[Federal Register Volume 63, Number 192 (Monday, October 5, 1998)]
[Rules and Regulations]
[Pages 53276-53278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26484]


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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)

[[Page 53277]]

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.
* * * * *

[[Page 53278]]

    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