[Federal Register Volume 73, Number 201 (Thursday, October 16, 2008)]
[Rules and Regulations]
[Pages 61350-61352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-24573]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 990

[Docket Number FR-5057-I-01]
RIN 2577-AC66


Public Housing Operating Fund Program; Increased Terms of Energy 
Performance Contracts

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Interim rule.

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SUMMARY: This interim rule would make conforming amendments to the 
regulations of the Public Housing Operating Fund Program to reflect 
recent statutory amendments that allow for: The maximum term of an 
energy performance contract (EPC) between a public housing authority 
(PHA) and an entity other than HUD to be up to 20 years, and the 
extension of an existing EPC, without reprocurement, to a period of no 
more than 20 years, to allow additional energy conservation 
improvements. The increase in the maximum EPC term, which is currently 
limited to 12 years, is provided by statutory amendments and will 
enable longer payback periods for energy conservation measures.

DATES: Effective Date: November 17, 2008. Comment Due Date: December 
15, 2008.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 7th Street, 
SW., Room 10276, Washington, DC 20410-0500. Communications must refer 
to the above docket number and title. There are two methods for 
submitting public comments. All submissions must refer to the above 
docket number and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street, SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables

[[Page 61351]]

HUD to make them immediately available to the public. Comments 
submitted electronically through the http://www.regulations.gov Web 
site can be viewed by other commenters and interested members of the 
public. Commenters should follow the instructions provided on that site 
to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule.

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.

FOR FURTHER INFORMATION CONTACT: Elizabeth Hanson, Deputy Assistant 
Secretary, Departmental Real Estate Assessment Center, Office of Public 
and Indian Housing, Department of Housing and Urban Development, 451 
7th Street, SW., Room 2000, Washington, DC 20410-5000; telephone number 
202-475-7949 (this is not a toll-free number). Individuals with speech 
or hearing impairments may access this number through TTY by calling 
the toll-free Federal Information Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 9(e) of the United States Housing Act of 1937 (42 U.S.C. 
1437 et seq.) (1937 Act) establishes an Operating Fund for the purpose 
of making assistance available to PHAs to operate and manage public 
housing. HUD's regulations implementing section 9(e) of the 1937 Act 
are located at 24 CFR part 990 (entitled ``The Public Housing Operating 
Fund Program''). The part 990 regulations contain the policies and 
procedures governing the Operating Fund allocation formula used by HUD 
to distribute operating subsidies to PHAs.
    On September 19, 2005, at 70 FR 54984, HUD published a final rule 
amending the regulations at 24 CFR part 990 to provide a new formula 
for distributing operating subsidies to PHAs and to establish 
requirements that PHAs convert to asset management. The September 19, 
2005, final rule provides PHAs with incentives for energy conservation 
and utility rate reduction. The energy conservation methods may 
include, but are not limited to, physical improvements financed by a 
loan from a bank, utility, or governmental entity; management of costs 
under a performance contract; or a shared savings agreement with a 
private energy company. The final rule also provided, in Sec.  
990.185(a), that the term of the contract under which these energy 
conservation measures are taken cannot exceed 12 years.
    On August 8, 2005, President Bush signed into law the Energy Policy 
Act of 2005 (Pub. L. 109-58, 119 Stat. 594) (Energy Policy Act). 
Subtitle D of the Energy Policy Act amended section 9 of the 1937 Act 
to promote the use in public housing of innovative approaches to 
achieve programmatic efficiency and reduce utility costs. Specifically, 
section 151 of the Energy Policy Act amended section 9(e)(2)(C) of the 
1937 Act, which governs the treatment of waste and utility savings 
under the Operating Fund allocation formula. The amendment made by 
section 151 of the Energy Policy Act provides that qualifying contracts 
for energy conservation improvements may have terms of not more than 20 
years. (See 119 Stat. 647-648.) The Energy Policy Act also amended the 
Operating Fund treatment of savings resulting from such contracts. It 
allows for longer payback periods for retrofits, including windows, 
heating system replacements, wall insulation, site-based generation, 
advanced energy saving technologies, including renewable energy 
generation, and other such retrofits.
    The Consolidated Appropriations Act, 2008 (Pub. L. 110-161, 121 
Stat. 1844, approved December 26, 2007), amended section 9(e)(2)(C) of 
the 1937 Act (42 U.S.C. 1437g(e)(2)(C)), by adding the following 
clause:
    ``(iv) EXISTING CONTRACTS.--The term of a contract described in 
clause (i) that, as of the date of enactment of this clause, is in 
repayment and has a term of not more than 12 years, may be extended to 
a term of not more than 20 years to permit additional energy 
conservation improvements without requiring the reprocurement of energy 
performance, contractors.'' (See administrative provision, section 229, 
of title II of Division K, at 121 Stat. 2438.)

II. This Interim Rule

    This interim rule amends the regulations at 24 CFR 990.185 to 
provide that, consistent with the amendment to the 1937 Act by section 
151 of the Energy Policy Act, the term of an EPC between a PHA and an 
entity other than HUD may be up to 20 years. Consistent with the 
amendment made to section 9(e)(C)(2) by the Consolidated Appropriations 
Act, 2008, this rule also permits the extension of executed EPCs to a 
term of not more than 20 years without requiring a new competitive 
procurement process.
    The increased maximum contract terms provided by these statutory 
amendments permit longer payback periods for energy conservation 
measures. HUD encourages PHAs to utilize the extended contract terms to 
achieve additional reductions in utility consumption and costs. These 
statutory changes to EPC terms, as are being codified by this rule, 
provide PHAs with the ability to fund additional energy measures with a 
longer payback period, and also provide additional flexibility by 
allowing a PHA to extend an existing contract without needing to go 
through procurement.
    The provision for entering into EPCs with terms greater than 12 
years and for extending the terms of executed EPCs would commence to 
apply on the effective date of this rule.
    The 20-year contract term, consistent with statutory authority, is 
the maximum term. If state or local laws or regulations restrict terms 
of EPCs to a shorter period of time, PHAs would still have to comply 
with the state or local government requirement.
    Consistent with the statute, this rule clarifies that to qualify 
for the incentives under Sec.  990.185, the financing of energy 
conservation measures by a party other than HUD must be undertaken 
pursuant to a contract. This rule also clarifies that the term ``energy 
performance contract'' encompasses all contracts that qualify under 
Sec.  990.185, regardless of the energy conservation measure involved 
or the entity that is the other party to the contract with the PHA.

III. Justification for Interim Rulemaking

    In accordance with its regulations on rulemaking at 24 CFR part 10, 
HUD ordinarily publishes its rules for advance public comment. Notice 
and public procedure are omitted, however, if HUD determines that, in a 
particular case or class of cases, notice and public procedure are 
``impracticable, unnecessary, or contrary to the public interest.'' 
(See 24 CFR 10.1.) In this case, HUD is simply conforming its existing 
regulations to statutory provisions that are already legally effective. 
In doing so, HUD is not exercising agency discretion, but rather simply 
following the statutory mandate. Because this is a conforming 
regulation, advance public notice and comment is unnecessary. However, 
while HUD found the statutory language to be clear as to meaning and 
intent and has incorporated the language without change, PHAs may seek 
further clarification. HUD specifically welcomes comments on the 
clarity of the conforming amendments, as well as on any other aspect of 
the rule. HUD will consider all comments submitted by the public in the 
final rule that follows this interim rule.

[[Page 61352]]

IV. Findings and Certifications

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments and the private sector. This proposed rule does not 
impose any federal mandates on any state, local, or tribal government 
or the private sector within the meaning of UMRA.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Order. This rule does not have federalism 
implications and would not impose substantial direct compliance costs 
on state and local governments nor preempt state law within the meaning 
of the Order.

 Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
This rule, consistent with recent statutory amendments, provides PHAs 
with the flexibility to enter into energy performance contracts with 
terms of not more than 20 years. These revisions impose no significant 
economic impact on a substantial number of small entities. Therefore, 
the undersigned certifies that this rule will not have a significant 
impact on a substantial number of small entities.
    Notwithstanding HUD's view that this rule will not have a 
significant effect on a substantial number of small entities, HUD 
specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Environmental Impact

    This final rule does not direct, provide for assistance or loan and 
mortgage insurance for, or otherwise govern or regulate real property 
acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction; or establish, revise, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this rule 
is categorically excluded from environmental review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321).

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance program number is 
14.850.

List of Subjects in 24 CFR Part 990

    Accounting, Grant programs--housing and community development, 
Public housing, Reporting and recordkeeping requirements.

0
Accordingly, for the reasons described in the preamble, HUD amends 24 
CFR part 990 as follows:

PART 990--THE PUBLIC HOUSING OPERATING FUND PROGRAM

0
1. The authority citation for part 990 continues to read as follows:

    Authority: 42 U.S.C. 1437g; 42 U.S.C. 3535(d).


0
2. In Sec.  990.185, revise paragraph (a) introductory text and 
paragraph (a)(3)(iv), to read as follows:


Sec.  990.185  Utilities expense level: Incentives for energy 
conservation/rate reduction.

    (a) General/consumption reduction. If a PHA undertakes energy 
conservation measures that are financed by an entity other than HUD, 
the PHA may qualify for the incentives available under this section. 
For a PHA to qualify for these incentives, the PHA must enter into a 
contract to finance the energy conservation measures, and must obtain 
HUD approval. Such approval shall be based on a determination that 
payments under a contract can be funded from reasonably anticipated 
energy cost savings. The contract period shall not exceed 20 years. The 
energy conservation measures may include, but are not limited to: 
Physical improvements financed by a loan from a bank, utility, or 
governmental entity; management of costs under the performance 
contract; or a shared savings agreement with a private energy service 
company. All such contracts shall be known as energy performance 
contracts. PHAs may extend an executed energy performance contract with 
a term of less than 20 years to a term of not more than 20 years, to 
permit additional energy conservation improvements without the 
reprocurement of energy performance contractors. The PHA must obtain 
HUD approval to extend the term of an executed energy performance 
contract.
* * * * *
    (3) * * *
    (iv) If energy cost savings are less than the amount necessary to 
meet amortization payments specified in a contract, the contract term 
may be extended (up to the 20-year limit) if HUD determines that the 
shortfall is the result of changed circumstances, rather than a 
miscalculation or misrepresentation of projected energy savings by the 
contractor or PHA. The contract term may be extended only to 
accommodate payment to the contractor and associated direct costs.
* * * * *

    Dated: September 11, 2008.
Paula O. Blunt,
General Deputy Assistant Secretary for Public and Indian Housing.
 [FR Doc. E8-24573 Filed 10-15-08; 8:45 am]
BILLING CODE 4210-67-P