[Federal Register Volume 65, Number 224 (Monday, November 20, 2000)]
[Rules and Regulations]
[Pages 69657-69658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29499]


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DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1710

RIN 0572-AB52


General and Pre-Loan Policies and Procedures Common to Insured 
and Guaranteed Loans

AGENCY: Rural Utilities Service, USDA.

ACTION: Notice of confirmation of direct final rule.

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SUMMARY: The Rural Utilities Service (RUS) hereby gives notice that 
comments were received regarding direct final rule on General and Pre-
Loan Policies and Procedures Common to Insured and Guaranteed Electric 
Loans, and reconfirms the effective date of the direct final rule. This 
notice also serves to address the comments received.

Dates: The direct final rule, which was published on May 17, 2000, at 
65 FR 31246, was effective July 3, 2000.

FOR FURTHER INFORMATION CONTACT: Wei M. Moy, Chief, Power Resources & 
Planning Branch, Power Supply Division, Rural Utilities Service, U.S. 
Department of Agriculture, Stop 1568, 1400 Independence Avenue, SW, 
Washington, DC 20250-1568. Telephone: (202) 720-1438. FAX (202) 720-
1401. E-mail: [email protected].

Background

    The Rural Utilities Service (RUS) published a direct final rule on 
May 17, 2000, at 65 FR 31246, in the Federal Register amending 
Sec. 1710.254, Alternative Sources of Power, to allow flexibility in 
determining whether a borrower needs to solicit bids from all sources 
for new or replacement generation. It also deleted the requirement that 
borrowers seek bids if RUS financial assistance is requested from all 
sources for generation projects of 10 megawatts or more or for 
modifications to existing plants if it results in an increase in 
capacity of 10 percent. RUS reserves the right to review each project 
on a case-by-case basis and determine whether there is a need for a 
borrower to seek bids from all sources for the project.
    RUS received comments from three parties on this direct final rule, 
two of which were deemed adverse. According to RUS policy, should 
adverse comments be received concerning a direct final rule, the agency 
would withdraw the direct final rule and the companion proposed rule, 
which was published in the same issue of the Federal Register, would be 
the ruling action. RUS failed to issue a withdrawal notice. As a 
result, the direct final rule became effective on July 3, 2000. In lieu 
of this oversight, RUS feels that this notice of confirmation of direct 
final rule serves to address the concerns of the commentors and at the 
same time confirms the effective date of the direct final rule. If not 
for this oversight, this rule would have become effective through the 
normal regulatory process though its companion proposed rule and then 
as a final rule.
    A summaries of these comments and responses follows:

Comments

    Comment: Tri-State is in agreement with the amendment, and 
appreciates the flexibility that RUS has written into this amendment. 
However, Tri State recommended (1) That language be added regarding 
environmental issues, and (2) that, if RUS requires an applicant to 
solicit proposals for sources of power, the applicant be allowed to 
comply with the requirement by submitting competitive bids previously 
obtained by regional utilities.
    Reply: RUS appreciates the support for its efforts to modify the 
requirement that borrowers must seek bids from all sources if funding 
is requested for generation projects equal to or greater than 10 
megawatt or for modifications to existing plants if it results in an 
increase in capacity of 10 percent or more. Although the comments on 
environmental issues and the timing of competitive bid solicitations 
are appreciated, RUS feels these comments are non-responsive and do not 
effect language in the regulation.
    Comment: Otter Tail suggests that competitive bidding should be a 
standard imposed on any party seeking federal financing and that the 
inefficiencies in the review and approval process should not cause 
delays in an efficiently run business or agency. Otter Tail feels that 
RUS borrowers should be meeting their power needs within the market 
place and only when competitive policies have been followed should any

[[Page 69658]]

borrower be eligible for federally subsidized loans.
    Reply: The amendment does not abandon the practice of seeking 
competitive bids. Upon an RUS review of each project, a determination 
will be made whether there is a need for a borrower to seek competitive 
bids for the project. This evaluation by RUS will be performed on a 
case-by-case basis. RUS will continue to follow good business practice 
and make sound business decisions. At the same time, RUS will provide 
its borrowers with the flexibility to make sound business decisions to 
meet the power needs of rural America.
    Comment: Edison objects to the amendment, stating that the present 
regulation has been in existence for a long time and is entirely 
consistent with the nation's transition to competitive wholesale power 
markets. RUS borrowers should seek to meet their power needs out of 
these markets and make every effort to do so before seeking more 
assistance from RUS in the form of subsidized loans.
    Reply: This amendment deletes the requirement that borrowers seek 
bids if RUS financial assistance is requested from all sources for 10 
megawatts or more or for modifications to existing plants if it results 
in an increase in capacity of 10 percent. RUS will review each project 
on a case by case basis and determine whether there is a need for a 
borrower to seek competitive bids from all sources for the project. RUS 
will provide its borrowers with the flexibility to make sound business 
decisions to meet the power needs of rural America.
    The direct final rule requires RUS to review each project on a 
case-by-case basis and determine whether there is a need for a borrower 
to seek bids from all sources for the project. Following the initial 
RUS review, if it is determined that a full solicitation for bids to 
supply new or replacement generation is necessary, then RUS will 
require such an evaluation process be completed. This amendment in no 
way is intended to minimize the need for all borrowers to follow good 
business practice in making economically sound business decisions. The 
direct final rule provides RUS electric borrowers with the flexibility 
and tools necessary to make prudent decisions to meet the power needs 
of rural customers in the competitive environment advanced by industry 
restructuring efforts.
    These amendments to Sec. 1710.254, provide borrowers with increased 
flexibility during the new and replacement electric power evaluation 
period. The new policy requires RUS to review each project on a case-
by-case basis and determine whether there is a need for a borrower to 
seek bids from all sources for the project. Following this initial RUS 
review, if it is determined that a full solicitation for bids to supply 
new or replacement generation is necessary, then RUS will require that 
such an evaluation process be completed.
    As the electric industry moves to a more competitive environment, 
it is imperative that RUS prudently review and revise policy when 
necessary. The amendments to 7 CFR part 1710 are in no way intended to 
minimize the need for all borrowers to follow good business practice in 
making economically sound business decisions. The direct final rule 
provides RUS borrowers with the flexibility and tools necessary to make 
prudent decisions to meet the power needs of rural customers in the 
competitive environment advanced by industry restructuring efforts.
    To that effect the direct final rule stands as published.

Confirmation of Effective Date

    This is to confirm the effective date of July 3, 2000, of the 
direct final rule, 7 CFR Part 1710, General and Pre-Loan Policies and 
Procedures Common to Insured and Guaranteed Electric Loans, published 
in the Federal Register on May 17, 2000, at 65 FR 31246.

    Dated: November 13, 2000.
Anthony C. Haynes,
Acting Administrator, Rural Utilities Service.
[FR Doc. 00-29499 Filed 11-17-00; 8:45 am]
BILLING CODE 3410-15-P