[Federal Register Volume 63, Number 67 (Wednesday, April 8, 1998)]
[Proposed Rules]
[Pages 17127-17128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9204]


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DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Parts 1710 and 1714


Prioritizing the Queue for Hardship Rate and Municipal Rate Loans 
to Electric Borrowers

AGENCY: Rural Utilities Service, USDA.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Rural Utilities Service (RUS) makes hardship rate and 
municipal rate loans to electric borrowers who meet certain statutory 
requirements. All applications from borrowers for these loans are 
usually considered for approval on a first-come first-served basis. RUS 
now has a significant shortfall between the total dollar amount of 
qualified applications and loan authority for both hardship rate and 
municipal rate loans. This shortfall has resulted in long waits in the 
queues for loan approval. RUS is considering making changes to its 
administrative procedures to prioritize the applications for hardship 
rate and municipal rate loans, separately, in order to offer these 
loans to borrowers in greater need of assistance before offering them 
to other borrowers in the loan queues.

DATES: Written comments must be received by RUS or bear a postmark or 
equivalent not later than May 8, 1998.

ADDRESSES: Submit written comments to F. Lamont Heppe, Jr., Director, 
Program Development and Regulatory Analysis, U.S. Department of 
Agriculture, Rural Utilities Service, Stop 1522, 1400 Independence 
Avenue, SW, 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 (7 CFR 1.27(b)).

FOR FURTHER INFORMATION CONTACT: Alex M. Cockey, Jr., Deputy Assistant 
Administrator--Electric Program, U.S. Department of Agriculture, Rural 
Utilities Service, Stop 1560, 1400 Independence Avenue, SW., 
Washington, DC 20250-1560. Telephone: 202-720-9545. FAX: 202-690-0717.

SUPPLEMENTARY INFORMATION:

Background

    Under section 305(c) of the Rural Electrification Act of 1936, as 
amended (RE Act), RUS makes insured electric loans at either a 5 
percent hardship rate or a municipal rate to borrowers engaged 
primarily in providing retail electric service in rural areas. The 
criteria and related procedures for making these loans are codified 
primarily in 7 CFR part 1714. Under current practice, applications from 
borrowers for either hardship rate or municipal rate loans that meet 
the eligibility criteria are usually considered for approval on a 
first-come first-served basis, as provided in 7 CFR 1710.119(a).
    The administrative procedure of processing hardship and municipal 
rate loans on a first-come first-served basis has worked reasonably 
well when there have been sufficient appropriations to process all or 
nearly all the loan applications during the fiscal year. When 
appropriations are adequate, no borrower eligible for these loans has 
to wait more than a few months to receive financing. Under those 
circumstances it makes less difference in terms of meeting needs for 
financing and protecting the government's loan security interests if a 
more needy borrower has to wait in the loan queue a few months longer 
than a less needy borrower. But when appropriations become inadequate 
to finance all hardship and municipal rate loans pending during the 
year, it becomes even more of a problem if borrowers with greater need 
for financing must wait several months longer than other borrowers in 
the queue with lesser need.
    The substantial need for RUS loan funds to improve and maintain 
reliable rural electric infrastructure, coupled with fiscally limited 
loan authority, have more recently left RUS with a significant 
shortfall between the total dollar amount of qualified applications and 
loan authority. Based on loan applications currently on hand and those 
projected to come in during the

[[Page 17128]]

remainder of this fiscal year, RUS now projects a backlog of 
applications at the beginning of fiscal year 1999 of $1.3 billion for 
municipal rate loans and up to $70 million for hardship loans. The 
effects of these backlogs on the rural electric community would be 
partially offset if the Congress enacts the new Treasury rate loan 
program proposed by the Administration, at its proposed lending level 
of $400 million in fiscal year 1999.
    To address the projected backlog of applications for loans, RUS is 
considering changes to its administrative procedures to prioritize 
hardship and municipal rate loan applications so as to make more 
effective use of limited appropriations by funding borrowers with 
greater need for subsidized financing before funding those with lesser 
need. Every borrower eligible for financing would remain eligible, but 
those in greater need would receive their financing before borrowers of 
lesser need. RUS invites comments from the public on what criteria and 
procedures to use to prioritize the queues for hardship and municipal 
rate loans. We are especially interested in comments on the following 
questions:
     Since sections 305(c)(1) and 305(c)(2)(B)(ii) of the RE 
Act establish eligibility criteria for hardship and municipal rate 
loans, should the criteria for prioritizing the loan queues be based on 
those statutory criteria?
     For example, should the prioritization criteria include 
measures of (1) the difference between a borrower's average revenue per 
kWh sold and 120 percent of the average revenue per kWh sold by all 
electric utilities in the state served by the borrower; (2) the 
difference between a borrower's average residential revenue per kWh 
sold and 120 percent of the average residential revenue per kWh sold by 
all electric utilities in the state served by the borrower; (3) the 
difference between the average per capita income of the residents in 
the borrower's service territory and the average per capita income of 
all residents of the state in which the borrower serves; (4) the 
difference between the median household income of the residents in the 
borrower's service territory and the median household income of all 
residents in the state served by the borrower; and (5) the difference 
between the average number of consumers served by the borrower per mile 
of line and some standard, such as 5.5 consumers per mile, as cited in 
section 305(c)(2)(B)(ii) of the RE Act?
     Should other criteria be used to reflect the relative need 
for subsidized financing based on differences among borrowers in the 
inherent cost of providing service and the strength of the demand in 
the borrower's service territory? If so, what criteria should be used, 
for example, plant investment per consumer or per mile of line, cost of 
power per kWh, growth in borrower's kWh sales, borrower size reflecting 
economies of scale, or other measures?
     Should some priority be given to borrowers serving in 
Empowerment Zones or Enterprise Communities, areas that have been 
officially designated as having a special need for economic development 
and job creation?
     Should some priority be given to borrowers for financing 
of facilities located in counties of persistently high poverty and 
counties experiencing outward migration, as defined by the Department 
of Agriculture?
     Should an application receive credit for the time it has 
been in the queue to ensure that even the lowest priority applications 
eventually receive a loan? If the average (median) application had to 
wait, say, 6 months, based on its ranking in terms of need, would it be 
reasonable if the lowest ranked applications had to wait 1, 2, or 3 
years, or should they be moved up more quickly based on time spent in 
the queue?
     Should the Administrator exercise authority to move an 
application up in the queue if the borrower faces an extreme hardship 
based on the factors set forth in 7 CFR 1714.8(c)?

    Dated: April 2, 1998.
Wally Beyer,
Acting Under Secretary, Rural Development.
[FR Doc. 98-9204 Filed 4-7-98; 8:45 am]
BILLING CODE 3410-15-P