[Federal Register Volume 70, Number 21 (Wednesday, February 2, 2005)]
[Rules and Regulations]
[Pages 5349-5361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-1880]



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 Rules and Regulations
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  Federal Register / Vol. 70, No. 21 / Wednesday, February 2, 2005 / 
Rules and Regulations  

[[Page 5349]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Parts 1700 and 1709

RIN 0572-AB91


Assistance to High Energy Cost Rural Communities

AGENCY: Rural Utilities Service, USDA.

ACTION: Direct final rule.

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SUMMARY: The Rural Utilities Service (RUS) is adopting regulations 
implementing its financial assistance programs for rural communities 
with extremely high energy costs. These programs are authorized under 
section 19 of the Rural Electrification Act of 1936, as amended. This 
direct final rule is intended to establish and clarify eligibility and 
application requirements, the review and approval process, and grant 
administration procedures for RUS grants to rural communities with 
extremely high energy costs and for grants to State entities for bulk 
fuel revolving loan funds. This publication of these rules will assure 
timely and effective distribution of grant funds to eligible rural 
communities and State entities.

DATES: This rule will become effective on March 21, 2005, unless RUS 
receives written adverse comments or a written notice of intent to 
submit adverse comments on or before March 4, 2005. If such comments or 
notice is received, RUS will publish a timely document in the Federal 
Register withdrawing the rule. Comments received will be considered 
under the propose rule published in this edition of the Federal 
Register in the proposed rule section. Written comments must be 
received by RUS or carry a postmark or equivalent no later than March 
4, 2005.

ADDRESSES: Submit your adverse comments or notice of intent to submit 
adverse comments by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instruction for submitting 
comments.
     Agency Web site: http://www.usda.gov/rus/index2.Comments.htm. Follow the instructions for submitting comments.
     E-mail: [email protected]. Include in the subject line 
of the message ``7 CFR 1700 and 1709.''
     Mail: Addressed to Richard Annan, Acting Director, Program 
Development and Regulatory Analysis, Rural Utilities Service, United 
States Department of Agriculture, 1400 Independence Avenue, STOP 1522, 
Washington, DC 20250-1522.
     Hand Delivery/Courier: Addressed to Richard Annan, Acting 
Director, Program Development and Regulatory Analysis, Rural Utilities 
Service, United States Department of Agriculture, 1400 Independence 
Avenue, SW., Room 5168-S, Washington, DC 20250-1522.
    Instructions: RUS requests a signed original and three copies of 
all written comments (7 CFR 1700.4). Comments may also be submitted by 
e-mail at [email protected] and must contain the phrase ``High Cost 
Energy Grants'' in the subject line. All comments received must 
identify the name of the individual (and the name of the entity, if 
applicable) who is submitting the comment. All comments received will 
be posted without changes to http://www.usda.gov.rus.index2.Comments.htm, including any personal information 
provided. All comments will also be available for public inspection 
during regular business hours (7 CFR 1.27(b)).

FOR FURTHER INFORMATION CONTACT: Karen Larsen, Management Analyst, U.S. 
Department of Agriculture, Rural Utilities Service, Electric Program, 
1400 Independence Ave., SW., Stop 1560, Room 5165-S, Washington, DC 
20250-1560. Telephone (202) 720-9545, fax (202) 690-0717, e-mail 
address: [email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This direct final 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).

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) Program number 
assigned to the High Energy Cost Grant and Loan program is 10.859. The 
State Bulk Fuel Revolving Fund grant program CFDA program number is 
10.857. The Denali Commission High Energy Cost Grant and Loan Program 
CFDA program number is 10.858. The Catalog is available on a 
subscription basis from the Superintendent of Documents, the Unites 
States Government Printing Office, Washington, DC 20402-9325, telephone 
number (202) 512-1800.

Executive Order 12372

    This program is not subject to the requirements of Executive Order 
12372, ``Intergovernmental Review of Federal Programs,'' as implemented 
under USDA's regulations at 7 CFR part 3015.

Executive Order 12988

    This direct final rule has been reviewed under Executive Order 
12988, Civil Justice Reform. RUS has determined that this rule meets 
the applicable standards provided in section 3 of the Executive Order. 
In addition, all state and local laws and regulations that are in 
conflict with this rule will not be preempted, no retroactive effect 
will be given to this rule, and, in accordance with sec. 212(e) of the 
Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 
6912(e)), administrative appeal procedures, if any, must be exhausted 
before an action against the Department or its agencies may be 
initiated.

Executive Order 13132, Federalism

    The policies contained in this direct final rule do not have any 
substantial direct effect on states, on the relationship between the 
national government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on state and local 
governments. This rule is intended to foster cooperation between the 
Federal Government and the states and local governments, and reduces, 
where possible, any regulatory burden imposed by the Federal Government

[[Page 5350]]

that impedes the ability of states and local governments to solve 
pressing economic, social and physical problems in their state.

Regulatory Flexibility Certification

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this rule because RUS is not required by 5 U.S.C. 553 
(a)(2) or any other law to publish a notice of proposed rulemaking with 
respect to the subject matter of this direct final rule.

Unfunded Mandates

    This direct final rule contains no Federal mandates (under the 
regulatory provision of Title II of the Unfunded Mandates Reform Act of 
1995) for State, local, and tribal governments or the private sector. 
Therefore, this rule is not subject to the requirements of sections 202 
and 205 of the Unfunded Mandates Reform Act of 1995.

Environmental Impact Statement

    This direct final rule has been examined under RUS environmental 
regulations at 7 CFR part 1794. The RUS Administrator has determined 
that this action is not a major Federal action significantly affecting 
the environment. Therefore, in accordance with the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), an 
Environmental Impact Statement or Assessment is not required.

Information Collection and Recordkeeping Requirement

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
chapter 35), RUS invites comments on this information collection. 
Comments must be received by April 4, 2005. All responses to this 
notice will be summarized and included in the request for OMB approval. 
All comments will also become a matter of public record.
    Title: Assistance to High Energy Cost Rural Communities.
    Type of Request: Revision of a currently approved collection.
    OMB Control No.: 0572-0136.
    Abstract: This grant program will be administered by the Electric 
Program within the USDA Rural Utilities Service. Section 19 of the 
Rural Electrification Act of 1936, as amended (RE Act) authorizes the 
Secretary of Agriculture, acting through RUS, to make grants and loans 
to acquire, construct, extend, upgrade and otherwise improve energy 
facilities serving communities in which the average residential 
expenditure for home energy is at least 275 percent of the national 
average residential expenditure for home energy.
    Section 19 of the RE Act also authorizes the Secretary of 
Agriculture to make grants to establish and support a revolving fund to 
provide a more cost-effective means of purchasing fuel where the fuel 
cannot be shipped by means of surface transportation (the State Bulk 
Fuel Revolving Fund grant program).
    This rule sets forth the policies and procedures associated with 
the High Cost Energy Grant programs and the State Bulk Fuel Revolving 
Fund Grant Program, including the grant application and evaluation 
procedures and ongoing administration requirements for the programs. 
The currently approved collection of information covers the reporting 
burden associated with the High Energy Program. RUS intends to amend 
the collection of information to include hours associated with the 
State Bulk Fuel Program.
    Estimated Number of Respondents: Respondent grant applicants and 
grantees include individuals, business or other for-profit entities, 
not-for-profit institutions, and State, local, or tribal governments is 
estimated to be a combined total of 46 respondents.
    Estimated Number of Responses per Respondent: It is estimated that 
the total number of responses per respondent is a combined total of 
7.89 responses.
    Estimated Number of Total Annual Responses: It is estimated that 
the combined total number of responses is 187.
    Estimate of Hours Per Response: Public reporting burden for this 
collection of information is estimated to total an average of 8.33 
burden hours for both programs.
    Estimate of Total Annual Burden: It is estimated that the combined 
total of total annual burden hours 931.
    You may request copies of this information collection from Mary Pat 
Daskal, Program Development and Regulatory Analysis, at (202) 720-7853.
    Comments: Comments are invited on: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of RUS, including whether the information will have 
practical utility; (b) the accuracy of RUS' estimate of the burden of 
the proposed collection of information including the validity of the 
methodology and assumptions used; (c) ways to enhance the quality, 
utility and clarity of the information to be collected; and (d) ways to 
minimize the burden of the collection of information on those who are 
to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology. You may send your written 
comments to Mary Pat Daskal, Program Development and Regulatory 
Analysis, U.S. Department of Agriculture, STOP 1522, 1400 Independence 
Ave., SW., Washington, DC 20250-1522. E-mail responses may be sent to 
[email protected]. All responses to this notice will be 
summarized and included in the request for OMB approval. All comments 
will also become a matter of public record.

Background

    In 2000, the Rural Electrification Act of 1936, as amended (RE Act) 
was amended to create new financial assistance programs for high energy 
cost rural communities (Public Law 106-472, Sec.  301, Nov. 9, 2000). 
The new section 19 of the RE Act (7 U.S.C. 918a) authorizes the 
Secretary of Agriculture through the RUS to:
     Provide grants and loans to acquire, construct, extend, 
upgrade, and otherwise improve energy generation, transmission, or 
distribution facilities serving extremely high energy cost communities;
     Provide grants and loans to the Denali Commission (a 
Federal-State agency) to acquire, construct, extend, upgrade, and 
otherwise improve energy generation, transmission, or distribution 
facilities serving extremely high energy cost communities in rural 
Alaska; and
     Provide grants to existing State government entities for 
bulk fuel revolving funds to provide a more cost-effective means of 
purchasing fuel where the fuel cannot be shipped by means of surface 
transportation.
    This rulemaking codifies Agency policies and procedures for the RUS 
Assistance to High Energy Cost Communities Programs, including 
eligibility, application, and grant administration requirements for the 
High Energy Cost Grant Program and the Bulk Fuel Revolving Fund Grant 
Program. RUS is deferring issuing regulations implementing the loan 
programs authorized under these programs because no loan funds have 
been appropriated. The Denali Commission High Energy Cost Grants and 
Loan Program is administered by means of a Memorandum of Understanding 
and grant agreements executed between the RUS and the Denali 
Commission. The Denali Commission, a Federal agency, is the sole entity 
that is eligible for grants and loans under section 19(a)(2) of the RE 
Act (7 U.S.C. 918a(a)(2)). Applications and awards for assistance from 
the Denali Commission using RUS grant funds are administered under 
rules and

[[Page 5351]]

procedures established by the Denali Commission.
    During the first years of appropriations for these grant and loan 
programs, RUS administered the program under the USDA's general grant 
regulations, 7 CFR 3015, and requested competitive grant applications 
through publication of Notices of Funding Availability in the Federal 
Register. Because Congressional funding for the grant programs has 
continued, and given the high level of interest in the grant program, 
RUS is promulgating program-specific regulations that supplement the 
Department-wide grant regulation provisions.

Description of Rule

    RUS is revising 7 CFR part 1700 to include amendments and additions 
to the Agency delegations of authority to include the Assistance to 
High Energy Cost Rural Communities Programs and to delegate 
responsibility for administering the programs to the Assistant 
Administrator, Electric Program subject to certain explicit 
reservations to the Administrator.
    The rules add a new part 1709 to Chapter XVII of title 7 of the 
Code of Federal Regulations.
    Subpart A sets forth general policies, definitions, and 
administrative requirements for the Assistance to High Energy Cost 
Rural Communities programs. These provisions supplement and do not 
supplant general USDA and government-wide grant requirements. Subpart A 
includes provisions for the Administrator to allocate available funds 
among programs, establish application periods, and to determine and 
revise energy cost benchmarks for eligibility purposes.
    Subpart B sets forth the policies, procedures and requirements that 
are specific to the RUS High Energy Cost Grant program authorized under 
section 19(a)(2) of the RE Act. The rules describe eligibility 
requirements for applicants, communities, and projects. These 
provisions are similar to those used in the High Energy Cost Grant 
Notices of Funds Availability published December 9, 2002 (67 FR 72904) 
and January 23, 2004 (69 FR 3317). Subpart B also sets out the general 
application procedures that will be used and the evaluation and 
priority criteria that will be used by RUS to conduct solicitations for 
competitive grant applications. RUS proposes that detailed information 
on application requirements, application submissions, selection 
criteria weights and priorities and updated high energy cost 
eligibility benchmarks will be included in the grant announcement 
published for each application cycle.
    Subpart C establishes policies and procedures specific to the State 
Bulk Fuel Revolving Fund Grant program established under section 
19(a)(3) of the RE Act. These rules are substantially similar to the 
procedures, policies, and definitions used in the Notice of Funding 
Availability published in the Federal Register on July 6, 2002 (66 FR 
35584). That notice resulted in a single grant application from the 
State of Alaska. Other States and Territories may, however, also be 
eligible to participate in this program. Accordingly, RUS is adopting 
regulations and procedures for any future grant offerings under this 
program.
    Subpart G establishes RUS policy on recovery of financial 
assistance received under the loan and grant programs administered 
under this part by individuals or entities subsequently found to be 
ineligible or the use of grant funds for unauthorized purposes. Because 
of the limited amount of grant funds available to extremely high energy 
cost communities, the Agency believes it is appropriate to make clear 
that it will exercise whatever authority it has, including, but not 
limited to departmental regulations concerning the suspension or 
termination of grant agreements under 7 CFR part 3015, subpart N, to 
recover any grant or loan funds for which the applicant, community, or 
project is subsequently found to be ineligible or that were used for 
unauthorized purposes.

List of Subjects

7 CFR Part 1700

    Administrative practice and procedure, Electric utilities, Grant 
programs--energy, Rural areas.

7 CFR Part 1709

    Administrative practice and procedure, Electric utilities, Grant 
programs--energy, Rural areas.

0
For the reasons set forth in the preamble, RUS is amending chapter 
XVII, title 7, of the Code of Federal Regulations as follows:

PART 1700--GENERAL INFORMATION

0
1. The authority citation for part 1700 continues to read as follows:

    Authority: 5 U.S.C. 301, 552; 7 U.S.C. 901 et seq., 1921 et 
seq., 6941 et seq., 7 CFR 2.7.

Subpart B--Agency Organization and Functions

0
2. Subpart B is amended by adding Sec.  1700.33 to read as follows:


Sec.  1700.33  Assistance to High Energy Cost Rural Communities.

    RUS, through the Electric Program, makes grants and loans to assist 
high energy cost rural communities. The Assistant Administrator, 
Electric Program, directs and coordinates the assistance to high energy 
cost rural communities program and serves as the primary point of 
contact for applicants, grantees, and borrowers.

Subpart C--Loan and Grant Approval Authorities

0
3. Subpart C is amended by adding Sec.  1700.58 to read as follows:


Sec.  1700.58  Assistance to high energy cost rural communities.

    (a) Administrator: The authority to approve the following is 
reserved to the Administrator:
    (1) Allocation of appropriated funds among high energy cost 
community assistance programs;
    (2) Awards of grants and loans to extremely high energy cost 
communities;
    (3) Awards of grants and loans to the Denali Commission;
    (4) Awards of grants to State entities for State bulk fuel 
revolving funds; and
    (5) Grant agreements, loan contracts, security instruments and all 
other documents executed in connection with grants and loans agreements 
approved by the Administrator.
    (b) The Assistant Administrator, Electric Program has the authority 
to make any required certifications and to approve all grant and loan 
servicing actions not specifically reserved to the Administrator.

0
4. Part 1709 is added to read as follows:

PART 1709--ASSISTANCE TO HIGH ENERGY COST COMMUNITIES

Subpart A--General Requirements
Sec.
1709.1 Purpose.
1709.2 Policy. [Reserved]
1709.3 Definitions.
1709.4 Allocation of available funds among programs.
1709.5 Determination of energy cost benchmarks.
1709.6 Appeals.
1709.7 Applicant eligibility.
1709.8 Electronic submission.
1709.9 Grant awards and advance of funds.
1709.10 Ineligible grant purposes.
1709.11 Award conditions.
1709.12 Reporting requirements.
1709.13 Grant administration.
1709.14 Inspections.
1709.15 Grant close out.
1709.16 Performance reviews.
1709.17 Environmental review.
1709.18 Civil rights.
1709.19 Other USDA regulations.

[[Page 5352]]

1709.20 Member delegate clause.
1709.21 Audit requirements.
1709.22 Project changes.
1709.23-1709.99 [Reserved]
1709.100 OMB control number.
Subpart B--RUS High Cost Energy Grant Program
1709.101 Purpose.
1709.102 Policy.
1709.103-1709.105 [Reserved]
1709.106 Eligible applicants.
1709.107 Eligible communities.
1709.108 Supporting data for determining community eligibility.
1709.109 Eligible projects.
1709.110 Use of grant funds.
1709.111 Limitations on use of grant funds.
1709.112 Ineligible grant purposes.
1709.113 Limitations on grant awards.
1709.114 Application process.
1709.115 Availability of application materials.
1709.116 Application package.
1709.117 Application requirements.
1709.118 Submission of applications.
1709.119 Review of applications.
1709.120 Evaluation of applications.
1709.121 Administrator's review and selection of grant awards.
1709.122 Consideration of eligible grant applications under later 
grant announcements.
1709.123 Evaluation criteria and weights.
1709.124 Grant award procedures.
1709.125-1709.200 [Reserved]
Subpart C--Bulk Fuel Revolving Fund Grant Program
1709.201 Purpose.
1709.202 Policy. [Reserved]
1709.203 Definitions.
1709.204-1709.206 [Reserved]
1709.207 Eligible applicants.
1709.208 Use of grant funds.
1709.209 Limitations on use of grant funds.
1709.210 Application process.
1709.211 Submission of applications.
1709.212 Application review.
1709.213 Evaluation of applications.
1709.214 Administrator's review and selection of grant awards.
1709.215 Consideration of unfunded applications under later grant 
announcements.
1709.216 Evaluation criteria and weights.
1709.217 Grant award.
1709.218-1709.300 [Reserved]
Subparts D-F--[Reserved]
Subpart G--Recovery of Financial Assistance Used for Unauthorized 
Purposes
1709.601 Policy.
1709.602-1709.700 [Reserved]
1709.701-1709.999 [Reserved]

    Authority: 5 U.S.C. 301, 7 U.S.C. 901 et seq.

Subpart A--General Requirements


Sec.  1709.1  Purpose.

    The purpose of the Rural Utilities Service (RUS) Assistance to High 
Energy Cost Rural Communities Program is to help local communities meet 
their energy needs through direct loans and grants for energy 
facilities in qualifying extremely high energy cost communities, grants 
and loans to the Denali Commission for extremely high energy cost 
communities in Alaska, and grants to States to support revolving funds 
to finance more cost effective means of acquiring fuel in qualifying 
communities. This subpart sets forth definitions and requirements which 
are common to all grant and loan programs in this part administered by 
the RUS Electric Program under section 19 of the Rural Electrification 
Act of 1936, as amended (RE Act) (7 U.S.C. 918a).


Sec.  1709.2 Policy.  [Reserved]


Sec.  1709.3  Definitions.

    Administrator means the Administrator of the Rural Utilities 
Service (RUS), United States Department of Agriculture (USDA).
    Agency means the Rural Utilities Service (RUS), an agency of the 
United States Department of Agriculture (USDA), or a successor agency.
    Census block means the smallest geographic entity for which the 
U.S. Census Bureau collects and tabulates decennial census information 
and which are defined by boundaries shown on census maps.
    Census designated place (CDP) means a statistical entity recognized 
by the U.S. Census Bureau comprising a dense concentration of 
population that is not within an incorporated place but is locally 
identified by a name and which has boundaries defined on census maps.
    Electric program means the office within RUS, and its successor 
organization, that administers rural electrification programs 
authorized by the Rural Electrification Act of 1936 (RE Act) (7 U.S.C. 
901 et seq.) and such other programs so identified in USDA regulations.
    Extremely high energy costs means community average residential 
energy costs that are at least 275 percent of one or more home energy 
cost benchmarks identified by RUS and based on the latest available 
information on national average residential energy expenditures as 
reported by the Energy Information Administration (EIA) of the United 
States Department of Energy.
    Financial assistance means a grant, loan, or grant-loan combination 
issued under this part.
     Home energy means any energy source or fuel used by a household 
for purposes other than transportation, including electricity, natural 
gas, fuel oil, kerosene, liquified petroleum gas (propane), other 
petroleum products, wood and other biomass fuels, coal, wind and solar 
energy. Fuels used for subsistence activities in remote rural areas are 
also included.
    High energy cost benchmarks means the criteria established by RUS 
for eligibility as an extremely high energy cost community. Extremely 
high energy cost benchmarks are calculated as 275 percent of the 
relevant national average household energy benchmarks.
    Indian Tribe means a Federally recognized tribe as defined under 
section 4 of the Indian Self-Determination and Education Assistance Act 
(25 U.S.C. 450b) to include ``* * * any Indian tribe, band, nation, or 
other organized group or community, including any Alaska Native village 
or regional or village corporation as defined in or established 
pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et 
seq.), that is recognized as eligible for the special programs and 
services provided by the United States to Indians because of their 
status as Indians.''
    Person means any natural person, firm, corporation, association, or 
other legal entity, and includes Indian tribes and tribal entities.
    State means any of the several States of the United States, and, 
where provided by law, any Territory of the United States or other area 
authorized to receive the services and programs of the Rural Utilities 
Service or the Rural Electrification Act of 1936, as amended.
    Target area means the geographic area to be served by the grant.
    Target community means the unit or units of local government in 
which the target area is located.


Sec.  1709.4  Allocation of available funds among programs.

    The Administrator, in his sole discretion, shall allocate available 
funds among the programs administered under this part and determine the 
grant application periods under each program. In making fund 
allocations for each fiscal year, the Administrator may consider the 
amount of available funds, the nature and amount of unfunded grant 
applications and prior awards, Agency resources, Agency priorities, and 
any other pertinent information.


Sec.  1709.5  Determination of energy cost benchmarks.

    (a) The Administrator shall establish, using the most recent data 
available, and periodically revise, the home energy cost benchmarks and 
the high energy cost benchmarks used to determine community eligibility 
for high energy cost grant and loan programs and the Denali Commission 
high energy cost grants and loans. In

[[Page 5353]]

setting these energy cost benchmarks, the Administrator shall review 
the latest available information on home energy costs published by the 
EIA. High energy cost benchmarks will be set at 275 percent of the 
applicable national average home energy cost benchmark as determined by 
the Administrator from the published EIA data. Eligibility benchmarks 
shall be published in each grant announcement.
    (b) For use in determining eligibility for High Energy Cost Grants, 
the Administrator may establish benchmarks for national average annual 
household expenditures and for national average household per unit 
energy expenditures for major home energy sources or fuels, including, 
but not limited to, electricity, natural gas, fuel oil, kerosene, 
liquified petroleum gas (propane), other petroleum products, wood and 
other biomass fuels, coal, wind and solar energy.


Sec.  1709.6  Appeals.

    An applicant may appeal a decision by the Assistant Administrator, 
Electric Program rejecting an application for failure to meet 
eligibility requirements. Applicants may not appeal rating panel scores 
or rankings. An appeal must be made, in writing to the Administrator, 
within 10 days after the applicant is notified of the determination to 
reject the application. Appeals must state the basis for the appeal and 
shall be submitted to the Administrator, Rural Utilities Service, U.S. 
Department of Agriculture, 1400 Independence Ave., SW., STOP 1500, 
Washington, DC 20250-1500. Thereafter, the Administrator will review 
the appeal to determine whether to sustain, reverse, or modify the 
original determination. The Administrator's determination shall be 
final. A written copy of the Administrator's decision will be furnished 
promptly to the applicant.


Sec.  1709.7  Applicant eligibility.

    An outstanding judgment obtained against an applicant by the United 
States in a Federal Court (other than in the United States Tax Court), 
which has been recorded, shall cause the applicant to be ineligible to 
receive a grant or loan under this part until the judgment is paid in 
full or otherwise satisfied. RUS financial assistance under this part 
may not be used to satisfy the judgment.


Sec.  1709.8  Electronic submission.

    Applicants may submit applications and reports electronically if so 
provided in the applicable grant announcement and grant agreements or 
if other regulations provide for electronic submission. Any electronic 
submissions must be in the form prescribed in the applicable grant 
announcement, grant agreement, or regulation.


Sec.  1709.9  Grant awards and advance of funds.

    The grantee must execute a grant agreement that is acceptable to 
the Agency. The grantee must sign and return the grant agreement to the 
Agency, within the time specified, before any grant funds will be 
advanced.


Sec.  1709.10  Ineligible grant purposes.

    Grant funds under this part may not be used to:
    (a) Pay costs of preparing the application package for funding 
under programs in this part, or for any finders fees or incentives for 
persons or entities assisting in the preparation or submission of an 
application.
    (b) Fund political activities;
    (c) Pay any judgment or debt owed to the United States; or
    (d) Pay construction costs of the project incurred prior to the 
date of grant award except as provided herein. Construction work should 
not be started and obligations for such work or materials should not be 
incurred before the grant is approved.
    (1) Applicants may request Agency approval for reimbursement of 
pre-award construction obligations if there are compelling reasons for 
proceeding with construction before grant approval. Such requests may 
be approved if the Agency determines that:
    (i) Compelling reasons, as determined by the Agency, exist for 
incurring obligations before grant approval;
    (ii) The obligations will be incurred for authorized grant 
purposes;
    (iii) All environmental requirements applicable to the Agency and 
the applicant have been met;
    (iv) The applicant has the legal authority to incur the obligations 
at the time proposed, and payment of the debts will remove any basis 
for any mechanic's, material, or other liens that may attach to the 
grant financed property: and
    (v) The expenditure is incurred no more than 18 months before the 
date of the Administrator's approval of the grant award.
    (2) The Agency may authorize payment of approved pre-award project 
construction obligations at the time of award approval. The applicant's 
request and the Agency's authorization for paying such obligations 
shall be in writing.


Sec.  1709.11  Award conditions.

    In addition to all other grant requirements, all approved 
applicants will be required to do the following:
    (a) Enter into a grant agreement with the Agency in form and 
substance acceptable to the Agency;
    (b) Request advances or reimbursements, as applicable, as provided 
in the grant agreement; and
    (c) Maintain a financial management system that is acceptable to 
the Agency.


Sec.  1709.12  Reporting requirements.

    To support Agency monitoring of project performance and use of 
grant funds, Grantees shall file periodic reports, required under 7 CFR 
part 3015, as provided in this part, and the grant agreement as 
follows:
    (a) A financial status report listing project expenditures by 
budget category in such form and at such times as provided in the grant 
agreement.
    (b) Project performance reports in such form and at such intervals 
as provided in the grant agreement. The project performance report 
shall compare accomplishments to the objectives stated in the proposal 
and grant agreement. The project performance report should identify all 
completed tasks with supporting documentation. If the project schedule 
as approved in the grant agreement is not being met, the report should 
discuss the problems or delays that may affect completion of the 
project. Objectives for the next reporting period should be listed. 
Compliance with any special condition on the use of award funds should 
be discussed. Reports are due as provided in the grant agreement.
    (c) A final project performance report with supporting 
documentation in such form and at the time specified in the grant 
agreement.
    (d) Such other reports as the Agency determines are necessary to 
assure effective grant monitoring as part of the grant agreement or the 
grant announcement as a condition of the grant award or advances of 
funds.


Sec.  1709.13  Grant administration.

    The authority to approve administrative actions is vested in the 
Administrator except as otherwise provided in the RUS delegations of 
authority. Administration of RUS grants is governed by the provisions 
of this subpart and subpart B of this part, the terms of the grant 
agreement and, as applicable, the provisions of 7 CFR parts 3015, 3016 
and 3017, or their successors.


Sec.  1709.14  Inspections.

    The grantee will permit periodic inspection of the grant project 
operations by a representative of the Agency.

[[Page 5354]]

Sec.  1709.15  Grant closeout.

    Grant closeout is when all required work is completed, 
administrative actions relating to the completion of work and 
expenditure of funds have been accomplished, the final project report 
has been submitted and found acceptable by RUS and RUS accepts final 
expenditure information. No monitoring action by RUS of the grantee is 
required after grant closeout. However, grantees remain responsible in 
accordance with the terms of the grant agreement for compliance with 
conditions on property acquired or derived through grant funds.


Sec.  1709.16  Performance reviews.

    Each grant agreement shall include performance criteria and RUS 
will regularly evaluate the progress and performance of grantee 
according to such criteria. If the grantee does not comply with or does 
not meet the performance criteria set out in the grant agreement, the 
Administrator may require amendment of the grant agreement, or may 
suspend or terminate the grant pursuant to 7 CFR 2015, subpart N.


Sec.  1709.17  Environmental review.

    (a) All grants made under this subpart are subject to the 
requirements of 7 CFR part 1794 or its successor.
    (b) Applicants must address environmental aspects of their projects 
in the grant application in sufficient detail to allow the Agency to 
categorize the project for purposes of compliance with environmental 
review requirements. The grant announcement will establish the form and 
content of the environmental information required for the application.
    (c) Projects that are selected for grant awards by the 
Administrator will be reviewed by the Agency under 7 CFR part 1794 
prior to final award approval. The Agency may require the selected 
applicant to submit additional information, including an environmental 
report, environmental assessment, or environmental impact statement, as 
may be required, concerning the proposed project in order to complete 
the required reviews and to develop any project-specific conditions for 
the final grant agreement.


Sec.  1709.18  Civil rights.

    This program will be administered in accordance with applicable 
Federal Civil Rights Law. All grants made under this subpart are 
subject to the requirements of title VI of the Civil Rights Act of 
1964, which prohibits discrimination on the basis of race, color or 
national origin. In addition, all grants made under this subpart are 
subject to the requirements of section 504 of the Rehabilitation Act of 
1973, as amended, which prohibits discrimination on the basis of 
disability; the requirements of the Age Discrimination Act of 1975, 
which prohibits discrimination on the basis of age; and title III of 
the Americans with Disabilities Act, which prohibits discrimination on 
the basis of disability by private entities in places of public 
accommodations. Grantees are required to comply with certain 
regulations on nondiscrimination in program services and benefits and 
on equal employment opportunity including 7 CFR parts 15 and 15b; and 
45 CFR part 90, as applicable.


Sec.  1709.19  Other USDA regulations.

    The grant programs under this part are subject to the provisions of 
other departmental regulations, including but not limited to the 
following departmental regulations, or their successors, as applicable:
    (a) 7 CFR part 3015, Uniform Federal Assistance Regulations;
    (b) 7 CFR part 3016, Uniform Administrative Requirements for Grants 
and Cooperative Agreements to State and Local Governments;
    (c) 7 CFR part 3017, Governmentwide Debarment and Suspension 
(Nonprocurement) and Governmentwide Requirements for Drug-Free 
Workplace (Grants);
    (d) 7 CFR part 3018, New Restrictions on Lobbying;
    (e) 7 CFR part 3019, Uniform Administrative Requirements for Grants 
and Agreements with Institutions of Higher Education, Hospitals and 
Other Non-profit Organizations; and
    (f) 7 CFR part 3052, Audits of States, Local Governments and Non-
profit Organizations.


Sec.  1709.20  Member delegate clause.

    Each grant agreement under this part shall provide that no member 
of Congress shall be admitted to any share or part of a grant program 
or any benefit that may arise there from, but this provision shall not 
be construed to bar as a contractor under a grant a publicly held 
corporation whose ownership might include a member of Congress.


Sec.  1709.21  Audit requirements.

    The grantee shall provide the Agency with an audit for each year, 
beginning with the year in which a portion of the financial assistance 
is expended, in accordance with the following:
    (a) If the grantee is a for-profit entity, an RUS Electric or 
Telecommunication borrower or any other entity not covered by paragraph 
(b) of this section, the recipient shall provide an independent audit 
report in accordance with 7 CFR part 1773, ``Policy on Audits of RUS 
Borrowers'' and the grant agreement.
    (b) If the grantee is a State or local government, or a non-profit 
corporation (other than an RUS Electric or Telecommunication Borrower), 
the recipient shall provide an audit in accordance with 7 CFR part 
3052.


Sec.  1709.22  Project changes.

    The Grantee shall obtain prior written approval from the Agency for 
any change to the scope or objectives of the approved grant project.


Sec. Sec.  1709.23-1709.99  [Reserved]


Sec.  1709.100  OMB control number.

    The information collection requirements in this part are approved 
by the Office of Management and Budget and assigned OMB control number 
0572-0136.

Subpart B--RUS High Energy Cost Grant Program


Sec.  1709.101  Purpose.

    This subpart establishes policies and procedures for the Rural 
Utilities Service (RUS) High Energy Cost Grant Program under section 
19(a)(1) of the Rural Electrification Act of 1936, as amended (7 U.S.C. 
918a(a)(1)). The purpose of this grant program is to assure access to 
adequate and reliable energy services for persons in extremely high 
energy cost communities by providing financial assistance to acquire, 
construct, extend, upgrade, and otherwise improve energy generation, 
transmission, or distribution facilities serving the community.


Sec.  1709.102  Policy.

    (a) All high energy cost grants will be awarded competitively 
subject to the limited exceptions in 7 CFR 3015.158(d).
    (b) RUS may give priority consideration to projects that benefit 
smaller rural communities, communities experiencing economic hardship, 
projects that extend service to households that lack reliable 
centralized or commercial energy services, and projects that correct 
imminent hazards to public safety, welfare, the environment or critical 
community energy facilities. RUS may also give priority to projects 
that are coordinated with State rural development initiatives or that 
serve a Federally-identified Empowerment Zone or Enterprise Community 
(EZ/EC) or a USDA-identified ``Champion Community.'' Priority 
consideration will be provided

[[Page 5355]]

through the award of additional points under the project selection 
criteria as specified in the grant announcement.


Sec. Sec.  1709.103-1709.105  [Reserved]


Sec.  1709.106  Eligible applicants.

    (a) Eligible applicants for grants to fund projects serving 
eligible extremely high energy cost communities include Persons, 
States, political subdivisions of States, and other entities organized 
under the laws of States.
    (b) Eligible applicants may be for-profit or non-profit business 
entities including but not limited to corporations, associations, 
partnerships, limited liability partnerships (LLPs), cooperatives, 
trusts, and sole proprietorships.
    (c) Eligible government applicants include State and local 
governments, and agencies and instrumentalities of States and local 
governments.
    (d) Indian tribes, other tribal entities, and Alaska Native 
Corporations are eligible applicants.
    (e) Individuals are also eligible applicants under this program, 
however the proposed grant project must provide community benefits and 
not be for the sole benefit of the individual applicant or an 
individual household.
    (f) As a condition of eligibility, the applicant must demonstrate 
the capacity:
    (1) to enter into a binding grant agreement with the Federal 
Government at the time of the award approval; and
    (2) to carry out the proposed grant project according to its terms.


Sec.  1709.107  Eligible communities.

    (a) An eligible community under this program is one in which the 
average home energy costs exceed 275 percent of the national average 
under one or more high energy cost benchmarks established by RUS based 
on the latest available residential energy information from the Energy 
Information Administration (EIA) of the United States Department of 
Energy. RUS will update the national and high energy cost community 
benchmarks periodically to incorporate any changes in national home 
energy costs reported by EIA. RUS will publish the high energy cost 
community benchmark criteria in the grant announcement. Community 
eligibility will be determined by RUS at the time of application based 
on the criteria published in the applicable grant announcement.
    (b) The Application must include information demonstrating that 
each community in the grant's proposed target area exceeds one or more 
of the RUS high energy cost community benchmarks to be eligible for 
assistance under this program. The smallest area that may be designated 
as a target area is a 2000 Census block
    (c) The target community may include an extremely high cost to 
serve portion of a larger service area that does not otherwise meet the 
criteria, provided that the applicant can establish that the costs to 
serve the smaller target area exceed the benchmark.
    (d) In determining the community energy costs, applicants may 
include additional revenue sources that lower the rates or out of 
pocket consumer energy costs such as rate averaging, and other Federal, 
State, or private cost contributions or subsidies.
    (e) The applicant may propose a project that will serve high energy 
cost communities across a State or region, but where individual project 
beneficiaries will be selected at a later time. In such cases, to 
establish eligibility, the applicant must provide sufficient 
information in the application to determine that the proposed target 
area includes eligible high energy cost communities and proposed 
selection criteria to assure that grant funds are used to serve 
eligible communities.


Sec.  1709.108  Supporting data for determining community eligibility.

    The application shall include the following:
    (a) Documentation of energy costs. Documents or references to 
published or other sources for information or data on home energy 
expenditures or equivalent measures used to support eligibility, or 
where such information is unavailable or does not adequately reflect 
the actual cost of average home energy use in a local community, 
reasonable estimates of commercial energy costs.
    (b) Served areas. A comparison of the historical residential energy 
cost or expenditure information for the local commercial energy 
provider(s) serving the target community or target area with the 
benchmark criteria published by the Agency.
    (c) Engineering estimates. Estimates based on engineering standards 
may be used in lieu of historical residential energy costs or 
expenditure information under the following circumstances:
    (1) Where historical community energy cost data are unavailable 
(unserved areas), incomplete or otherwise inadequate;
    (2) Where the target area is not connected to central station 
electric service to a degree comparable with other residential 
customers in the State or region.
    (3) Where historic energy costs do not reflect the costs of 
providing a necessary upgrade or replacement of energy infrastructure 
that would have the effect of raising costs above one or more of the 
Agency benchmarks.
    (d) Independent Agency review. Information to support high energy 
cost eligibility is subject to independent review by the Agency. The 
Agency may reject applications that are not based on credible data 
sources or sound engineering estimates.


Sec.  1709.109  Eligible projects.

    Eligible projects are those that acquire, construct, extend, 
repair, upgrade or otherwise improve energy generation, transmission or 
distribution facilities serving communities with extremely high energy 
costs. All energy generation, transmission and distribution facilities 
and equipment used to provide or improve electricity, natural gas, home 
heating fuels, and other energy services to eligible communities are 
eligible. Projects providing or improving service to communities with 
extremely high energy costs through on-grid and off-grid renewable 
energy technologies, energy efficiency, and energy conservation 
projects and services are eligible. A grant project is eligible if it 
improves, or maintains energy services, or reduces the costs of 
providing energy services to eligible communities. Examples of eligible 
activities include, but are not limited to, the acquisition, 
construction, replacement, repair, or improvement of:
    (a) Electric generation, transmission, and distribution facilities, 
equipment, and services serving the eligible community;
    (b) Natural gas distribution or storage facilities and associated 
equipment and activities serving the eligible community;
    (c) Petroleum product storage and handling facilities serving 
residential or community use.
    (d) Renewable energy facilities used for on-grid or off-grid 
electric power generation, water or space heating, or process heating 
and power for the eligible community;
    (e) Backup up or emergency power generation or energy storage 
equipment, including distributed generation, to serve the eligible 
community; and
    (f) Implementation of cost-effective energy efficiency, energy 
conservation measures that are part of the implementation of a 
coordinated demand management or energy conservation program for the 
eligible community, such as, for example, weatherization of residences 
and

[[Page 5356]]

community facilities, or acquisition and installation of energy-
efficient or energy saving appliances and devices .


Sec.  1709.110  Use of grant funds.

    (a) Project development costs. Grants may be used to fund the costs 
and activities associated with the development of an eligible energy 
project. RUS will in no case approve the use of grant funds to be used 
solely or primarily for project development costs. Eligible project 
development costs must be reasonable and directly related to the 
project and may include the following:
    (1) Costs of conducting, or hiring a qualified consultant to 
conduct, a feasibility analysis of the proposed project to help 
establish the financial and technical sustainability of the project, 
provided that such costs do not exceed more than 10 percent of total 
project costs;
    (2) Design and engineering costs, including costs of environmental 
and cultural surveys and consulting services necessary to the project 
and associated environmental review, siting and permit approvals; and
    (3) Fees for legal and other professional services directly related 
to the project.
    (b) Construction costs. Grant funds may be used for the reasonable 
costs of construction activities, including initial construction, 
installation, expansion, extension, repair, upgrades, and related 
activities, including the rental or lease of necessary equipment, to 
provide or improve energy generation, transmission, or distribution 
facilities or services;
    (c) Acquisitions and purchase. Grant funds may be used for the 
acquisition of property, equipment, and materials, including the 
purchase of equipment, and materials, the acquisition or leasing of 
real or personal property, equipment, and vehicles associated with and 
necessary for project development, construction, and operation. Grant 
funds may be used for the acquisition of new or existing facilities or 
systems where such action is a cost-effective means to extend or 
maintain service to an eligible community or reduces the costs of such 
service for the primary benefit of community residents.
    (d) Grantee cost contributions. Grant funds may be applied as 
matching funds or cost contributions under Federal or other programs 
where the terms of those programs so allow use of other Federal funds.


Sec.  1709.111  Limitations on use of grant funds.

    (a) Planning and administrative costs. Not more than 4 percent of 
each grant award may be used for the planning and administrative 
expenses of the applicant that are unrelated to the grant project.
    (b) Unproven technology. Only projects that utilize technology with 
a proven operating history, and for which there is an established 
industry for the design, installation, and service (including spare 
parts) of the equipment, are eligible for funding. Energy projects 
utilizing experimental, developmental, or prototype technologies or 
technology demonstrations are not eligible for grant funds. The 
determination by RUS that a project relies on unproven technology shall 
be final.


Sec.  1709.112  Ineligible grant purposes.

    (a) Grant funds may not be used for the costs of preparing the 
grant application, finders fees, fuel purchases, routine maintenance or 
other operating costs, or purchase of equipment, structures or real 
property not directly associated with providing energy services in the 
target community, or, except as provided in Sec.  1709.11(d), project 
construction costs incurred prior to the date of the grant award.
    (b) In general, grant funds may not be used to support projects 
that primarily benefit areas outside of eligible target communities. 
However, grant funds may be used to finance an eligible target 
community's proportionate share of a larger energy project.
    (c) Grant funds may not be used to refinance or repay the 
applicant's outstanding loans or loan guarantees under the Rural 
Electrification Act of 1936, as amended.


Sec.  1709.113  Limitations on grant awards.

    (a) The Administrator may establish minimum or maximum amount of 
funds that may be awarded in a single grant application within in any 
grant cycle in order to distribute available grant funds as broadly as 
possible. If the Administrator elects to impose a minimum or maximum 
grant amount, the limitations will be published in the grant 
announcement.
    (b) The Administrator may restrict eligible applicants to a single 
award of grant funds or to a monetary cap on grant awards within a 
grant cycle in order to assure that the available grant funds are 
distributed as broadly as possible. If the Administrator elects to 
impose a limit or cap on grant awards, the terms will be established in 
the grant announcement.


Sec.  1709.114  Application process.

    The RUS will request applications for high energy cost grants on a 
competitive basis by publication of a grant announcement as a Notice of 
Funds Availability (NOFA) or Notice of Funding Opportunity. The grant 
announcement will establish the amount of funds available, the 
application package contents and additional requirements, the 
availability of application materials, high energy cost community 
eligibility benchmarks, selection criteria and weights, priority 
considerations, and deadlines and procedures for submitting 
applications.


Sec.  1709.115  Availability of application materials.

    Application materials, including copies of the grant announcement 
and all required forms and certifications will be available by request 
from the Agency and by such other means as the Agency may determine. In 
addition, the Agency may make available an application guide and other 
materials that may be of assistance to prospective applicants.


Sec.  1709.116  Application package.

    The requirements for the application package will be established in 
the grant announcement. A complete application package will consist of 
the standard application for federal assistance (SF-424 series), as 
applicable, a narrative project proposal prepared in accordance with 
the grant announcement, an RUS environmental profile, and such other 
supporting documentation, forms, and certifications as required in the 
grant announcement and this part.


Sec.  1709.117  Application requirements.

    (a) Required forms. The forms required for application and where to 
obtain them will be specified in the announcement. All required forms 
must be completed, signed and submitted by a person authorized to 
submit the proposal on behalf of the applicant. For applications and 
forms that are submitted electronically, the application must be 
authenticated as provided in the grant announcement. In the case of 
grant applications submitted electronically, the applicant may be 
required to provide signed originals of required forms prior to and as 
a condition of the grant award.
    (b) Narrative proposal. Each application must include a narrative 
proposal describing the proposed project and addressing eligibility and 
selection criteria. The grant announcement will specify the contents, 
order, and format for the narrative proposal. The proposal must include 
all the required elements identified in this subsection. The grant 
announcement may establish additional required elements that must be 
addressed in the narrative project proposal.

[[Page 5357]]

    (1) Executive summary. A summary of the proposal should briefly 
describe the project including target community, goals, tasks to be 
completed and other relevant information that provides a general 
overview of the project. The applicant must clearly state the amount of 
grant funds requested and identify any priority ratings for which the 
applicant believes it is qualified.
    (2) Applicant eligibility. The narrative and supporting 
documentation must describe the applicant and establish its 
eligibility.
    (3) Community eligibility. This section must describe the target 
area and communities to be served by the project and demonstrate 
eligibility. The applicant must clearly identify the:
    (i) Location and population of the areas to be served by the 
project;
    (ii) Population of the local government division to which they 
belong;
    (iii) Identity of local energy providers; and
    (iv) Sources of the high energy cost data and estimates used.
    (4) Project eligibility. The narrative must describe the proposed 
project in sufficient detail to establish that it is an eligible 
project.
    (5) Project description. The project description must:
    (i) Describe the project design, materials, and equipment in 
sufficient detail to support a finding of technical feasibility;
    (ii) Identify the major tasks to be performed and a proposed 
timeline for completion of each task; and
    (iii) Identify the location of the project target area and the 
eligible extremely high energy cost communities to be served.
    (6) Project management. The applicant must describe how and by whom 
the project will be managed during construction and operation. The 
description should address the applicant's organizational structure, 
key project personnel and the degree to which full time employees, 
affiliated entities or contractors will be utilized. The applicant must 
describe the identities, legal relationship, qualifications and 
experience of those persons that will perform project management 
functions. If the applicant proposes to use the equipment or design, 
construction and other services from non-affiliated entities, the 
applicant must describe how it plans to contract for such equipment or 
services.
    (7) Budget. The budget narrative must present a detailed breakdown 
of all estimated costs and allocate these costs among the listed tasks 
in the work plan. All project costs, not just grant funds, must be 
accounted for in the budget. A pro forma operating budget for the first 
year of operations must also be included. The detailed budget 
description must be accompanied by SF-424A, ``Budget Information--Non-
Construction Programs,'' or SF-424C ``Budget Information--Construction 
Programs,'' as applicable.
    (8) Project goals and objectives. The applicant must identify 
unambiguous measures for expected cost reduction, efficiencies or other 
improvements and the degree to which the incremental benefit will be 
enjoyed by residents of the eligible community. The description should 
specifically address how the project will provide or improve energy 
generation, transmission or distribution services in the target area. 
The project objectives and proposed evaluation measures will be the 
basis for project performance measures in the grant agreement.
    (9) Performance measures. The application must include specific 
criteria for measuring project performance. These proposed criteria 
will be used in establishing performance measures incorporated in the 
grant agreement in the event the proposal receives funding under this 
subpart. These suggested criteria are not binding on the Agency. 
Appropriate measures of project performance include expected reductions 
in home energy costs, avoided cost increases, enhanced reliability, new 
households served, or economic and social benefits from improvements in 
energy services.
    (10) Proposal evaluation and selection criteria. The application 
must address individually and in narrative form each of the proposal 
evaluation and selection criteria referenced in the grant announcement.
    (11) Rural development initiatives. The proposal should describe 
whether and how the proposed project will support any State rural 
development initiatives. If the project is in support of a rural 
development initiative, the application should include confirming 
documentation from the appropriate rural development agency. The 
application must identify the extent to which the project is dependent 
upon or tied to other rural development initiatives, funding and 
approvals.
    (12) Environmental profile. The application must include 
information about project characteristics and site specific conditions 
that may involve environmental, historic preservation and other 
resource issues. This information must be presented in sufficient 
detail so as to facilitate the Agency's identification of projects that 
may require additional environmental review under 7 CFR part 1794 
before a grant award can be approved. The format and requirements for 
the environmental profile will be established in the grant 
announcement.
    (13) Regulatory and other required project approvals. The applicant 
must identify all regulatory or other approvals required by other 
Federal, State, local, tribal or private entities (including conditions 
precedent to financing) that are necessary to carry out the proposed 
project and an estimated schedule for obtaining the necessary permits 
and approvals.


Sec.  1709.118  Submission of applications.

    Unless otherwise provided in the grant announcement, a complete 
original application package and two copies must be submitted by the 
application deadline to RUS at the address specified in the applicable 
announcement. Instructions for submittal of applications electronically 
will be established in the grant announcement.


Sec.  1709.119  Review of applications.

    (a) RUS will review each application package received to determine 
whether the applicant is eligible and whether the application is 
timely, complete, and responsive to the requirements set forth in the 
grant announcement.
    (b) RUS may, at its discretion, contact the applicant to clarify or 
supplement information in the application needed to determine 
eligibility, identifying information, and grant requests to allow for 
informed review. Failure of the applicant to provide such information 
in response to a written request by the Agency within the time frame 
established by the Agency may result in rejection of the application.
    (c) After consideration of the information submitted, the Assistant 
Administrator, Electric Program will determine whether an applicant or 
project is eligible and whether an application is timely, complete, and 
responsive to the grant announcement and shall notify the applicant in 
writing. The Assistant Administrator's decision on eligibility may be 
appealed to the Administrator.


Sec.  1709.120  Evaluation of applications.

    (a) The Agency will establish one or more rating panels to review 
and rate the grant applications. The panels may include persons not 
employed by the Agency.
    (b) All timely and complete applications that meet the eligibility 
requirements will be referred to the rating panel. The rating panel 
will evaluate and rate all referred

[[Page 5358]]

applications according to the evaluation criteria and weights 
established in the grant announcement. Panel members may make 
recommendations for conditions on grant awards to promote successful 
performance of the grant or to assure compliance with other Federal 
requirements.
    (c) After the rating panel has evaluated and scored all proposals, 
in accordance with the point allocation specified in the grant 
announcement, the panel will prepare a list of all applications in rank 
order, together with funding level recommendations and recommendations 
for conditions, if any.
    (d) The list of ranked projects and rating panel recommendations 
will be forwarded to the Administrator for review and selection.


Sec.  1709.121  Administrator's review and selection of grant awards.

    (a) The final decision to make an award is at the discretion of the 
Administrator. The Administrator shall make any selections of finalists 
for grant awards after consideration of the applications, the rankings, 
comments, and recommendations of the rating panel, and other pertinent 
information.
    (b) Based on consideration of the application materials, ranking 
panel ratings, comments, and recommendations, and other pertinent 
information, the Administrator may elect to award less than the full 
amount of grant requested by an applicant. Applicants will be notified 
of an offer of a reduced or partial award. If an applicant does not 
accept the Administrator's offer of a reduced or partial award, the 
Administrator may reject the application and offer an award to the next 
highest ranking project.
    (c) The projects selected by the Administrator will be funded in 
rank order to the extent of available funds.
    (d) In the event an insufficient number of eligible applications 
are received in response to a published grant announcement and selected 
for funding to exhaust the funds available, the Administrator reserves 
the discretion to reopen the application period and to accept 
additional applications for consideration under the terms of the grant 
announcement. A notice regarding the reopening of an application period 
will be published in the Federal Register.


Sec.  1709.122  Consideration of eligible grant applications under 
later grant announcements.

    At the discretion of the Administrator, the grant announcement may 
provide that all eligible but unfunded proposals submitted under 
preceding competitive grant announcements may also be considered for 
funding. This option is provided to reduce the burden on applicants and 
the Agency. The grant announcement shall indicate how applicants may 
request reconsideration of previously submitted, but unfunded, 
applications and how they may supplement their applications.


Sec.  1709.123  Evaluation criteria and weights.

    (a) Establishing evaluation criteria and weights. The grant 
announcement will establish the evaluation criteria and weights to be 
used in ranking the grant proposals submitted. Unless supplemented in 
the grant announcement, the criteria listed in this section will be 
used to evaluate proposals submitted under this program. Additional 
criteria may be included in the grant announcement. In establishing 
evaluation criteria and weights, the total points that may be awarded 
for project design and technical merit criteria shall not be less than 
65 percent of the total available points, and the total points awarded 
for priority criteria shall not be more than 35 percent of the total 
available points. The distribution of points to be awarded per 
criterion will be identified in the grant announcement.
    (b) Project design and technical merit. In reviewing the grant 
proposal's project design and technical merit, reviewers will consider 
the soundness of the applicant's approach, the project's technical and 
financial feasibility, the adequacy of financial and other resources, 
the capabilities and experience of the applicant and its project 
management team, the project goals, and identified community needs and 
benefits. Points will be awarded under the following project elements:
    (1) Comprehensiveness and feasibility. Reviewers will assess the 
technical and economic feasibility of the project and how well its 
goals and objectives address the challenges of the eligible 
communities. The panel will review the proposed design, construction, 
equipment and materials for the proposed energy facilities to determine 
technical feasibility. Reviewers may propose additional conditions on 
the grant award to assure that the project is technically sound. 
Budgets will be reviewed for completeness and the strength of non-
Federal funding commitments. Points may not be awarded unless 
sufficient detail is provided to determine whether or not funds are 
being used for qualified purposes. Reviewers will consider the adequacy 
of the applicant's budget and resources to carry out the project as 
proposed. Reviewers will also evaluate how the applicant proposes to 
manage available resources such as grant funds, income generated from 
the facilities and any other financing sources to maintain and operate 
a financially viable project once the grant period has ended. Reviewers 
must make a finding of operational sustainability for any points to be 
awarded. Projects for which future grant funding is likely to be 
required in order to assure ongoing operations will not receive any 
points.
    (2) Demonstrated experience. Reviewers will consider whether the 
applicant or its project team have demonstrated experience in 
successfully administering and carrying out projects that are 
comparable to that proposed in the application. The reviewers may 
assign a higher point score to proposals that develop the internal 
capacity to provide or improve energy services in the eligible 
communities over other proposals that rely extensively on temporary 
outside contractors.
    (3) Community needs. Reviewers will consider the applicant's 
assessment of community energy needs to be addressed by the proposed 
project as well as the severity of physical and economic challenges 
affecting the target communities. In determining whether one proposal 
should receive more points than another under this criterion, reviewers 
will consider the relative burdens placed on the communities and 
individual households by extremely high energy costs, the hardships 
created by limited access to reliable and affordable energy services 
and the availability of other resources to support or supplement the 
proposed grant funding.
    (4) Project evaluation and performance measures. Reviewers will 
consider the applicant's suggested project evaluation and performance 
criteria. Reviewers may award higher points to criteria that are 
quantifiable, directly relevant to project goals, and reflect serious 
consideration than to more subjective performance criteria that do not 
incorporate variables that reflect a reduction in energy cost or 
improvement in service.
    (5) Coordination with rural development initiatives. Proposals that 
include documentation confirming coordination with State rural 
development initiatives may be credited points for this criterion.
    (c) Priority considerations. Subject to the limitation in paragraph 
(a) of this section, evaluation points may also be awarded for projects 
that advance identified priority interests identified in the grant 
announcement to assist the Agency in selecting among competing projects 
when the amount of funding

[[Page 5359]]

requests exceed available funds. The grant announcement may incorporate 
all or some of the priority criteria listed below, and as discussed in 
paragraph (a) of this section, the grant announcement may supplement 
these criteria. The announcement will also specify the points that will 
be awarded to qualifying applications under these priority criteria.
    (1) Community economic hardship. Economic hardship points may be 
awarded where the median household income for the target community is 
significantly below the State average or where the target community 
suffers from economic conditions that severely constrain its ability to 
provide or improve energy facilities serving the community. Applicants 
must describe in detail and document conditions creating severe 
community economic hardship in the proposal.
    (2) Rurality. Priority consideration may be given to proposals that 
serve smaller rural communities. Applications will be scored based on 
the population of the largest incorporated cities, towns or villages or 
census designated places included within the grant's proposed target 
area as determined using the latest available population figures from 
the U.S. Census Bureau.
    (3) Unserved energy needs. Points may be awarded to projects that 
extend or improve electric or other energy services to eligible 
communities or areas of eligible communities that do not have reliable 
centralized or commercial service.
    (4) Imminent hazard. Additional points may be awarded for projects 
that correct a condition posing an imminent hazard to public safety, 
public welfare, the environment, or to a critical community or 
residential energy facility in immediate danger of failure because of a 
deteriorated condition, capacity limitation, or damage from a natural 
disaster or accident.
    (5) Cost sharing. Projects that evidence significant commitments of 
funds, contributed property, equipment, or other in kind support for 
the project may be awarded additional points for this criterion where 
the aggregate value of these contributions exceed ten percent of total 
eligible project costs.


Sec.  1709.124  Grant award procedures.

    (a) Notification of applicants. The Agency will notify all 
applicants in writing whether they have been selected for a grant 
award. Applicants that have been selected as finalists for a 
competitive grant award will be notified in writing of their selection 
and advised that the Agency may request additional information in order 
to complete the required environmental review under 7 CFR 1794 and to 
meet other pre-award conditions.
    (b) Letter of conditions. The Agency will notify each applicant 
selected as a finalist in writing setting out the amount of grant funds 
and the terms and conditions under which the grant will be made and 
requesting that the applicant indicate in writing its intent to accept 
these conditions.
    (c) Applicant's intent to meet conditions. Upon reviewing the 
conditions and requirements in the letter of conditions, the selected 
applicant must notify the agency in writing within the time period 
indicated, of its acceptance of the conditions, or if the proposed 
certain conditions cannot be met, the applicant must so advise the 
Agency and may propose alternate conditions. The Agency must concur 
with any changes proposed to the letter of conditions by the applicant 
before the application will be further processed.
    (d) Grant agreement. The Agency and the grantee must sign a grant 
agreement acceptable to the Agency prior to the advance of funds.


Sec. Sec.  1709.125-1709.200  [Reserved]

Subpart C--Bulk Fuel Revolving Fund Grant Program


Sec.  1709.201  Purpose.

    This subpart establishes policies and procedures for the Rural 
Utilities Service (RUS) State Bulk Fuel Revolving Fund Grants. The 
purpose of this grant program is to assist State entities in 
establishing and supporting a revolving fund to provide a more cost-
effective means of purchasing fuel for communities where the fuel 
cannot be shipped by means of surface transportation.


Sec.  1709.202 Policy.  [Reserved]


Sec.  1709.203  Definitions.

    As used in this subpart, the following definitions apply:
    Eligible area means any area that is primarily dependent on 
delivery of fuel by water or air for a significant part of the year and 
where fuel cannot be shipped routinely by means of surface 
transportation either because of absolute physical constraints or 
because surface transportation is not practical or is prohibitively 
expensive.
    Fuel means oil, diesel fuel, gasoline and other petroleum products, 
coal, and any other material that can be burned to make energy.
    State entity means a department, agency, or instrumentality of any 
State.
    Surface transportation means transportation by road, rail or 
pipeline.


Sec. Sec.  1709.204-1709.206  [Reserved]


Sec.  1709.207  Eligible applicants.

    Eligible applicants are restricted to State entities in existence 
as of November 9, 2000. Eligible State entities may partner with other 
entities, including other government agencies, in carrying out the 
programs funded by this program. Each applicant must demonstrate that 
it has the authority to enter into a binding agreement with the Federal 
Government to carry out the grant activities.


Sec.  1709.208  Use of grant funds.

    Grant funds must be used to establish and support a revolving loan 
fund that facilitates cost effective fuel purchases for persons, 
communities, and businesses in eligible areas. Where a recipient State 
entity's existing program is authorized to fund multiple purposes, 
grant funds may only be used to the extent the recipient fund finances 
eligible activities.


Sec.  1709.209  Limitations on use of grant funds.

    Not more than 4 percent of the grant award may be used for the 
planning and administrative expenses of the grantee.


Sec.  1709.210  Application process.

    (a) Applications. The Agency will solicit applications on a 
competitive basis by publication of a grant announcement establishing 
the amount of funds available, the maximum grant award, the required 
application materials and where to obtain them, the evaluation and 
selection criteria and weights, and application deadlines. Unless 
otherwise specified in the announcement, applicants must file an 
original application package and two copies. Where provided in the 
grant announcement, applicants may submit electronic applications.
    (b) Required forms. The grant application will use the Standard 
Application for Federal Assistance (SF-424 series or its successor) and 
other forms as provided in the grant announcement. The required forms 
must be completed, signed and submitted by a person authorized to 
submit the proposal on behalf of the applicants. Where provided in the 
grant announcement, applicants may file electronic versions of the 
forms in compliance with the instructions in the grant announcement.
    (c) Narrative proposal and required elements. Each grant 
application must include a narrative proposal describing the project 
and addressing the following

[[Page 5360]]

elements. The form, contents, and order of the narrative proposal will 
be specified in the grant announcement. Additional elements may be 
published in the applicable grant announcement.
    (1) Executive summary. This summary of the proposal must identify 
the State entity applying for the grant and the key agency contact 
information (telephone and fax numbers, mailing address and e-mail 
address). The applicant must clearly state the amount requested in this 
section. It should briefly describe the program, including the 
estimated number of potential beneficiaries in eligible areas, their 
estimated fuel needs, the projects and activities to be financed 
through the revolving fund and how the projects and activities will 
improve the cost effectiveness of fuel procured.
    (2) Applicant eligibility. The application must establish that the 
applicant is a State entity that was in existence as of November 9, 
2000, and has the legal authority to enter into a financial assistance 
relationship with the Federal Government to carry out the grant 
activities.
    (3) Assessment of needs and potential beneficiaries. The 
application must provide estimates of the number, location and 
population of potentially eligible areas in the State and their 
estimated fuel needs and costs. The section must also describe the 
criteria used to identify eligible areas, including the characteristics 
that make fuel deliveries by surface transport impossible or 
impracticable. The description of beneficiary communities should 
provide a detailed breakdown of the density profile of the area to be 
served by eligible projects. Indicate to what extent persons in 
eligible areas live outside of communities of 2,500 persons or more, 
communities of 5,000 or more or outside of communities of 20,000 or 
more. All population estimates should be based on Census Bureau data 
where available. All representations should be supported with exhibits 
such as maps, summary tables and references to official information 
sources.
    (4) Project description. The application must:
    (i) Describe the legal structure and staffing of the revolving fund 
proposal for fuel purchase support.
    (ii) Identify the objectives of the project, the proposed criteria 
for establishing project funding eligibility and how the project is to 
be staffed, managed and financed.
    (iii) Describe how the potential beneficiaries will be informed of 
the availability of revolving fund benefits to them.
    (iv) Explain how the proposed revolving fund program will help 
provide a more cost-effective means of meeting fuel supply needs in 
eligible areas, encourage the adoption of financially sustainable 
energy practices, the adequate planning and investment in bulk fuel 
facility operations and maintenance and cost-effective investments in 
energy efficiency.
    (v) If the revolving fund program is not yet operational, a 
proposed implementation schedule and milestones should be provided.
    (5) Demonstrated experience. The application shall describe past 
accomplishments and experiences that are relevant to determine whether 
the applicant is capable of administering the grant project.
    (6) Budget. The application must include a pro forma operating 
budget for the proposed fund and a description of all funding sources. 
The level of detail must be sufficient for reviewers to determine that 
grant funds will be used only for eligible purposes and to determine 
the extent to which the program is entirely dependent on grant funding 
or whether it has financial support from the State or other sources.
    (7) Performance measures and project evaluation. The application 
must provide unambiguous and quantifiable measures that will be used to 
evaluate the success and cost-effectiveness of the revolving fund in 
assuring adequate fuel supplies for eligible communities and for 
assessing the fuel supply projects financed. The grant announcement may 
establish additional required elements that must be addressed in the 
narrative proposal of the application package.


Sec.  1709.211  Submission of applications.

    Completed applications must be submitted to RUS at the address 
specified in the grant announcement on or before the deadline specified 
in the grant announcement. Instructions for submittal of applications 
electronically will be established in the grant announcement. Late 
applications will be rejected.


Sec.  1709.212  Application review.

    The Agency will review all applications to determine whether the 
applicant is eligible and whether the application is timely, complete 
and sufficiently responsive to the requirements set forth in the grant 
announcement to allow for an informed review. Failure to address any of 
the required evaluation criteria or to submit all required forms will 
disqualify the proposal. The Agency reserves the right to contact the 
applicant to clarify information contained in the proposal to resolve 
issues related to eligibility and the grant request. Applications that 
are timely, complete, and responsive will be forwarded for further 
evaluation. Applications that are late, incomplete, or non-responsive 
will be rejected.


Sec.  1709.213  Evaluation of applications.

    (a) The Agency will establish one or more rating panels to review 
and rate the grant applications. The panels may include persons not 
employed by the Agency.
    (b) The rating panel will evaluate and rate all complete 
applications that meet the eligibility requirements according to the 
evaluation and selection criteria and weights established in the grant 
announcement. Panel members may make recommendations for conditions on 
grant awards to promote successful performance of the grant or to 
assure compliance with other Federal requirements.
    (c) After all proposals have been evaluated and scored, the 
proposals, the rankings, recommendations, and comments of the rating 
panel will be forwarded to the Administrator.


Sec.  1709.214  Administrator's review and selection of grant awards.

    (a) The final decision to make a grant award is at the discretion 
of the Administrator. The Administrator shall consider the 
applications, the ranking, comments, and recommendations of the rating 
panel, and any other pertinent information before making a decision 
about which, if any, applications to approve, the amount of funds 
awarded, and the order of approval. The Administrator reserves the 
right not to make any awards from the applications submitted. When the 
Administrator decides not to make any awards, the Administrator shall 
document in writing the reason for the decision.
    (b) Decisions on grant awards will be made by the Administrator 
after consideration of the applications, the rankings and 
recommendations of the rating panel. The Administrator may elect to 
award less than the full amount of grant requested by an applicant.
    (c) The applications selected by the Administrator will be funded 
in rank order to the extent of available funds.


Sec.  1709.215  Consideration of unfunded applications under later 
grant announcements.

    The grant announcement may provide that all eligible but unfunded 
proposals submitted under preceding announcements may also be 
considered for funding. The announcement shall describe whether and how 
prior applicants may request reconsideration

[[Page 5361]]

and supplement their application material.


Sec.  1709.216  Evaluation criteria and weights.

    Unless supplemented in the grant announcement, the criteria listed 
in this section will be used to evaluate proposals submitted under this 
program. The total points available and the distribution of points to 
be awarded per criterion will be identified in the grant announcement.
    (a) Program Design. Reviewers will consider the financial viability 
of the applicant's revolving fund program design, the proposed criteria 
for establishing eligible projects and borrowers, and how the program 
will improve the cost effectiveness of bulk fuel purchases in eligible 
areas. Programs demonstrating a strong design and the ability to 
improve cost effectiveness will receive more points than applications 
that are less detailed.
    (b) Assessment of needs. Reviewers will award more points to 
programs that serve or give priority to assisting more costly areas 
than those that serve populations that suffer from less severe physical 
and economic challenges.
    (c) Program evaluation and performance measures. Reviewers may 
award more points to performance measures that are relevant to the 
project objective and quantifiable than to performance measures that 
are more subjective and do not incorporate variables that reflect a 
reduction in fuel cost or improvement in service.
    (d) Demonstrated experience. Applicants may be awarded points for 
relevant experience in administering revolving fund or other comparable 
programs.
    (e) Rurality. Reviewers may award more points to proposals that 
give priority in access to funds to communities with low population 
density or that are located in remote eligible areas than to proposals 
that serve eligible, but less remote and higher population density 
communities.
    (f) Cost sharing. Although cost-sharing is not required under this 
program, projects that evidence significant funding or contributed 
property, equipment or other in kind support for the project may be 
awarded points for this criterion where the aggregate value of these 
contributions exceed 25 percent of the annual funding operations.
    (g) Additional priority considerations. The grant announcement may 
provide for additional points to be awarded to projects that advance 
identified Agency priority interests under this program.


Sec.  1709.217  Grant award.

    (a) Notification of applicants. The Agency will notify all 
applicants in writing whether or not they have been selected for a 
grant award.
    (b) Letter of conditions. The Agency will notify a selected 
applicant in writing, setting out the amount of grant approved and the 
conditions under which the grant will be made.
    (c) Applicant's intent to meet conditions. Upon reviewing the 
conditions and requirements in the letter of conditions, the selected 
applicant must complete, sign and return the Agency's ``Letter of 
Intent to Meet Conditions,'' or, if certain conditions cannot be met, 
the applicant may propose alternate conditions to the Agency. The 
Agency must concur with any changes proposed to the letter of 
conditions by the applicant before the application will be further 
processed.
    (d) Grant agreement. The Agency and the grantee must execute a 
grant agreement acceptable to the Agency prior to the advance of funds.


Sec. Sec.  1709.218-1709.300  [Reserved]

Subparts D-F [Reserved]

Subpart G--Recovery of Financial Assistance Used for Unauthorized 
Purposes


Sec.  1709.601  Policy.

    This subpart prescribes the policies of the Rural Utilities Service 
(RUS) when it is subsequently determined that the recipient of an 
Assistance to High Energy Cost Rural Communities program loan or grant 
was not eligible for all or part of the financial assistance received 
or that the assistance received was used for unauthorized purposes. It 
is the policy of the Agency that when assistance under this part has 
been received by an ineligible recipient or used for unauthorized 
purposes the Agency shall initiate appropriate actions to recover from 
the recipient the sum that is determined to be ineligible or used for 
unauthorized purposes, regardless of amount, unless any applicable 
statute of limitation has expired. The Agency shall make full use of 
available authority and procedures, including but not limited to those 
available under 7 CFR part 3015, subpart N.


Sec. Sec.  1709.602-1709.700  [Reserved]


Sec. Sec.  1709.701-1709.999  [Reserved]

    Dated: January 13, 2005.
Hilda Gay Legg,
Administrator, Rural Utilities Service.
[FR Doc. 05-1880 Filed 2-1-05; 8:45 am]
BILLING CODE 3410-15-P