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: Final rule.

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SUMMARY: This final rule amends the Rural Utilities Service's (RUS)

regulations on long-range financial forecasting. This final rule

provides that RUS may request a sensitivity study on a case-by-case

basis.

EFFECTIVE DATE: This final rule is effective November 4, 1998.

FOR FURTHER INFORMATION CONTACT: Alex Cockey, STOP 1560, Deputy

Assistant Administrator, Electric Program, Rural Utilities Service,

U.S. Department of Agriculture, 1400 Independence Ave., SW.,

Washington, DC 20250-1560, telephone number: (202) 720-9545, E-mail:

[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be not significant for

purposes of Executive Order 12866 and, therefore, has not been reviewed

by OMB.

Executive Order 12988

This final rule has been reviewed in accordance with Executive

Order 12988, Civil Justice Reform. RUS has determined that this final

rule meets the applicable standards provided in section 3 of the

Executive Order.

In accordance with the Executive Order and the rule; (1) all State

and local laws and regulations that are in conflict with this rule will

be preempted; (2) no retroactive effect will be given to the rule; and

(3) administrative proceedings are required to be exhausted prior to

initial litigation against the Department (7 U.S.C. 6912).

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 related to the RUS electric program, and therefore, the

Regulatory Flexibility Act does not apply to this rule.

Information Collection and Recordkeeping Requirements

The reporting and recordkeeping requirements contained in this

final rule were approved by the Office of Management and Budget (OMB)

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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 this collection of information, including suggestions for

reducing the burden to F. Lamont Heppe, Jr., Director, Program

Development and Regulatory Analysis, Rural Utilities Service, USDA,

1400 Independence Ave., STOP 1522, Washington, DC 20250-1522.

National Environmental Policy Act Certification

The Administrator of RUS has determined that this final 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 final 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, telephone

number (202) 512-1800.

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 FR 47034) determined that RUS loans and loan guarantees

were not covered by Executive Order 12372.

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 today's rule

is not subject to the requirements of section 202 and 205 of the

Unfunded Mandates Reform Act.

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

The Rural Utilities Services (RUS), makes loans, loan guarantees to

RUS electric borrowers, and provides accommodations of its lien in

order for the electric borrowers 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).

RUS, pursuant to the RE Act, 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.

RUS regulations establishing the requirement that borrowers submit

a long-range financial forecast as part of and to support a loan

application are contained at 7 CFR part 1710, subpart G. Part 1717,

subparts R and S of 7 CFR contains the policies for lien accommodations

and subordinations by RUS of its first lien on borrower's systems and

facilities. RUS requires borrowers to submit a long-range financial

forecast as part of certain applications requesting a lien

accommodation or subordination of its lien. A long-range financial

forecast demonstrates that a borrower's system is economically viable

currently and in the projected time period. This rule changes some of

the requirements regarding long-range financial forecasts.

On May 20, 1997, at 62 FR 27546, RUS published a proposed rule to

clarify the financial forecasting requirement for all electric

borrowers. The comment period on the proposed rule closed July 21,

1997. Comments received from one borrower regarding the proposed rule

are presented as follows:

The proposed rule eliminated the minimum dollar threshold that,

when met, necessitated a sensitivity analysis by the borrower. The

commenter proposed that the minimum dollar amounts be retained. The

commenter proposed that the dollar amounts be increased from $25

million to $40 million for power supply borrowers and from $3 million

to $5 million for distribution borrowers.

RUS has determined that setting arbitrary thresholds for requiring

sensitivity studies serves no useful purposes at this time. In some

cases the dollar amounts would create unnecessary work for a borrower

and for RUS if they remained. In other cases, where borrowers would

fall under the minimum dollar amounts, sensitivity analysis would still

be needed. RUS has concluded that the determination as to when a

sensitivity analysis should be required should be done on a case-by-

case basis at the time a borrower requests an action or approval by

RUS. RUS has, however, added examples of those factors that will be

taken into account in determining when a sensitivity analysis will be

required. It is not, of course, possible to anticipate all factors that

will affect the determination. Consequently, the factors listed are

examples and are not intended to limit the determination of RUS. The

variables to be tested by the sensitivity analysis will be determined

by RUS in consultation with the borrower, at an appropriate time.

List of Subjects in 7 CFR Part 1710

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

Reporting and recordkeeping, Rural areas.

For reasons set forth in the preamble, RUS hereby amends 7 CFR

chapter XVII 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:

Authority: 7 U.S.C. 901-905(b), Pub. L. 99-591, 100 Stat. 3341;

Pub. L. 103-354, 108 Stat. 3178, (7 U.S.C. 6941 et seq.).

2. Section 1710.300 is amended by removing paragraph (f) and

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 taking into account such factors as the number and type of large

power loads, projections of future borrowings and the associated

interest, projected loads, projected revenues, and the probable future

competitiveness of the borrower. 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.

* * * * *

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3. 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 RUS deems

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: September 28, 1998.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 98-26484 Filed 10-2-98; 8:45 am]

BILLING CODE 3410-15-P