[Federal Register Volume 62, Number 34 (Thursday, February 20, 1997)]
[Rules and Regulations]
[Pages 7663-7665]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3990]


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DEPARTMENT OF AGRICULTURE
Rural Utilities Service

7 CFR Part 1710

RIN 0572-AB30


Pre-Loan Procedures for Electric Loans

AGENCY: Rural Utilities Service, USDA.

ACTION: Direct final rule.

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SUMMARY: The Rural Utilities Service (RUS) is issuing a minor amendment 
to its pre-loan procedures that will clarify that use of a conventional 
utility indenture as a security instrument for loans to power supply 
borrowers is permissible. This amendment will give these borrowers and 
RUS the flexibility to address the complex issues surrounding power 
supply loans in the rapidly changing electric industry. The rule will 
also enhance loan security and, by conforming more closely to private 
lending practice, allow easier access to private sector financing.
    In the proposed rules section of this Federal Register, RUS is 
proposing approval of and soliciting comments on this action. If 
adverse comments are received on this action, RUS will withdraw this 
final rule prior to its effective date and address the comments 
recieved in response to this action in a final rule on the related 
proposed rule, which is published in the proposed rules section of this 
Federal Register. A second public comment period will not be held. 
Parties interested in commenting on this action should do so at this 
time.

DATES: This rule will become effective on April 7, 1997, unless we 
receive written adverse comments or notice of intent to submit adverse 
comments on or before March 24, 1997. If the effective date is delayed, 
timely notice will be published in the Federal Register.


[[Page 7664]]


ADDRESSES: Submit any adverse comments or notice of intent to submit 
adverse comments to F. Lamont Heppe, Jr., Director, Program Support and 
Regulatory Analysis, Rural Utilities Service, U.S. Department of 
Agriculture, Room 2230-S, 1400 Independence Avenue, SW., STOP 1522, 
Washington, DC 20250-1522. RUS requires, in hard copy, a signed 
original and 3 copies of all comments (7 CFR 1700.30(e)). Comments will 
be available for public inspection during regular business hours at 
Room 4034, South Building, U.S. Department of Agriculture, Washington, 
DC 20250 between 8:00 a.m. and 4:00 p.m. (7 CFR part 1.27(b)).

FOR FURTHER INFORMATION CONTACT: F. Lamont Heppe, Jr., Director, 
Program Support and Regulatory Analysis, Rural Utilities Service, U.S. 
Department of Agriculture, Room 2230-S, 1400 Independence Avenue, SW., 
STOP 1522, Washington, DC 20250-1522. Telephone: 202-720-0736. FAX: 
202-720-4120. E-mail: [email protected].

SUPPLEMENTARY INFORMATION: This regulatory action has been determined 
to be not significant for the purposes of Executive Order 12866, 
Regulatory Planning and Review, and, therefore has not been reviewed by 
the Office of Management and Budget (OMB). 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.) for which RUS published a general notice of proposed rulemaking 
pursuant to 5 U.S.C. 553(b), or any other law. Therefore, the 
Regulatory Flexibility Act does not apply to this action. 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. This rule is excluded from the scope of 
Executive Order 12372, Intergovernmental Consultation, which may 
require consultation with State and local officials. A Notice of Final 
Rule titled Department Programs and Activities Excluded from Executive 
Order 12372 (50 FR 47034) exempts RUS electric loans and loan 
guarantees from coverage under this Order. This rule has been reviewed 
under Executive Order 12988, Civil Justice Reform. RUS has determined 
that this rule meets the applicable standards provided in Sec. 3. of 
the Executive Order.
    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.

Information Collection and Recordkeeping Requirements

    The recordkeeping and reporting burdens contained in this 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.

Background

    RUS recognizes that power supply borrowers (also known as 
generation and transmission borrowers or ``G&T's'') generally have a 
far more complex corporate structure and face more complex financing 
issues than distribution borrowers. In order to meet the financing 
needs of these borrowers more efficiently, RUS is amending its 
regulations to specifically allow the use of a conventional utility 
indenture in lieu of a mortgage as security instruments for loans to 
these borrowers.
    Although current RUS regulations do not preclude the use of trust 
indentures as security instruments for RUS loans, the Agency believes 
that it would be useful to clarify how RUS regulations in 7 CFR Chapter 
XVII will be reconciled with any conflicting provisions contained in 
conventional utility indentures and related loan contracts which the 
Agency may accept in lieu of typical RUS mortgages and mortgages as 
loan instruments. The Agency anticipates that otherwise some of the 
provisions in such indentures and loan contracts might conflict with 
provisions in this chapter that were developed to implement or 
interpret the traditional standard forms of RUS loan instruments which 
were designed for use under different circumstances.
    On July 18, 1995, at 60 FR 36882, and December 29, 1995, at 60 FR 
67396, RUS substantially revised the forms of loan instruments it uses 
in making loans to electric distribution borrowers. Because of the 
differing situations of power supply borrowers, RUS did not attempt to 
prescribe corresponding forms of those new documents for power supply 
borrowers. Nevertheless, RUS recognizes that many of the reasons 
underlying the modernization effort apply to its power supply 
borrowers. Thus, RUS believes that the option of using trust indentures 
represents a balanced approach to increasing borrowers' access to 
private capital markets and reducing RUS operational controls while 
simultaneously enhancing RUS loan security by appropriately adapting to 
the changing cooperative electric industry.
    RUS is willing to consider the use of an indenture when RUS and the 
power supply borrower mutually agree that it is appropriate. The terms 
of each indenture and related loan agreement will be negotiated on a 
case by case basis to best meet the needs of the individual borrower 
and the Government as the electric industry undergoes a period of 
drastic change. RUS believes that ultimately this approach will enhance 
loan security by addressing the individual circumstances of each 
borrower; will allow RUS greater flexibility in dealing with the more 
complex structures of most power supply borrowers; and will allow these 
borrowers easier access to private sources of credit, thus reducing 
their dependence on RUS financing. RUS recognizes that this approach 
may conflict from time to time with some provisions of 7 CFR Chapter 
XVII. This regulation provides that the terms of any indenture or 
associated loan contract control in such circumstances.
    RUS is publishing this action without prior proposal because the 
Agency views this as a noncontroversial amendment and anticipates no 
adverse comments. However, in a separate document in the proposed rules 
section of this Federal Register publication, RUS is proposing to amend 
7 CFR part 1710 should adverse or critical comments be filed.
    If RUS receives such comments, RUS will publish a subsequent 
document that will withdraw this direct final rule before the effective 
date. All public comments received will be addressed in a subsequent 
final rule based on the proposed rule. RUS will not institue a second 
comment period on this action. Any parties interested in commenting on 
this action should do so at this time.

List of Subjects in 7 CFR Part 1710

    Electric power, Electric utilities, Loan programs--energy, 
Reporting and recordkeeping requirements, Rural areas.

    For the reasons set out in the preamble, and under the authority of 
7 U.S.C. 901 et seq., RUS amends 7 CFR Part 1710 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:


[[Page 7665]]


    Authority: 7 U.S.C. 901-950(b); Pub. L. 99-591, 100 Stat. 3341; 
Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).

    2. Section 1710.113 is amended by redesignating the existing 
paragraph (c) as paragraph (c)(1) and adding a new paragraph (c)(2) to 
read as follows:


Sec. 1710.113  Loan security.

* * * * *
    (c)(1) * * *
    (2) The Administrator, at his or her discretion, may approve the 
use of an indenture patterned after those indentures commonly used by 
utilities engaged in private market financing, in lieu of a mortgage as 
the security instrument for loans to power supply borrowers. The use of 
an indenture will be by mutual agreement of the borrower and the 
Administrator. The terms of each indenture and related loan agreement 
will be negotiated on a case by case basis to best meet the needs of 
the individual borrower and the Government. The provisions of the 
indenture and loan contract shall control, notwithstanding any 
provisions of 7 CFR Chapter XVII which may be in conflict therewith.
* * * * *

    Dated: February 10, 1997.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 97-3990 Filed 2-19-97; 8:45 am]
BILLING CODE 3410-15-P