that such a person or entity must have the

written consent of the owner. A contractual provision would suffice,

but it is not the only written manifestation of owner consent that

would be acceptable. This provision will enable the Department to avoid

a situation where both the owner and operator of a facility apply.

Proposed Section 451.4

Proposed Sec. 451.4 answers the question: What is a qualified

renewable energy facility? Proposed paragraph (a) tracks section 1212

by providing that various State instrumentalities or a nonprofit

electric cooperative must be the owner.

Proposed paragraph (b) clarifies an ambiguity in section 1212 with

regard to what constitutes ownership. In light of the possibility that

the facilities of nonprofit electric cooperative may be financed, the

Department worded proposed paragraph (b) to cover situations in which

the cooperative has all rights to the beneficial use of the qualified

renewable energy facility, but legal title is held by a financing

source for the benefit of the cooperative. The Department invites

comments on the adequacy of proposed paragraph (b) in light of

experience with the title aspects of financing arrangements.

Proposed paragraph (c) tracks the language of section 1212 by

requiring that the electricity generated must be ``for sale in, or

affecting, interstate commerce among the States.'' The Department is

inclined to interpret the word ``sale'' to mean a transaction between

two entities, who may be related, involving the transfer of electric

energy for consideration. Thus, electric energy generated by an entity

for internal use by that entity would not constitute a ``sale.''

Proposed paragraph (d) restates that only ``renewable energy

sources'' as defined by proposed Sec. 451.2 are covered.

Proposed paragraph (e) lists the types of biomass and geothermal

energy sources specifically excluded by section 1212. This paragraph

reflects the provisions of section 1212(b)(1) and (2). 42 U.S.C.

13317(b)(1) and (2).

Proposed paragraph (f) tracks the provision of section 1212 which

requires that the facility must first be used during the period

beginning with October 1, 1993, and ending on September 30, 2003.

In addition, the Department considered inclusion of a requirement

that, to be considered qualified for receipt of incentive payments, a

facility must be purchased and installed without financial assistance

from other federal programs. The requirement was omitted from this

proposed rule because of uncertainty regarding the total breadth and

form of federal programs that might be applicable to facility design,

construction, installation, and operation. The Department will consider

this possibility further and invites comments on the advisability of

such a requirement.

Proposed Section 451.5

Proposed Sec. 451.5 deals with where and when to apply. Proposed

paragraph (a) permits the filing of an application only in response to

an annual notice in the Federal Register. Issuance of that notice

should closely follow enactment of appropriations. Proposed paragraph

(b) concerns the initial application. It provides that such an

application may be filed in the first fiscal year following that in

which electricity eligible for incentive payments is first generated,

and that subsequent applications may be filed in the fiscal years

following those in which electricity eligible for incentive payments is

generated.

Proposed Section 451.6

Consistent with the requirements of section 1212, proposed

Sec. 451.6 provides that the Department may only make incentive

payments for a 10-fiscal year period to any particular qualified

renewable facility.

Proposed Section 451.7

Proposed Sec. 451.7 describes metering requirements which the

Department thinks are desirable to promote the accuracy and veracity of

applications for incentive payments. In all cases, the number of

kilowatt-hours generated and sold is to be metered. If non-qualifying

renewable or non-renewable energy sources as well as qualifying

renewable energy sources are used, proposed Sec. 451.7 would not

require electrical metering of sources where such is not possible or

practical. In such cases, the kilowatt hours attributable to the

qualified renewable energy source must usually be calculated from

fractions of heat input, or other energy input, from the several

sources. Such inputs must be metered, measured, or otherwise quantified

from the respective raw energy streams using commonly accepted (and

identified) procedures and conversion methodologies.

Proposed Section 451.8

Proposed Sec. 451.8 sets forth application content requirements.

Most of the requirements are self-explanatory. However, several of them

deserve some discussion to focus them for public comment.

Proposed paragraph (f) would require: ``That components and

equipment, representing at least 50 percent of the capital cost of the

qualified renewable energy facility, were substantially manufactured in

a State.'' This provision is consistent with the purposes of title XII

of the Energy Policy Act of 1992. It is modeled on a provision of

section 6 of the Renewable Energy and Energy Efficiency Technology

Competitiveness Act of 1989, as amended by title XII of the Energy

Policy Act of 1992. 42 U.S.C. Sec. 12005(b)(1)(B). Like section 6, it

would not exclude entities merely on the basis of foreign ownership. It

would promote domestic jobs and production without discriminating

against foreign entities that invest in production facilities in the

United States.

Proposed paragraphs (g) and (h) would require independently audited

and certified statements of the monthly and annual electric energy

generated and sold. The content of the certification should be similar

to the type of certification supplied by an accounting firm in a

company's annual report to shareholders. Paragraph (h) also describes

the calculation necessary when the metered number of kilowatt-hours

represents electric energy generated from renewable and non-renewable

or excluded-renewable energy sources. The proposed requirement for an

independently audited and certified statement will minimize the chance

of erroneous claims and the need for DOE audits.

Consistent with applicable regulations under the Paperwork

Reduction Act, 5 CFR 1320.6(f), proposed paragraph (k) would require a

statement agreeing to retain records for a period of three years to

provide for prompt access to, or copies of, such records in response to

a written request by DOE. DOE is still considering whether the

retention period should be the entire ten year period during which

incentive payments may be collected. DOE did not propose a longer

retention period because the proposed audit and certification

requirements would make fraud or mistake unlikely.

Proposed Section 451.9

Proposed Sec. 451.9 describes DOE's procedures for processing

applications for incentive payments including the statutory formula for

initially calculating the amount due and the adjustment for inflation.

DOE is proposing a procedure to deal with the possibility that there

could be a shortage of appropriations to make the full incentive

payments. The President's annual budget request and Congressional

action on that request will precede receipt of the applications in

every year. It is therefore unlikely that Congress will appropriate

precisely the amount necessary to make the full incentive payments. In

the event that the amount appropriated is less than the amount required

to make full payments to all qualified applicants, the proposed

procedure involves priority first (and, if necessary, pro rata

payments) to all owners or operators of solar, wind, geothermal, and

closed-loop biomass facilities, and priority second (and, if necessary,

pro rata payments) to owners or operators of all other qualified

facilities. This procedure favors emerging technologies which are

similarly favored by the tax credit provisions of sections 1914 and

1916. These technologies are close to or in early commercialization

stages where the incentive payments can help speed the

commercialization process. If payments are reduced as a result of a

shortage of appropriations, the kilowatt-hours attributable to the

shortfall will accrue for payment in succeeding years to the extent

that Congress appropriates funds sufficient to allow payment for these

accruals together with other eligible electricity production.

Proposed Section 451.10

DOE is proposing an administrative remedy for those aggrieved by

the initial decision of the DOE Deciding Official who will be the

Assistant Secretary for Energy Efficiency and Renewable Energy. In

order to exhaust administrative remedies, it will be necessary to

appeal to DOE's Office of Hearings and Appeals. This procedure has two

virtues. It would be less expensive than pursuing a judicial remedy

immediately. It would also ensure that DOE has made a record which is

appropriate for judicial review in the event a petition for review is

filed in a federal court.

III. Regulatory Review

DOE has concluded that this is not a significant regulatory action

because it does not meet the criteria which define such actions under

Executive Order 12866, 58 FR 51735, and is therefore exempt from

regulatory review. Accordingly, no clearance of this proposed rule by

the Office of Management and Budget is required.

IV. Review Under the Regulatory Flexibility Act

This proposed rule was reviewed under the Regulatory Flexibility

Act of 1980, 5 U.S.C. 601-612, which requires preparation of a

regulatory flexibility analysis for any regulation that will have a

significant economic impact on a substantial number of small entities;

i.e., small businesses, small organizations, and small governmental

jurisdictions. DOE has determined that this proposed rule will not have

a significant impact on small entities because the rule directly

affects only qualified renewable energy facilities owned by state or

local governments or non-profit electrical cooperatives, and such

facilities are not deemed small entities.

V. Review Under the Paperwork Reduction Act

New information collection requirements subject to the Paperwork

Reduction Act, 44 U.S.C. 3501, et seq., and recordkeeping requirements

are proposed by this rulemaking. Accordingly, this notice has been

submitted to the Office of Management and Budget for review and

approval of paperwork requirements. Earlier in this notice, DOE

described the application content proposed for use under the rule. The

information DOE proposes to collect on the applications for incentive

payments is necessary to determine whether the applicant is qualified

for payment. The frequency of the information collection is monthly for

those entities eligible to apply for incentive payments. It is

estimated that less than 40 entities will apply for incentive payments

in the first year, growing to less than 200 over a ten year period.

The public reporting burden is estimated to average 25 hours per

response, including time for reviewing instructions, searching existing

data sources, gathering and maintaining the data needed, and completing

and retrieving the collection of information. The collection of

information contained in this proposed rule is considered the least

burdensome for the Department of Energy's functions to comply with the

legal requirements and achieve program objectives. However, comments

are requested concerning the accuracy of the estimated paperwork

reporting burden, in addition to the proposed record retention

requirement discussed above.

VI. Review Under Executive Order 12612

Executive Order 12612, 52 FR 41685 (October 30, 1987), requires

that regulations, rules, legislation, and any other policy actions be

reviewed for any substantial direct effects on States, on the

relationship between the National Government and the States, or in the

distribution of power and responsibilities among various levels of

Government. If there are sufficient substantial effects, then the

Executive Order requires preparation of a federalism assessment to be

used in all decisions involved in promulgating and implementing policy

action. This proposed rule establishes an incentive program under which

state owned renewable energy facilities may qualify for incentive

payments based on the amount of electric energy the facility generates

using specified renewable sources for sale in, or affecting interstate

commerce. The Department has determined that since the generation of

electricity is not a primary function of a State, the proposed rule

will not have a substantial direct effect on the institutional

interests or traditional functions of States.

VII. Review Under Executive Order 12778

Section 2 of Executive Order 12778 instructs each agency to adhere

to certain requirements in promulgating new regulations. These

requirements, set forth in section 2(a) and (b)(2), include eliminating

drafting errors and needless ambiguity, drafting the regulations to

minimize litigation, providing clear and certain legal standards for

affected legal conduct, and promoting simplification and burden

reduction. Agencies are also instructed to make every reasonable effort

to ensure that the regulation describes any administrative proceeding

to be available prior to judicial review and any provisions for the

exhaustion of administrative remedies. DOE certifies that the proposed

rule meets the requirements of section 2(a) and (b)(2) of Executive

Order 12778.

VIII. Review Under the National Environmental Policy Act

DOE has determined that promulgation of this proposed rule falls

within the procedural rulemaking class, Category A6 of Appendix A to

Subpart D, ``Categorical Exclusions Applicable to General Agency

Actions'', of the DOE National Environmental Policy Act (NEPA)

regulations. 10 CFR part 1021. It is therefore categorically excluded

from preparation of either an Environmental Assessment or an

Environmental Impact Statement under the NEPA (42 U.S.C. 4321, et.

seq).

IX. Opportunities for Public Comment

A. Written Comment Procedures

Interested persons are invited to participate in this rulemaking by

submitting data, views, or comments with respect to the proposed

rulemaking.

Twelve copies of written comments should be submitted to the

address indicated in the ADDRESSES section of this notice and must be

received by the date indicated in the DATES section of this notice.

Comments should be identified on the outside of the envelope and on the

documents themselves with the designation ``REPI NOPR, Docket No. EE-

RM-94-301''. In the event any person wishing to provide written

comments cannot provide twelve copies, alternative arrangements can be

made in advance with DOE.

All written comments received will be available for public

inspection as part of the administrative record on file for this

rulemaking in the Department of Energy Freedom of Information Office

Reading Room at the address provided at the beginning of this notice.

If informal meetings or other contacts occur during this rulemaking,

DOE may add a memorandum to the record on file summarizing what

transpired.

Pursuant to the provisions of 10 CFR 1004.11, any person submitting

information which that person believes to be confidential and which may

be exempt by law from public disclosure, should submit one complete

copy of the document, as well as two copies from which the information

claimed to be confidential has been deleted. DOE reserves the right to

determine the confidential status of the information and to treat it

according to its determination.

B. Public Hearing

1. Request to Speak Procedures

A public hearing on the proposed rule will be held at the time and

place indicated in the DATES and ADDRESSES Sections of this notice. Any

person who has an interest in the proposed rule or who is a

representative of a group or class of persons that has an interest in

the proposed rule may request an opportunity to make an oral

presentation. A request to speak at the public hearing should be

addressed to the address or phone number indicated at the beginning of

this notice. The person making the request should briefly describe his

or her interest in the proceedings and, if appropriate, state why the

person is a proper representative of the group. The person should also

provide a phone number where he or she may be reached during the day.

Each person selected to be heard will be notified by DOE as to the

approximate time they will be speaking. Twelve copies of the speaker's

statement should be submitted at the hearing. In the event any person

wishing to testify cannot meet this requirement, alternative

arrangements can be made in advance with DOE.

2. Conduct of the Hearing

DOE reserves the right to select persons to be heard at the

hearing, to schedule their respective presentations, and to establish

procedures governing the conduct of the hearing. The length of each

presentation will be limited to 10 minutes or based on the number of

persons requesting an opportunity to speak.

A DOE official will preside at the hearing. This will not be a

judicial or evidentiary-type hearing. It will be conducted in

accordance with 5 U.S.C. 553 and section 501 of the Department of

Energy Organization Act, 42 U.S.C. 7191.

Questions may be asked only by those conducting the hearing. At the

conclusion of all initial oral statements, each person who has made an

oral statement will be given the opportunity to make a rebuttal or

clarifying statement. The statements will be given in the order in

which the initial statements were made and will be subject to time

limitations.

Any further procedural rules needed for the proper conduct of the

hearing will be announced by the presiding officer.

A transcript of the hearing will be made by DOE and made available

as part of the administrative record for this rulemaking. It will be on

file for inspection at the DOE Freedom of Information Reading Room at

the address indicated at the beginning of this notice.

If DOE must cancel the public hearing, DOE will make every effort

to publish an advance notice of such cancellation in the Federal

Register. Actual notice of cancellation will also be given to all

persons scheduled to speak. The hearing date may be canceled in the

event no member of the public requests the opportunity to make an oral

presentation.

List of Subjects in 10 CFR Part 451

Electric utilities, Grant programs, Solar energy.

Issued in Washington, DC, on May 9, 1994.

Christine A. Ervin,

Assistant Secretary, Energy Efficiency and Renewable Energy.

For the reasons set forth in the preamble, title 10, chapter II, of

the Code of Federal Regulations is proposed to be amended by adding a

new part 451 to read as set forth below:

PART 451--RENEWABLE ENERGY PRODUCTION INCENTIVES

Sec.

451.1 Purpose and scope.

451.2 Definitions.

451.3 Who may apply.

451.4 What is a qualified renewable energy facility.

451.5 Where and when to apply.

451.6 What is the duration of incentive payments.

451.7 Metering requirements.

451.8 Application content requirements.

451.9 Procedures for processing applications.

451.10 Administrative appeals.

Authority: 42 U.S.C. 7254; 42 U.S.C. 13317.

Sec. 451.1 Purpose and scope.

(a) The provisions of this part cover the policies and procedures

applicable to the determinations by DOE to make incentive payments for

electric energy generated in a State and sold by a qualified renewable

energy facility, as defined by 42 U.S.C. 13317 and this part.

(b) Determinations to make incentive payments under this part are

not subject to the provisions of 10 CFR part 600 and such payments

shall not be construed to be financial assistance.

Sec. 451.2 Definitions.

As used in this part--

Closed-loop biomass means plant matter, other than standing timber,

grown for the sole purpose of being used to generate electricity.

Deciding Official means the Assistant Secretary for Energy

Efficiency and Renewable Energy (or any DOE official to whom the

authority of the Assistant Secretary may be redelegated by the

Secretary of Energy). The duties of the Assistant Secretary may not be

sub-delegated without the written approval of the Secretary.

DOE means the Department of Energy.

Finance Office means the DOE Office of the Chief Financial Officer

(or any office to which that office's authority may be redelegated by

the Secretary).

Fiscal year means the Federal fiscal year beginning October 1 and

ending on September 30 of the following calendar year.

Nonprofit electrical cooperative means a cooperative association

that is treated as tax exempt under section 501(c)(12) of the Internal

Revenue Code and that is organized under the laws of any State for the

purpose of providing electric service to its members and other

customers.

Renewable energy facility means a system or an integrated set of

components necessary to generate electric energy in whole or in part

from a renewable energy source, including--

(1) Solar photovoltaic cells which convert sunlight to direct

current electricity;

(2) Solar thermal electric systems which use a fluid heated by the

sun to drive a turbine generator;

(3) Wind energy systems which capture wind energy through

aerodynamically shaped blades rotating about a horizontal or vertical

axis and drive an alternating current or direct current generator;

(4) Biomass energy systems which use heat derived from combustion

of plant matter or from combustion of gases or liquids derived from

plant matter or animal waste or from combustion of gases derived from

landfills in order to drive an electric generator; and

(5) Geothermal systems which use natural heat stored underground in

rocks or underground in an aqueous liquid or vapor, whether or not

under pressure, in order to drive an electric generator.

Renewable energy source means solar heat, solar light, wind,

geothermal, and biomass energy except for exclusions set forth in

section 451.4(e) of this part.

State means the District of Columbia, Puerto Rico, and any of the

States, territories, and possessions of the United States.

Sec. 451.3 Who may apply.

Any owner, or operator with the written consent of the owner, but

not both, of a qualified renewable energy facility, may apply for

incentive payments for electric energy generated from a renewable

energy source and sold.

Sec. 451.4 What is a qualified renewable energy facility.

In order to be eligible for an incentive payment under this part, a

renewable energy facility must meet the following qualifications--

(a) Ownership. The owner must be-

(1) A State (or agency, authority, or instrumentality thereof);

(2) Any political subdivision of a State (or agency, authority, or

instrumentality thereof);

(3) Any corporation or association wholly owned, directly or

indirectly, by a State or a political subdivision of a State; or

(4) A nonprofit electric cooperative.

(b) What must be owned. The owner must have all rights to the

beneficial use of the renewable energy facility, and legal title must

be held by, or for the benefit of, the beneficial owner.

(c) Sales affecting interstate commerce. The renewable energy

facility must generate electric energy for sale in, or affecting,

interstate commerce among the States.

(d) Type of renewable energy sources. Except as provided in

paragraph (e) of this section, the source of the electric energy for

which incentive payments is sought must be solar heat, solar light,

wind energy, biomass energy, or geothermal energy.

(e) Excluded renewable energy sources. The source of the electric

energy for which incentive payments is sought may not be--

(1) Municipal solid waste which is burned to create heat; or

(2) A dry steam geothermal reservoir which has--

(i) No mobile liquid in its natural state;

(ii) Steam quality of 95 percent water, or higher; and

(iii) An enthalpy for the total produced fluid greater than or

equal to 1200 British thermal units per pound.

(f) Time of first use. The date of the first use of a qualified

renewable energy facility must occur during the period beginning with

October 1, 1993, and ending on September 30, 2003.

(g) Location. The qualified renewable energy facility must be

located in a State.

Sec. 451.5 Where and when to apply.

(a) The owner or operator of a qualified renewable energy facility

may file an annual application for incentive payment under this part

only in response to an annual notice in the Federal Register inviting

applications.

(b) An applicant may file the initial application for incentive

payments under this part in the first fiscal year following that in

which electricity generated from the qualified renewable energy

facility is first eligible for such payments. Subsequent applications

may be filed in the fiscal years following those in which the

electricity eligible for incentive payments is generated.

Sec. 451.6 What is the duration of incentive payments.

DOE may make incentive payments under this part with respect to a

qualified renewable energy facility only for a 10-fiscal year period.

Sec. 451.7 Metering requirements.

The number of kilowatt-hours generated and sold from a qualified

renewable energy facility must be measured by a standard metering

device that--

(a) Meets generally accepted industry standards;

(b) Is maintained in proper working order according to the

instructions of its manufacturer; and

(c) Is calibrated according to generally accepted industry

standards.

Sec. 451.8 Application content requirements.

Except as provided in paragraph (b) of this section, each

application for incentive payments under this part must be signed by an

authorized executive official and shall provide information showing to

the satisfaction of DOE--

(a) That the applicant is the owner or operator (with the written

consent of an authorized executive official of the owner);

(b) The name of the facility or other official designation by the

owner;

(c) The location of the qualified renewable energy facility and

type of renewable energy source;

(d) The name and telephone number of a point of contact to respond

to questions or requests for additional information;

(e) That the renewable energy facility satisfies the eligibility

criteria under section 451.4 of this part and other requirements

prerequisite to receipt of incentive payments under this part;

(f) That components and equipment, representing at least 50 percent

of the capital cost of the qualified renewable energy facility, were

substantially manufactured in a State;

(g) An independently audited, certified statement of the annual and

monthly metered number of kilowatt-hours generated and sold to another

entity during the fiscal year and the entity or class of customer to

whom the electric energy was sold;

(h) In the case of a renewable energy facility which generates

electric energy using a fossil fuel, nuclear energy, or other non-

qualified energy source, in addition to a renewable energy source, an

independently audited, certified statement of the number of kilowatt

hours attributable to the renewable energy source, calculated by

multiplying the monthly and annual total number of metered kilowatt-

hours generated and sold to another entity during the fiscal year by a

fraction consisting of the heat input, as measured in British thermal

units, received by the working fluid from the renewable energy source

divided by the heat input, as measured in British thermal units,

received by the working fluid from all energy sources;

(i) The amounts of accrued electric energy by year, if any, for

which the applicant previously applied and DOE did not make incentive

payments as a result of insufficient appropriations;

(j) Wire transfer payment instructions, if available; and

(k) A statement agreeing to retain records of the independent audit

for a period of three years and to provide prompt (no later than 10

calendar days) access to, or copies of, such records in response to a

written request by DOE.

Sec. 451.9 Procedures for Processing Applications.

(a) Upon receipt, each application shall be date and time stamped

and DOE shall acknowledge receipt thereof.

(b) DOE may request supplementary information.

(c) DOE may conduct an audit to verify the number of kilowatts

claimed to have been generated from renewable energy sources.

(d) Upon evaluating the application and any other available

information, DOE shall determine whether the application meets the

requirements of this part and, if appropriate, the number of kilowatt-

hours to be used in calculating the incentive payment.

(e) Calculating payments. Subject to adjustments under paragraphs

(f) and (g) of this section, incentive payments under this part to the

owner or operator of any qualified renewable energy facility shall be

calculated by multiplying the number of kilowatt-hours of electricity

generated through the use of renewable energy sources and sold to

another entity during the payment period by 1.5 cents per kilowatt-

hour.

(f) Adjustments. The amount of the incentive payment to any owner

or operator under this section shall be adjusted for inflation for each

fiscal year beginning after calendar year 1993 in the same manner as

provided in section 29(d)(2)(B) of the Internal Revenue Code of 1986,

except that in applying such provisions the calendar year 1993 shall be

substituted for calendar year 1979.

(g) If there are insufficient appropriations available to make

incentive payments for all approved applications, DOE shall--

(1) On a priority (and if necessary on a pro rata) basis, make

incentive payments first with respect to qualified renewable energy

facilities using wind, solar, geothermal, and closed-loop biomass

technologies;

(2) In the event there are insufficient funds for full incentive

payments to applicants other than those specified in paragraph (g)(1)

of this section, reduce the amount of incentive payments to these other

applicants on a prorated basis by the ratio of appropriated funds

remaining after payments under paragraph (g)(1) to the total approved

incentive payments for the other applicants; and

(3) Treat the number of kilowatt-hours attributable to the portion

of any incentive payment which is reduced under this paragraph as

accrued energy that may be combined with energy subsequently produced

from the same source for which subsequent application for incentive

payment is made.

(h) After calculating the amount of the incentive payment under

paragraphs (e) through (g) of this section, the DOE Deciding Official

shall then issue a notice of the determination to the applicant--

(1) Approving the application as appropriate for payment and

forwarding a copy to the DOE Finance Office with a request to pay;

(2) Setting forth the calculation of the approved amount; and

(3) Stating the amount of accrued kilowatt-hours, if any, and the

energy source for same.

(i) If the application does not meet the requirements of this part

or some of the kilowatt-hours claimed in the application meriting an

incentive payment are disallowed as unqualified, the Deciding Official

shall issue a notice denying the application in whole or in part with

an explanation of the basis for denial.

Sec. 451.10 Administrative appeals.

(a) In order to exhaust administrative remedies, an applicant who

receives a notice denying an application in whole or in part shall

appeal, on or before 30 days from date of the notice issued by the DOE

Deciding Official, to the Office of Hearings and Appeals, 1000

Independence Avenue, SW., Washington, D.C. 20585, in accordance with

the procedures set forth in subpart H of 10 CFR part 205.

(b) If an applicant does not appeal under paragraph (a) of this

section, the determination of the DOE Deciding Official shall become

final for DOE and judicially unreviewable.

(c) If an applicant appeals on a timely basis under paragraph (a)

of this section, the decision and order of the Office of Hearings and

Appeals shall be final for DOE.

(d) If the Office of Hearings and Appeals orders an incentive

payment, the DOE Deciding Official shall send a copy of such order to

the DOE Finance Office with a request to pay.

[FR Doc. 94-11738 Filed 5-12-94; 8:45 am]

BILLING CODE 6450-01-P