Long-Range Financial Forecasts of Electric Borrowers

DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1710

RIN 0572-AA89

Long-Range Financial Forecasts of Electric Borrowers

AGENCY: Rural Utilities Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Rural Utilities Service (RUS) proposes to amend its policy

on long-range financial forecasts of electric borrowers. RUS requires

that applicants for loans, loan guarantees, lien accommodations, and

certain general fund approvals, submit, as part of their application, a

long-range financial forecast. RUS loans are generally amortized over a

period of 35 years, and the long-range financial forecast provides RUS

information necessary to determine that the loans are feasible. This

amended provision will eliminate some of the items in the present

forecasting regulation that are no longer considered necessary to be

included in borrower's forecast. Eliminated items include the

sensitivity study for all forecasts, and a commercially available

credit report for applicants seeking a loan or loan guarantee. The

proposed regulation provides that RUS may request a sensitivity study

on a case-by-case basis.

DATES: Written comments must be received by RUS or carry a postmark or

equivalent by July 21, 1997.

ADDRESSES: Written comments should be addressed to William E. Davis,

Program Advisor, Electric Program, Rural Utilities Service, U.S.

Department of Agriculture, 1400 Independence Ave., SW., Washington, DC

20250-1569. RUS requires a signed original and three copies of all

comments (7 CFR 1700.30(e)). Comments will be available for public

inspection during regular business hours (7 CFR 1.27(b)).

FOR FURTHER INFORMATION CONTACT: William E. Davis, Program Advisor,

Electric Program, Rural Utilities Service, U.S. Department of

Agriculture, 1400 Independence Ave., SW., Washington, D.C. 20250-1569,

telephone number: (202) 720-0738, E-mail: [email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This proposed rule has been determined to be not significant for

purposes of Executive Order 12866 and therefore has not been reviewed

by OMB.

Executive Order 12778

This proposed rule has been reviewed in accordance with Executive

Order 12778, Civil Justice Reform. RUS has determined that this

proposed rule meets the applicable standards provided in Section 3 of

the Executive Order.

Regulatory Flexibility Act Certification

The Administrator of RUS has determined the Regulatory Flexibility

Act (5 U.S.C. 601 et seq.) definition of the rule does not include

rules relating to the RUS electric program, and, therefore, the

Regulatory Flexibility Act does not apply to this proposed rule.

Information Collection and Recordkeeping Requirements

The reporting and recordkeeping requirements contained in the

proposed 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.

Send questions or comments regarding this burden or any other

aspect of these collections of information, including suggestions for

reducing the burden to William E. Davis, Program Advisor, Electric

Program, Rural Utilities Service, 1400 Independence Ave., SW.,

Washington, D.C. 20250-1569.

National Environmental Policy Act Certification

RUS has determined that this proposed 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 proposed 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, D.C. 20402-

9325, telephone number (202)783-3238.

[[Page 27547]]

Executive Order 12372

This proposed rule is excluded from the scope of Executive Order

12372, Intergovernmental Consultation. A Notice of Final Rule entitled

Department Programs and Activities Excluded from Executive Order 12372

(50 FR 47034) exempts RUS loans and loan guarantees to governmental and

nongovernmental entities from coverage under this order.

National Performance Review

This regulatory action is being taken as part of the

National Performance Review program to eliminate unnecessary

regulations and improve those that remain in force.

Background

Rural Utilities Services,(RUS), makes loans, loan guarantees, and

lien accommodations to provide electric service to new consumers, and

to improve the quality and quantity of electric service to existing

consumers in rural areas, as authorized by the Rural Electrification

Act of 1936, as amended, 7 U.S.C. 901 et seq. (RE Act). According to

the terms of the RE Act and RUS regulations, RUS may make a loan only

if the Administrator of RUS determines that the security thereof is

reasonably adequate and such loan will be repaid within the time

agreed.

Regulations establishing the requirement that borrowers submit a

long-range financial forecast as part of a loan application are set

forth at 7 CFR part 1710, subpart G. On October 19, 1993, at 58 FR

53835, Rural Electrification Administration (REA), predecessor to RUS,

published a rule, 7 CFR part 1717, subparts R and S, setting forth

policies for lien accommodations and subordination. Under this

regulation, RUS requires borrowers to submit a long-range financial

forecast as part of certain applications for a lien accommodation or

subordination. The proposed regulation will affect these requirements

by changing how the long-range financial forecast is prepared.

List of Subjects in 1 CFR Part 1710

Electric power, Electric utilities, Loan programs-energy, Rural

areas.

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:

Authority: 7 U.S.C. 901-905b; Public Law 99-591, 100 Stat. 3341-

16; Public Law 103-354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.)

2. Section 1710.300 is amended by revising paragraph (d)(5) to read

as follows:

Sec. 1710.300 General.

* * * * *

(d) * * *

(5) A sensitivity analysis may be required by RUS on a case-by-case

basis. When RUS determines that a sensitivity analysis is necessary for

Distribution Borrowers, the variables to be tested will be determined

by the General Field Representative in consultation with the Borrower

and the Regional Office. The Regional Office will consult with the

Power Supply Division in the case of generation projects for

Distribution Borrowers. For Power Supply Borrowers, the variables to be

tested will be determined by the borrower and the Power Supply

Division.

* * * * *

3. Paragraph (f) of section 1710.300 is removed.

4. Section 1710.302 is amended by revising paragraphs (b), (d)(1),

and (d)(5), to read as follows:

Sec. 1710.302 Financial forecasts--power supply borrowers.

* * * * *

(b) The financial forecast shall cover a period of 10 years. RUS

may request projections for a longer period of time if deemed

necessary.

* * * * *

(d) * * *

(1) Identify all plans for generation and transmission capital

additions and system operating expenses on a year-by-year basis,

beginning with the present and running for 10 years, unless a longer

period of time has been requested by RUS.

* * * * *

(5) Include sensitivity analysis if required by RUS pursuant to

Sec. 1710.300(d)(5).

* * * * *

Dated: May 9, 1997.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 97-13129 Filed 5-19-97; 8:45 am]

BILLING CODE 3410-15-P