Post-Loan Policies and Procedures for Insured Electric Loans

DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1721

Post-Loan Policies and Procedures for Insured Electric Loans

AGENCY: Rural Utilities Service, USDA.

ACTION: Direct final rule.

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SUMMARY: As a part of its ongoing program to streamline regulations,

the Rural Utilities Service (RUS) is amending its regulation on the

advance of funds to reflect an increase in the threshold limit from

$25,000 to $100,000 for which plant investments may be made in the

borrowers' systems and be eligible for insured loan fund financing

without being included in an RUS-approved construction work plan (CWP).

In addition, RUS has determined to no longer limit borrowers to 130

percent of the project cost estimate for projects in the CWP or

amendment and approved loan, as amended, for which prior RUS approval

must be obtained. These changes will have the effect of reducing the

number of actions by borrowers that would otherwise require RUS

approval and will reduce administrative costs to borrowers and to the

agency.

DATES: This rule will become effective February 11, 2000 unless we

receive written adverse comments or notice of intent to submit adverse

comments on or before January 27, 2000. If we receive such comments or

notice, we will publish a timely withdrawal of the Direct Final Rule in

the Federal Register stating that the rule will not become effective

until we have addressed the comments received and published a final

rule. A second public comment period will not be held. Parties

interested in commenting on this action should do so at this time.

ADDRESSES: Submit adverse comments or notice of intent to submit

adverse comments to F. Lamont Heppe, Jr., Director, Program Development

and Regulatory Analysis, U.S. Department of Agriculture, Rural

Utilities Service, Stop 1522, 1400 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: Charles M. Philpott, Chief,

Engineering Branch, Northern Regional Division, U.S. Department of

Agriculture , Rural Utilities Service, Room 4034 South Bldg., 1400

Independence Ave., SW., Washington, DC 20250-1522. Telephone: (202)

720-1432. E-mail: [email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be not significant for purposes of

Executive Order 12866 and, therefore, has not been reviewed by the

Office of Management and Budget (OMB).

Executive Order 12988

This 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 this

rule and (3) in accordance with Sec. 212(e) of the Department of

Agriculture Reorganization Act of 1994 (7 U.S.C. Sec. 6912(e))

administrative appeal procedures, if any are required, must be

exhausted prior to initiating litigation against the Department or its

agencies.

Regulatory Flexibility Act Certification

The Administrator of RUS has determined that this rule relating to

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. RUS borrowers, as a result

of obtaining federal financing, received economic benefits that exceed

any direct economic costs associated with complying with RUS

regulations and requirements.

Information Collection and Recordkeeping Requirements

The Office of Management and Budget has approved the reporting and

recordkeeping requirements contained in 7 CFR part 1721 under the

Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) and assigned

control number 0572-0032. This rule contains no additional information

collection or recordkeeping 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 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 local, and tribal governments or the private sector. A final rule

related notice entitled, ``Department Programs and Activities Excluded

from Executive

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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, this rule

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

Unfunded Mandates Reform Act of 1995.

Background

RUS is amending its regulations to change the definition of a minor

project from the current threshold level of $25,000 or less, to a

project costing $100,000 or less. Section 1721.1 restricts borrowers to

advances of insured loan funds for projects, except for minor projects,

that are included in an RUS approved borrower's construction work plan

(CWP) or CWP amendment. A minor project is defined as a project costing

$25,000 or less. A minor project is eligible for insured loan funding

without being included in an RUS-approved CWP or amendment. In RUS'

review of the impact of this rule on borrowers, we have determined that

the $25,000 limit for a minor project is creating unneeded paperwork

and cost burdens on borrowers requiring unnecessary CWP amendments to

be approved by RUS, without producing significant benefits. The

increase to $100,000 for a minor project will allow borrowers greater

flexibility in their construction programs and reduce the number of CWP

amendments requiring RUS approval. The level of $100,000 is considered

reasonable and adequate for purposes of monitoring borrowers'

construction programs and will provide sufficient safeguards to assure

that RUS loan funds are being used for intended loan purposes.

RUS is further amending its regulations to eliminate the

requirement that funding requests from borrowers not exceed 130 percent

of the project cost estimate, previously approved by RUS in the

borrowers' CWP or CWP amendment and in an approved loan.

Under Sec. 1721.1, the ``130 percent rule'' applies to each major

project included in the borrower's CWP and RUS approved loan. In RUS'

review of compliance with this rule, we have determined that the

majority of cases of noncompliance occur when borrowers exceed 130

percent of the cost estimate for projects coded in the 100 and 600

series. These project codes relate to the construction of distribution

line extensions and the installation of miscellaneous line equipment

required to provide electric service to new customers. Since a borrower

cannot accurately predict the number of new customers, significant cost

variations can and do occur in these projects from the time the cost

estimates were originally prepared in the CWP. In view of this, RUS is

amending the rule to remove the 130 percent limitation for the projects

coded 100 and 600.

Further, in reviewing the 130 percent rule as applied to the

remaining major project codes in the CWP and approved loan, most

borrowers are either providing good cost estimates for the projects in

the CWP and loan or are amending the CWP, as needed, based on factors

other than an increase in cost. Therefore, RUS is amending the

regulation to eliminate the ``130 percent rule'' in its entirety for

all major projects included in the borrowers' CWPs and RUS-approved

insured loans.

RUS believes that the changes under this rule will reduce

administrative costs to borrowers and to the Government and will relax

the RUS requirements under which borrowers may qualify for RUS insured

fund financing.

List of Subjects in 7 CFR Part 1721

Electric power, Loan programs--energy, Rural areas.

For the reasons set forth in the preamble, RUS amend 7 CFR chapter

XVII as follows:

PART 1721--POST-LOAN POLICIES AND PROCEDURES FOR INSURED ELECTRIC

LOANS

1. The authority citation for part 1721 is revised to read as

follows:

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

2. Section 1721.1 is revised to read as follows:

Sec. 1721.1 Advances.

(a) Purpose and amount. With the exception of minor projects,

insured loan funds will be advanced only for projects which are

included in an RUS approved borrower's construction work plan (CWP) or

approved amendment and in an approved loan, as amended. Loan fund

advances can be requested in an amount representing actual costs

incurred.

(b) Minor project. Minor project means a project costing $100,000

or less. Such a project qualifies for advance of loan funds even though

it may not have been included in an RUS-approved borrower's CWP,

amendment to such CWP, or approved loan. Total advances requested shall

not exceed the total loan amount. All projects for which loan fund

advances are requested must be constructed to achieve purposes

permitted by terms of the loan contract between the borrower and RUS.

(c) Certification. Pursuant to the applicable provisions of the RUS

loan contract, borrowers shall certify with each request for funds to

be approved for advance that such funds are for projects in compliance

with this section and shall also provide for those that cost in excess

of $100,000, a contract or work order number as applicable and a CWP

cross-reference project coded identification number. For a minor

project not included in an RUS approved borrower's CWP, the Borrower

shall describe the project and do one of the following to satisfy RUS'

environmental requirements (see 7 CFR part 1794).

(1) If applicable, state that the project is a categorical

exclusion of a type described in Sec. 1794.21(b), which normally does

not require preparation of an Environmental Report (ER); or

(2) If applicable, state that the project is a categorical

exclusion of a type that normally requires an ER and then:

(i) Submit the ER with the request for funds to be approved for

advance, or

(ii) If applicable, certify that it has analyzed the minor project

with respect to a comprehensive service area environmental map and data

base collected and used in preparing the ER for its RUS-approved

borrower's CWP, and that on the basis of that information, the minor

project will not be located in an environmentally sensitive area or

location.

(d) Noncompliance. Where insured loan funds are found to have been

advanced in noncompliance with this section, borrowers will be required

to deposit the appropriate amount of the over-advance in the

construction fund-trustee account and pay any accrued and unpaid

interest to RUS. The Administrator will require borrowers, in order to

remedy such noncompliance, to pay an additional amount equal to the

interest on the funds over-advanced for the period such funds were

outstanding, calculated at a rate equal to the difference between the

RUS loan interest rate and the most recent rate at which RUS sold

Certificates of Beneficial Ownership (CBO's). While RUS will generally

permit the amount of over-advance deposited in the construction fund-

trustee account to be subsequently used by the borrower for RUS

approved projects, nothing in this section shall be construed to

preclude RUS from exercising any rights or

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remedies which RUS may have pursuant to the loan contract.

Dated: December 21, 1999.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 99-33639 Filed 12-27-99; 8:45 am]

BILLING CODE 3410-15-P