Electric System Operations and Maintenance

DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1730

RIN 0572-AA74

Electric System Operations and Maintenance

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Utilities Service (RUS) is amending its regulations

by adding a new part on electric system operations and maintenance.

This action codifies and clarifies RUS policy relating to the

operations and maintenance of electric systems by RUS electric

borrowers. This rule also contains provisions relating to the review

and evaluation of borrowers' electric systems and facilities operations

and maintenance practices. These policies are presently contained in

RUS Bulletin 161-5, which will be rescinded when the final rule becomes

effective. This action clarifies the policies, procedures, and

requirements, facilitates understanding and compliance, and improves

program effectiveness with respect to electric system operations and

maintenance.

EFFECTIVE DATE: This rule is effective February 23, 1998.

FOR FURTHER INFORMATION CONTACT: Mr. Fred J. Gatchell, Deputy Director,

Electric Staff Division, Rural Utilities Service, U.S. Department of

Agriculture, Stop 1569, 1400 Independence Ave., SW., Washington, DC

20250-1569, telephone (202) 720-1398, e-mail [email protected].

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).

Regulatory Flexibility Act Certification

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.), and, therefore, the Regulatory

Flexibility Act does not apply to this rule.

National Environmental Policy Act Certification

The Administrator 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.

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. A Final Rule-Related Notice entitled,

``Department Programs and Activities Excluded from Executive Order

12372,'' (50 Fed. Reg. 47034) exempted RUS loans and loan guarantees

from coverage under this order.

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 in section 3 of the Executive 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.

Information Collection and Recordkeeping Requirements

The recordkeeping and reporting burdens contained in this rule were

approved by OMB pursuant to the Paperwork Reduction Act of 1995 (44

U.S.C. chapter 35) under control number 0572-0025.

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 section 202 and 205 of the Unfunded

Mandates Reform Act.

Background

RUS has promulgated policies and procedures regarding the review

and evaluation of the operations and maintenance practices of RUS

financed electric systems. These policies and procedures are presently

contained in RUS Bulletin 161-5, Electric System Review and Evaluation.

The security instrument and loan contract between RUS and electric

borrowers set certain standards for the operation and maintenance of

each borrower's electric system. The purpose of this rule is to

implement the operations and maintenance provisions of the security

instrument and loan contract between RUS and electric borrowers and to

consolidate and clarify RUS policies and procedures with respect to

electric system operations and maintenance. Most of the provisions of

this rule represent policies and requirements that have been in effect

for some time. One new provision expands the requirement for electric

system review and evaluation of borrower's electric systems to include

power supply borrowers in addition to the distribution borrowers

presently covered by Bulletin 161-5. Proper operation and maintenance

practices are equally significant for power supply borrowers, so RUS

believes that power supply borrowers' operation and maintenance

practices should be covered under the review and evaluation

requirements of this rule. RUS Form 300, Review Rating Summary, has

also been updated and revised based on RUS' experience using this form.

[[Page 3450]]

Comments

On April 16, 1997, RUS published a proposed rule at 62 Fed. Reg.

18544. Comments were received from ten parties, including two

cooperative associations, a borrower engineering committee, two

distribution borrowers, and five power supply borrowers. RUS considered

all comments received. The significant and most commonly made comments

are addressed herein.

Several commenters requested that RUS provide more guidance and

supplemental information regarding these requirements, especially the

ratings of the items on RUS Form 300, Review Rating Summary. RUS is

currently preparing Bulletin 1730-1, ``Electric System Operation and

Maintenance (O&M),'' which will provide guidelines related to O&M,

including a rating guide for RUS Form 300.

Some commenters requested that RUS provide for an ``alternative

dispute resolution'' procedure if a borrower disagrees with a rating or

determination made by RUS. This type of disagreement has rarely

occurred, and RUS believes that an adequate appeal avenue already

exists. Any disagreements with the RUS staff's rating can always be

appealed with the Regional Director or the Administrator.

One commenter requested that this rule address more operational

concerns, such as momentary interruptions, voltage stability, job

training and safety, and lightning protection. It was also suggested

that RUS require that an O&M survey be completed prior to beginning a

new construction work plan (CWP) or long-range engineering plan (LRP).

RUS encourages borrowers to expand and elaborate on the O&M

requirements prescribed by this rule to meet their specific needs;

however, RUS has decided not to expand the requirements of this rule in

these areas.

Some commenters recommended that the O&M reviews be limited to

specific areas where a borrower has experienced problems, to borrowers

with specific financial problems, or to certain specific types of

facilities. RUS believes that all aspects of all borrowers' O&M should

be reviewed periodically and these reviews should cover all facilities.

These reviews can reveal potential problem areas that can be corrected

before they manifest themselves as operational or financial

difficulties. Therefore, RUS has not changed the scope of this rule.

Several commenters pointed out that the proposed rule does not

adequately address borrowers who own but do not operate certain

facilities. The rule has been changed to address this situation.

Several commenters requested that the frequency of inspection and

test be determined giving due consideration to the manufacturer's

recommendations, but that borrowers should not be specifically required

to blindly follow such recommendations. RUS agrees and has revised the

rule accordingly.

Some commenters requested that RUS clarify the requirement to

evaluate compliance with the prior editions of the National Electrical

Safety Code (NESC) and the National Electrical Code (NEC), when

applicable. The rule has been clarified with respect to the NEC. Since

the NESC itself specifically addresses facilities that comply with

prior editions of the NESC, no change is needed in the rule with

respect to the NESC.

Several commenters requested that RUS eliminate duplication of

reviews made by other Federal agencies and State commissions, etc. The

rule has been changed to indicate that RUS will not duplicate these

reviews, but may review the reports of these other reviewers. Since

some of these other reviews may target a specific area (e.g., safety),

and the RUS' review covers a wider range of areas (e.g., safety,

reliability, economy, etc.), the RUS review may partially overlap the

reviews of others.

Several commenters requested that RUS eliminate the requirement for

an explanation of the borrower's rating of acceptable items. It is not

RUS' intent to require an extensive discussion of these items, but

simply an explanation of how the borrower arrived at its rating. RUS

believes that this should involve little extra effort and should

improve the overall value of the review, so no change has been made to

this requirement.

One commenter suggested that RUS require that the borrower's Board

of Directors be appraised of the findings of the O&M review. Item 15 of

RUS Form 300 calls for the date that the O&M review was reviewed by the

Board of Directors. For purposes of clarifying the rule, a specific

provision has been added to the rule requiring discussion of the O&M

review with the Board of Directors.

One commenter suggested that RUS not require a corrective action

plan (CAP) in all cases where there is an unsatisfactory (i.e., 0 or 1)

rating. RUS considers any unsatisfactory rating to be a potentially

serious problem, so a CAP should be prepared. However, if the

correction of the deficiency is already underway or can be accomplished

in a short time or simply, the CAP may be very short and simple, such

as referring to an item in an approved CWP. The rule does not specify

the format or amount of detail required for a CAP, so that borrowers

have sufficient flexibility to tailor it to the seriousness and

complexity of the problem. No change has been made to this requirement.

A number of commenters requested that RUS clarify or eliminate

various items on the RUS Form 300. RUS has reviewed these items and has

determined that requiring ``Staff Hours'' under part IV, Operations and

Maintenance Budgets, is confusing, burdensome, and of limited benefit.

This item has been deleted. RUS believes that Bulletin 1730-1,

``Electric System Operation and Maintenance (O&M),'' should provide

additional guidance.

Some commenters are concerned that RUS requirements with respect to

O&M may require excessive and unavailable funding. RUS recognizes that

correcting operating and maintenance deficiencies may indeed be

expensive, especially if the system has been allowed to deteriorate.

Nevertheless, proper O&M of borrowers' systems is essential to the

success of the rural electric program and to protecting the property

that is the security for the Government's loans and guarantees. It is

essential that each borrower budget sufficient resources to operate and

maintain its system efficiently and properly.

One commenter stated that ``this wasteful activity [the proposed

rule] is unneeded, unnecessary and without common sense.'' RUS

disagrees. As stated above, proper O&M of borrowers' systems is

essential to the success of the rural electric program and to

protecting the property that is the security for the Government's loans

and guarantees. This rule is intended to clearly outline RUS policies

and procedures and the borrowers' responsibilities with respect to O&M.

List of Subjects in 7 CFR Part 1730

Electric power, Loan programs--energy, Reporting and recordkeeping

requirements, Rural areas.

In view of the above, RUS hereby amends 7 CFR chapter XVII by

adding part 1730 to read as follows:

PART 1730--ELECTRIC SYSTEM OPERATIONS AND MAINTENANCE

Subpart A--General

Sec.

1730.1 Introduction.

1730.2 RUS policy.

1730.3 RUS addresses.

1730.4 Definitions.

1730.5-1730.19 [Reserved]

[[Page 3451]]

Subpart B--Operations and Maintenance Requirements

1730.20 General.

1730.21 Inspections and tests.

1730.22 Borrower analysis.

1730.23 Review rating summary, RUS Form 300.

1730.24 RUS review and evaluation.

1730.25 Corrective action.

1730.26 Engineer's certification.

1730.27-1730.99 [Reserved]

Appendix A to Subpart B of Part 1730--Review Rating Summary, RUS

Form 300

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

Subpart A--General

Sec. 1730.1 Introduction.

(a) This part contains the policies and procedures of the Rural

Utilities Service (RUS) related to electric borrowers' operation and

maintenance practices and RUS' review and evaluation of such practices.

(b) The policies and procedures included in this part apply to all

electric borrowers (both distribution borrowers and power supply

borrowers) and are intended to clarify and implement certain provisions

of the security instrument and loan contract between RUS and electric

borrowers regarding operations and maintenance. This part is not

intended to waive or supersede any provisions of the security

instrument and loan contract between RUS and electric borrowers.

(c) The Administrator may waive, for good cause, on a case by case

basis, certain requirements and procedures of this part.

Sec. 1730.2 RUS policy.

It is RUS policy to require that all property of a borrower be

operated and maintained properly in accordance with the requirements of

each borrower's loan documents. It is also RUS policy to provide

financial assistance only to borrowers whose operations and maintenance

practices and records are satisfactory or to those who are taking

corrective actions expected to make their operations and maintenance

practices and records satisfactory to RUS.

Sec. 1730.3 RUS addresses.

(a) Persons wishing to obtain forms referred to in this part should

contact: Program Support and Regulatory Analysis, Rural Utilities

Service, U.S. Department of Agriculture, Stop 1522, 1400 Independence

Ave., SW., Washington, DC 20250-1522, telephone (202) 720-8674.

Borrowers or others may reproduce any of these forms in any number

required.

(b) Documents required to be submitted to RUS under this part are

to be sent to the office of the borrower's assigned RUS General Field

Representative (GFR) or such other office as designated by RUS.

Sec. 1730.4 Definitions.

Terms used in this part have the meanings set forth in 7 CFR Part

1710.2. References to specific RUS forms and other RUS documents, and

to specific sections or lines of such forms and documents, shall

include the corresponding forms, documents, sections and lines in any

subsequent revisions of these forms and documents. In addition to the

terms defined in 7 CFR Part 1710.2, the term Prudent Utility Practice

has the meaning set forth in Article 1, Section 1.01 of Appendix A to

Subpart B of 7 CFR Part 1718--Model Form of Mortgage for Electric

Distribution Borrowers, for the purposes of this Part.

Secs. 1730.5-1730.19 [Reserved]

Subpart B--Operations and Maintenance Requirements

Sec. 1730.20 General.

Each distribution borrower and power supply borrower shall operate

and maintain its system in compliance with Prudent Utility Practice, in

compliance with its loan documents, and in compliance with all

applicable laws, regulations and orders, shall maintain its systems in

good repair, working order and condition, and shall make all needed

repairs, renewals, replacements, alterations, additions, betterments

and improvements, in accordance with applicable provisions of the

borrower's security instrument. Each borrower is responsible for on-

going operations and maintenance programs, for maintaining records of

the physical and electrical condition of its electric system and for

the quality of services provided to its customers. The borrower is also

responsible for all necessary inspections and tests of the component

parts of its system, and for maintaining records of such inspections

and tests. Each borrower shall budget sufficient resources to operate

and maintain its system in accordance with the requirements of this

part. For portions of the borrower's system that are not operated by

the borrower, if any, the borrower is responsible for ensuring that the

operator is operating and maintaining the system properly in accordance

with the operating agreement.

Sec. 1730.21 Inspections and tests.

(a) Each borrower shall conduct all necessary inspections and tests

of the component parts of its electric system, and maintain adequate

records of such inspections and tests.

(b) The frequency of inspection and testing will be determined by

the borrower in conformance with applicable laws, regulations, national

standards, and Prudent Utility Practice. The frequency of inspection

and testing will be determined giving due consideration to the type of

facilities or equipment, manufacturer's recommendations, age, operating

environment and hazards to which the facilities are exposed,

consequences of failure, and results of previous inspections and tests.

The records of such inspections and tests will be retained in

accordance with applicable regulatory requirements and Prudent Utility

Practice. The retention period should be of a sufficient time period to

identify long-term trends. Records must be retained at least until the

applicable inspections or tests are repeated.

(c) Inspections of facilities must include a determination of

whether the facility complies with the National Electrical Safety Code,

National Electrical Code (as applicable), and applicable State or local

regulations. Any serious or life-threatening deficiencies shall be

promptly repaired, disconnected, or isolated in accordance with

applicable codes or regulations. Any other deficiencies found as a

result of such inspections and tests are to be recorded and those

records are to be maintained until such deficiencies are corrected or

for the retention period required by paragraph (b) of this section,

whichever is longer.

Sec. 1730.22 Borrower analysis.

(a) Each borrower shall periodically analyze in writing its

operations and maintenance policies, practices, and procedures to

determine if they are appropriate and if they are being followed. The

records of inspections and tests are also to be reviewed and analyzed

to identify any trends which could indicate deterioration in the

physical condition or the operational effectiveness of the system or

suggest a need for changes in operations or maintenance practices. For

portions of the borrower's system that are not operated by the

borrower, if any, the borrower's written analysis would also include a

review of the operator's performance under the operating agreement.

(b) When a borrower's operations and maintenance policies,

practices, and procedures are to be reviewed and evaluated by RUS, the

borrower shall:

(1) Conduct the analysis required by paragraph (a) of this section

not more

[[Page 3452]]

than 90 days prior to the scheduled RUS review;

(2) Complete RUS Form 300, Review Rating Summary, and other related

forms, prior to RUS' review and evaluation; and

(3) Make available to RUS the borrower's completed RUS Form 300

(including a written explanation of the basis for each rating) and

records related to the operations and maintenance of the borrower's

system.

(c) For those facilities not included on the RUS Form 300 (e.g.,

generating plants), the borrower shall prepare and complete an

appropriate supplemental form for such facilities.

Sec. 1730.23 Review rating summary, RUS Form 300.

RUS Form 300 in Appendix A shall be used when required by this

part.

Sec. 1730.24 RUS review and evaluation.

RUS will initiate and conduct a periodic review and evaluation of

the operations and maintenance practices of each borrower for the

purpose of assessing loan security and determining borrower compliance

with RUS policy as outlined in this part. This review will normally be

done at least once every three years. The borrower will make available

to RUS the borrower's policies, procedures, and records related to the

operations and maintenance of its complete system. Reports made by

other inspectors (e.g., other Federal agencies, State inspectors, etc.)

will also be made available, as applicable. RUS will not duplicate

these other reviews but will use their reports to supplement its own

review. RUS may inspect facilities, as well as records, and may also

observe construction and maintenance work in the field. Key borrower

personnel responsible for the facilities being inspected are to

accompany RUS during such inspections, unless otherwise determined by

RUS. RUS personnel may prepare an independent summary of the operations

and maintenance practices of the borrower. The borrower's management

will discuss this review and evaluation with its Board of Directors.

Sec. 1730.25 Corrective action.

(a) For any items on the RUS Form 300 rated unsatisfactory (i.e., 0

or 1) by the borrower or by RUS, the borrower shall prepare a

corrective action plan (CAP) outlining the steps (both short term and

long term) the borrower will take to improve existing conditions and to

maintain an acceptable rating. The CAP must include a time schedule and

cost estimate for corrective actions, and must be approved by the

borrower's Board of Directors. The CAP must be submitted to RUS for

approval within 90 days after the completion of RUS' evaluation noted

in Sec. 1730.24.

(b) The borrower must periodically report to RUS in writing

progress under the CAP. This report must be submitted to RUS every six

months until all unsatisfactory items are corrected unless RUS

prescribes a different reporting schedule.

Sec. 1730.26 Engineer's certification.

Where provided for in the borrower's loan documents, RUS may

require the borrower to provide an ``Engineer's Certification'' as to

the condition of the borrower's system (including, but not limited to,

all mortgaged property.) Such certification shall be in form and

substance satisfactory to RUS and shall be prepared by a professional

engineer satisfactory to RUS. If RUS determines that the Engineer's

Certification discloses a need for improvements to the condition of its

system or any other operations of the borrower, the borrower shall,

upon notification by RUS, promptly undertake to accomplish such

improvements.

Secs. 1730.27-1730.99 [Reserved]

Appendix--A to Subpart B of Part 1730--Review Rating Summary, RUS

Form 300

Borrower Designation ________

Date Prepared ________

Ratings on form are:

0: Unsatisfactory--no records

1: Unsatisfactory--corrective action needed

2: Acceptable, but should be improved--see attached

recommendations

3: Satisfactory--no additional action required at this time

N/A: Not applicable

PART I--TRANSMISSION and DISTRIBUTION FACILITIES

1. Substations (Transmission and Distribution)

a. Safety, Clearance, Code Compliance--Rating: ________

b. Physical Condition: Structure, Major Equipment, Appearance--

Rating: ________

c. Inspection Records Each Substation--Rating: ________

d. Oil Spill Prevention--Rating: ________

2. Transmission Lines

a. Right-of-Way: Clearing, Erosion, Appearance, Intrusions--

Rating: ________

b. Physical Condition: Structure, Conductor, Guying--Rating:

________

c. Inspection Program and Records--Rating: ________

3. Distribution Lines--Overhead

a. Inspection Program and Records--Rating: ________

b. Compliance with Safety Codes: Clearances--Rating: ________

Compliance with Safety Codes: Foreign Structures--Rating:

________

Compliance with Safety Codes: Attachments--Rating: ________

c. Observed Physical Condition from Field Checking: Right-of-

Way--Rating: ________

Observed Physical Condition from Field Checking: Other--Rating:

________

4. Distribution--Underground Cable

a. Grounding and Corrosion Control--Rating: ________

b. Surface Grading, Appearance--

Rating: ________

c. Riser Poles: Hazards, Guying, Condition--Rating: ________

5. Distribution Line Equipment: Conditions and Records

a. Voltage Regulators--Rating: ________

b. Sectionalizing Equipment--

Rating: ________

c. Distribution Transformers--

Rating: ________

d. Pad Mounted Equipment--Safety: Locking, Dead Front,

Barriers--Rating: ________

Pad Mounted Equipment--Appearance: Settlement, Condition--

Rating: ________

e. Kilowatt-hour and Demand Meter Reading and Testing--Rating:

________

PART II--OPERATION AND MAINTENANCE

6. Line Maintenance and Work Order Procedures

a. Work Planning and Scheduling--

Rating: ________

b. Work Backlogs: Right-of-Way Maintenance--Rating: ________

Work Backlogs: Poles--Rating: ________

Work Backlogs: Retirement of Idle Services--Rating: ________

Work Backlogs: Other--Rating: ________

7. Service Interruptions

a. Average Annual Hours/Consumer by Cause (Complete for each of

the previous 5 years)

1. Power Supplier ________

2. Major Storm ________

3. Scheduled ________

4. All Other ________

5. Total ________

Rating: ________

b. Emergency Restoration Plan--Rating:________

8. Power Quality

General Freedom from Complaints--Rating:________

9. Loading and Load Balance

a. Distribution Transformer Loading--Rating:________

b. Load Control Apparatus--Rating:________

c. Substation and Feeder Loading--Rating:________

10. Maps and Plant Records

a. Operating Maps: Accurate and Up-to-Date--Rating:________

b. Circuit Diagrams--Rating:________

c. Staking Sheets--Rating:________

PART III--ENGINEERING

11. System Load Conditions and Losses

a. Annual System Loses, ________%--Rating:________

b. Annual Load Factor, ________%--Rating:________

[[Page 3453]]

c. Power Factor at Monthly Peak, ________%--Rating:________

d. Ratio of Individual Substation Peak kW to kVA, ________--

Rating:________

12. Voltage Conditions

a. Voltage Surveys--Rating:________

b. Substation Transformer Output Voltage Spread--Rating:________

13. Load Studies and Planning

a. Long Range Engineering Plan--Rating:________

b. Construction Work Plan--Rating:________

c. Sectionalizing Study--Rating:________

d. Load Data for Engineering Studies--Rating:________

e. Load Forecasting Data--Rating:________

PART IV--OPERATION AND MAINTENANCE BUDGETS

For Previous 2 Years:

Normal Operation--Actual $________

Normal Maintenance--Actual $________

Total--Actual $________

For Present Year:

Normal Operation--Budget $________

Normal Maintenance--Budget $________

Total--Budget $________

For Future 3 Years:

Normal Operation--Budget $________

Normal Maintenance--Budget $________

Additional (Deferred) Maintenance--Budget $________

Total--Budget $________

14. Budgeting:

Adequacy of Budgets For Needed Work--Rating:________

15. Date Discussed with Board of Directors ________

Remarks: ________

EXPLANATORY NOTES

Item No. ________ Comments ________

Rated by ________ ________ Title ________ Date ________

Reviewed by ________ Manager ________ Date ________

Reviewed by ________ RUS GFR ________ Date ________

Dated: January 14, 1998.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 98-1661 Filed 1-22-98; 8:45 am]

BILLING CODE 3510-15-P