[Federal Register Volume 78, Number 188 (Friday, September 27, 2013)]
[Notices]
[Pages 59666-59670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-23604]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Transmission Infrastructure Program; Proposed Transmission 
Infrastructure Program Updates and Request for Comments

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice and request for comments.

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SUMMARY: The Western Area Power Administration (``Western'') hereby 
announces updates to its Transmission Infrastructure Program (``the 
Program'' or TIP). The Program implements Section 402 of the American 
Recovery and Reinvestment Act of 2009 (``Recovery Act'') regarding 
loans for the purpose of: (1) Constructing, financing, facilitating, 
planning, operating, maintaining, or studying construction of new or 
upgraded electric power transmission lines and related facilities with 
at least one terminus within Western's service territory, and (2) 
delivering or facilitating the delivery of power generated by renewable 
energy resources constructed, or reasonably expected to be constructed, 
after the date that the Recovery Act was enacted.
    Through this Federal Register notice (FRN), Western seeks public 
comment on proposed updates to the Program. The proposed updates will 
create a more efficient and transparent process to screen and evaluate 
potential projects, improve communications with project applicants, 
promote additional interest from potential applicants that seek 
Western's assistance to develop a project and use Western's Recovery 
Act borrowing authority, and integrate the DOE Loan Programs Office 
into the process. The FRN also identifies the principles Western will 
continue using to ensure (1) that the Program is separate and distinct 
from Western's power marketing functions, and (2) that each eligible 
TIP project stands on its own for repayment purposes.

DATES: The comment period begins September 27, 2013 and ends October 
28, 2013. Western will accept written comments at any time during the 
consultation and comment period but no later than October 28, 2013.

ADDRESSES: Send written comments to: Transmission Infrastructure 
Program, Western Area Power Administration, P.O. Box 281213, Lakewood, 
CO 80228-8213, email [email protected]. Western will post information 
about Program developments on its Web site at http://ww2.wapa.gov/sites/western/recovery/Pages/default.aspx, including written comments 
received in response to this FRN after the close of the comment period.

FOR FURTHER INFORMATION CONTACT: Please contact Mr. John Kral, 
Transmission Infrastructure Program, Western Area Power Administration, 
P.O. Box 281213, Lakewood, CO 80228, telephone (720) 962-7710, email 
[email protected]. This FRN is also available on Western's Web site at 
http://ww2.wapa.gov/sites/western/recovery/Pages/default.aspx.

SUPPLEMENTARY INFORMATION:

Background

    Western markets and transmits wholesale hydroelectric power 
generated at Federal dams across the western United States. Western's 
transmission system was developed to deliver Federal hydroelectric 
power to preference customers. Western owns and operates a transmission 
system with more than 17,000 circuit-mile, high-voltage lines and also 
markets power across 15 western states and a 1.3 million square-mile 
service area. Western's service area encompasses all of the following 
states: Arizona, California, Colorado, Nebraska, Nevada, New Mexico, 
North Dakota, South Dakota, Utah and Wyoming; and parts of Iowa, 
Kansas, Montana, Minnesota, and Texas.
    Western markets excess capacity on its transmission system 
consistent with the policies and procedures outlined in its Open Access 
Transmission Tariff (OATT) on file with the Federal Energy Regulatory 
Commission. Western offers nondiscriminatory access to its transmission 
system, including requests to interconnect new generating resources to 
its transmission system, under its OATT.
    The Program implements Section 402 of the Recovery Act, which 
amends Section 301 of the Hoover Power Plant Act of 1984. The Program 
uses the authority granted under these statutes to borrow up to $3.25 
billion from the U.S. Department of the Treasury to develop new or 
upgraded electric power transmission lines and related facilities, with 
at least one terminus within Western's service territory, that delivers 
or facilitates the delivery of power generated by renewable energy 
resources.
    Western sought public comment on the policies it proposed to use to 
implement its Recovery Act borrowing authority as announced in a March 
4, 2009 Federal Register notice (74 FR 9391). A public comment forum 
was held in Lakewood, Colorado, on March 23, 2009, and a transcript and 
meeting video were made available through Western's Web site. Western 
received comments from 40 customers and other stakeholders. All 
comments were reviewed and, where appropriate, incorporated into the 
Program. Western announced the TIP on May 14, 2009 (74 FR 22732) (``the 
May 2009 Notice''). In the May 2009 Notice, Western established 
policies on project funding, project evaluation, project development, 
operations and maintenance, and project rates and repayment.

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Proposed Action

    The proposed action is to implement updates to the Program as set 
forth in this FRN.
    Since 2012, Western has engaged in an internal review of the 
Program to evaluate its current project development and financing 
practices and to identify areas where the Program could be improved. As 
a result of this process Western seeks to achieve: (1) More efficient 
screening of projects, (2) increased transparency of the process used 
to review and evaluate projects, (3) improved communications with 
project applicants, and (4) additional interest from potential 
applicants that seek Western's assistance to develop a project and use 
Western's borrowing authority to obtain project funding.

Table of Contents

I. Definitions
II. Principles
III. Project Evaluation Criteria
IV. Project Life-Cycle Overview
V. Funding During the Project Development Phase
VI. Reaffirmation of Project Development, Operations & Maintenance, 
and Project Rates and Repayment

I. Definitions

    Advanced Funding Agreement (AFA): The document that sets forth the 
terms by which the Project Applicant provides advance funds to Western 
for development work on an Eligible Project. An AFA is executed after 
TIP has reviewed and accepted a Project Applicant's Business Plan 
Proposal.
    Business Plan Proposal: The document prepared by the Project 
Applicant that articulates project development, commercial, and 
financial plans supported by Financial Model projections. The Business 
Plan Proposal is a preliminary plan that identifies the conditions 
precedent required for a Project Applicant to apply for financing. 
Submitted after Western and the Project Applicant have entered into a 
Memorandum of Understanding, a Business Plan Proposal is a detailed, 
comprehensive document that will mature and be revised by the Project 
Applicant prior to submission of a loan application.
    Project Development Phase: The phase of the project that precedes 
the Project Finance Phase and construction of the project. The Project 
Development Phase begins when a Project Applicant submits a Statement 
of Interest and concludes when a Project Applicant submits an 
application for the use of Western's borrowing authority. The Project 
Development Phase may include activities associated with facilities 
studies, Western Electricity Coordinating Council (WECC) path rating, 
environmental review, design of facilities, obtaining necessary 
permits, negotiation and execution of commercial agreements, 
acquisition of external financing, and any other activity that must be 
completed prior to the start of construction. The Program offers 
Project Applicants assistance during this phase.
    DOE Loan Programs Office (LPO): A program within the Department of 
Energy. DOE LPO performs underwriting and loan monitoring and 
administration functions.
    Eligible Project: A project that: (1) Delivers or facilitates the 
delivery of renewable energy resources, (2) has one terminus in 
Western's service territory, (3) can demonstrate a reasonable 
expectation of repayment, (4) will not adversely impact system 
reliability or operations, and (5) is in the public interest.
    Financial Model: A model that includes a simulation of relevant 
costs, benefits, values, and risks that will be assessed when making 
financial decisions affecting a project. Financial Models submitted to 
TIP must be in Microsoft Excel and use standard industry conventions or 
templates provided by Western.
    Project Finance Phase: The Project Finance Phase involves the 
underwriting, financing, and loan monitoring and servicing for an 
Eligible Project. With few exceptions, it follows completion of the 
Project Development Phase. The DOE LPO is responsible for administering 
the Project Finance Phase.
    Memorandum of Understanding (MOU): The standard document that sets 
forth an understanding between Western and a Project Applicant after 
Western has approved the applicant's Statement of Interest. An MOU 
precedes the applicant's submission of a Business Plan Proposal.
    Project Applicant: Term used to refer to an entity that submits a 
Statement of Interest and Business Plan Proposal.
    Statement of Interest (SOI): The document submitted by a Project 
Applicant that outlines its proposed project. The first step in the TIP 
Development Phase, an SOI is limited to 10 pages. An SOI must, at a 
minimum, include a detailed description of the proposed project 
(including transmission route information, if applicable, and a 
preliminary business model), the proposed role that TIP would play in 
project development, and sufficient information to demonstrate that the 
project meets or is reasonably expected to meet Western's Project 
Evaluation Criteria.

II. Principles

    In the May 2009 Notice, Western identified the principles it would 
use to guide implementation of its borrowing authority. Application of 
the Program-related principles ensures, among other things, that the 
Program is separate and distinct from Western's power marketing 
functions and that each project stands on its own for loan repayment 
purposes. Western hereby reaffirms the Program-related principles set 
forth in the May 2009 Notice. For convenience, the Program-related 
principles are set forth below.
    Consistent with its borrowing authority, Western will be guided by 
the following Program related principals:
    1. Provide opportunities, where appropriate, for participation by 
other entities in constructing, financing, owning, facilitating, 
planning, operating, maintaining or studying construction of new or 
upgraded electric power transmission lines and related facilities.
    2. Use revenue from an individual project developed under the 
Program as the only source to:
    a. repay the project loan made by Western;
    b. pay project-related ancillary services and operation and 
maintenance expenses; and
    c. pay for ancillary services provided by an existing Federal power 
system.
    3. Use appropriate accounting controls to treat each transmission 
line and related facility that receives borrowing authority separately 
and distinctly from each other and all other Western power and 
transmission facilities.
    4. Ensure project beneficiaries repay project costs.

III. Project Evaluation Criteria

    Consistent with the requirements set forth in the Recovery Act, 
Western will use the following criteria in evaluating projects:
    1. Facilitates the delivery to market of power generated by 
renewable resources constructed or reasonably expected to be 
constructed.
    2. Has at least one terminus within Western's service territory.
    3. Establishes the reasonable expectation that the project will 
generate enough transmission service revenue to repay the principle 
investment, all operating costs including overhead, and accrued 
interest by the end of the project's service life.

[[Page 59668]]

    4. Will not adversely impact system reliability or operations, or 
other statutory obligations.
    5. Is in the public interest.

IV. Project Life-Cycle Overview

    Based on its experience to date, the Program anticipates that the 
majority of Eligible Projects will require some project development 
(e.g., environmental permitting, establishment of WECC path rating, and 
technical design work) before a loan can be issued using Western's 
borrowing authority. With this in mind, Western's involvement in each 
project is divided into two general phases--the Project Development 
Phase and the Project Finance Phase. Though there may be exceptions 
(e.g., a project that needs no development work), the expectation is 
that each project will complete the Project Development Phase and the 
underwriting and execution stages of the Project Finance Phase before 
it receives funding under the borrowing authority. Projects that 
receive funding under the borrowing authority enter a loan monitoring 
stage until all payments and other amounts due have been repaid.

A. Project Development Phase

    The Project Development Phase involves the origination and 
development work for a potential project. This phase is divided into 
three parts: (1) Project introduction, which involves the initial 
intake and evaluation of an SOI; (2) project initiation, which involves 
the development of a more substantial business proposal and initiation 
of due diligence for each project that advances beyond an SOI; and (3) 
project development, which involves a review of the proposed baseline 
project plan and budget as well as the development of major project 
decision milestones for each project that advances beyond the business 
proposal stage. The elements of the Project Development Phase and 
relevant procedures are explained below.
1. Statement of Interest
    The review process begins when a Project Applicant submits an SOI. 
Western will post instructions on submitting SOIs on its Web site. On 
or about the beginning of each quarter (approximately January 1, April 
1, July 1, and October 1), Western will screen SOIs received during the 
previous quarter for purposes of determining whether or not each 
proposed project meets or is reasonably expected to meet the Project 
Evaluation Criteria (see Section III above). Western may contact 
Project Applicants for clarifications during the review period, but 
will not engage in material discussions about an SOI. Western will make 
its determination no later than 30 days after the beginning of each 
quarter.
    If Western determines that an SOI does not or is not expected to 
meet all of the Project Evaluation Criteria, it will inform the Project 
Applicant in writing of the proposal's deficiencies and take no further 
action on the proposal. Project Applicants who submit an SOI that does 
not comport with the Project Evaluation Criteria will be invited to 
submit a revised SOI as early as the next quarterly review if they so 
choose. If Western determines that an SOI meets the Project Evaluation 
Criteria, the proposed project will be deemed an Eligible Project and 
will be assigned to the development queue, and the Project Applicant 
will be offered the opportunity to enter into an MOU with Western. 
Because projects will possess varying degrees of maturity, a project 
may remain in the development queue until Western--after engaging in 
discussions with the Project Applicant--determines that the project is 
sufficiently developed to proceed to the Business Plan Proposal stage.
    The Project Applicant is responsible for the costs associated with 
Western's review of an SOI. Those costs are addressed in Section V 
below.
2. Memorandum of Understanding
    Project Applicants who submit an SOI that meets or is reasonably 
expected to meet the Project Evaluation Criteria will be offered the 
opportunity to enter into an MOU with Western. The MOU is a standard 
document that, among other things, establishes the relationship among 
the parties, funding obligations for the submission of a Business Plan 
Proposal, confidentiality provisions, and the making of public 
statements regarding a project. The execution of an MOU does not imply 
that Western has approved a project for use of Western's borrowing 
authority. It does, however, represent Western's intent to move forward 
with its review and evaluation of the project for purposes of 
determining whether or not to participate in project development 
activities. Upon entering into an MOU, either party may terminate the 
document for any reason.
    Western will post a model MOU on its Web site. A Project Applicant 
may take up to six months to enter into an MOU with Western after 
receiving confirmation that its SOI has been approved.
3. Business Plan Proposal
    The Business Plan Proposal explains a project's development, 
commercial, and financial plans supported by Financial Model 
projections. A Business Plan Proposal is a preliminary plan that may 
lead to the determination that a project is financially, technically, 
commercially, and legally viable and thus, appropriate to proceed on to 
development. A Business Plan Proposal also addresses anticipated 
conditions precedent that a commercial lender would require in a loan 
application. It is expected that a Business Plan Proposal submitted for 
development assistance will mature and be revised by the Project 
Applicant prior to submission of a loan application.
    At a minimum, it is expected that a Business Plan Proposal will 
include the following information:
     A comprehensive project description that includes the 
history of the project to date.
     The names of all investors, partners, joint ventures, and 
other entities with a financial or legal interest in the proposed 
project.
     The status of all efforts to obtain project funding from 
other sources.
     Information to assess the financial viability of the 
proposed project, including audited financial statements and reports of 
the Project Applicant and any other investors in the project and 
detailed Financial Models.
     The Project Applicant's recent and relevant experience in 
developing projects of similar size and scope.
     A plan for how the Project Applicant expects to generate 
revenue from the project to:
    (1) Repay principal and interest associated with a loan from 
Western's borrowing authority, and
    (2) pay for project-related ancillary services and operations and 
maintenance expenses.
     A detailed analysis of any impact that the proposed 
project may have on the reliability of the integrated electrical grid.
     An explanation of how the project will obtain and deliver 
generation-related ancillary services (if appropriate).
     An independent analysis of any new technologies to be 
employed as part of the project.
     All known material economic, legal, and other risks that 
may have an effect on the project.
     A listing of all TIP development-related services that the 
Project Applicant seeks to obtain.
     Relevant information concerning required approvals, 
permits, licenses,

[[Page 59669]]

land rights, and other permissions that must be obtained on behalf of 
the project.
     Detailed project technical specifications and designs.
     Required interconnections and path ratings.
    Western will perform a due diligence review of a Business Plan 
Proposal to determine if the proposal is deficient in these or any 
other material respects. It will notify the Project Applicant in 
writing and work with the applicant to remedy any deficiencies. When 
Western determines that the Business Plan Proposal adequately addresses 
all technical, commercial, and financial aspects of a proposed project 
and contains the requisite Financial Models, it will invite the Project 
Applicant to enter into an AFA.
    A Project Applicant may take up to 12 months to submit a Business 
Plan Proposal after signing an MOU with Western. Due to the varying 
nature and complexity of Business Plan Proposals, Western will not 
establish a firm fixed time frame for reviewing such documents but will 
endeavor to complete its review expeditiously while keeping the Project 
Applicant apprised of its progress.
    The Project Applicant is responsible for the costs associated with 
Western's review of a Business Plan Proposal. Those costs are addressed 
in Section V below.
4. Advance Funding Agreement
    An AFA is an agreement that sets forth the terms under which 
Western will participate in the development of a project. The terms of 
an AFA call upon a Project Applicant to advance a mutually-agreed 
amount to cover costs Western incurs in performing project development 
activities as set forth in the document. No work will commence without 
receipt of advance payment. The AFA also provides that if there are 
insufficient funds to cover Western's project-related development 
expenses, Western will inform the Project Applicant of the 
insufficiency and request additional funding.
    TIP will post a model AFA on its Web site.
5. Project Development
    Once an AFA is executed, the parties begin to perform project 
development-related activities. These activities often include 
facilities studies and designs; establishment of a WECC path rating; 
environmental, cultural, endangered species, and other assessments; 
negotiation and execution of commercial agreements; acquisition of 
external financing for construction; negotiation of the project 
ownership structure; any needed interconnection agreements; and 
Western's continued performance of due diligence as it relates to the 
project and any other activity that must be completed prior to the 
start of construction. Depending on the nature of the project and the 
amount of development that has already occurred, the Project 
Development Phase is likely to vary in length from less than a year to 
several years.

B. Transition From Project Development Phase to Project Finance Phase

    Western, in consultation with LPO, will determine when a project 
has completed the Project Development Phase and will coordinate with 
LPO regarding the transition of a project from the Project Development 
Phase to the Project Finance Phase.

C. Project Finance Phase

    The Project Finance Phase involves the underwriting, financing, and 
loan monitoring and servicing for a project. This phase can generally 
be divided into three parts: (1) Project underwriting, which involves 
submission by an applicant of a completed loan application and business 
plan, the completion of extensive due diligence and financial modeling 
by LPO and its advisors, and negotiation of a term sheet and 
conditional commitment containing the material business and legal terms 
of a possible financing transaction; (2) for any project that proceeds 
beyond underwriting, project execution, which involves the negotiation 
and documentation of definitive loan documents and any other agreements 
and instruments required for the financing of the project, as well as 
the closing of such financing; and (3) for any project that achieves 
execution, project implementation, which involves the actual 
implementation and funding disbursements in accordance with the loan 
documents as well as loan servicing and monitoring activities.

V. Funding During the Project Development Phase

A. Policies and Procedures

1. Accounting Principles
    Western will use generally accepted accounting principles and 
practices in recording and tracking all expenses and revenue 
transactions for each project.
2. Program Funding
    The Program must be financially self-sustaining. As such, expenses 
incurred by Western in reviewing SOIs and evaluating Business Plan 
Proposals must be borne by Project Applicants. Similarly, Project 
Applicants must provide adequate advance funding for services performed 
by Program personnel or contractors during the Project Development 
Phase.
3. Allocation of Expenses--SOI
    a. Based on Western's experience, it estimates that it will cost 
approximately $50,000 to review and screen an SOI. Therefore, Project 
Applicants shall make a one-time $50,000 payment to the Program at the 
time an SOI is submitted to cover costs related to the SOI review. 
Project Applicants should contact the TIP office to make arrangements 
for this payment. Failure to make this payment will result in Western 
taking no action to review and screen the SOI.
    b. If, in the course of reviewing the SOI, Western determines that 
there are insufficient funds to cover its anticipated expenses, Western 
will promptly inform the Project Applicant of the insufficiency and 
request adequate additional funding to complete its review. If an SOI 
does not meet or is reasonably expected to not meet all of the Project 
Evaluation Criteria, leading Western to conclude that no further action 
on the project proposal is required, any funds paid by the Project 
Applicant in excess of actual costs incurred by Western in reviewing 
the proposal will be returned to the Project Applicant.
4. Allocation of Expenses--Business Plan Proposal
    a. Based on its experience, Western estimates that it will cost 
approximately $250,000 to review and evaluate a Business Plan Proposal. 
Therefore, Project Applicants shall make a one-time $250,000 payment to 
Western at the time a Business Plan Proposal is submitted to cover 
costs related to the Business Plan Proposal review and evaluation. 
Failure to include this payment with the submission of a Business Plan 
Proposal will result in Western taking no action to review and evaluate 
the proposal. Project Applicants should contact the TIP office to make 
arrangements for making this advance. The Project Applicant may elect 
to apply funds remaining (if any) from its $50,000 SOI submission 
payment that are in Western's control to the $250,000 Business Plan 
Proposal charge.
    b. If, in the course of reviewing and evaluating the Business Plan 
Proposal, Western determines that there are insufficient funds to cover 
Western's anticipated project-related expenses, Western will inform the 
Project Applicant of the insufficiency and request adequate additional 
funding to

[[Page 59670]]

complete its review. If a Business Plan Proposal does not lead to the 
determination that a project is financially, technically, and 
commercially viable and ready to proceed to development, Western will 
notify the Project Applicant and any funds paid by the Project 
Applicant in excess of actual costs incurred by Western in evaluating 
the proposal will be returned to the Project Applicant.
5. Allocation of Expenses--AFA
    As part of the AFA, Western and the Project Applicant will mutually 
agree on an amount to cover costs associated with project development 
activities performed by Western. The Project Applicant may elect to 
apply funds remaining (if any) from its $250,000 Business Plan Proposal 
payment that are in Western's control to the mutually agreed upon 
amount.

VI. Reaffirmation of Project Development and Operations & Maintenance, 
and Project Rates and Repayment Policies and Practices

    Western reaffirms the Project Development and Operations & 
Maintenance, and Project Rates and Repayment Policies and Practices set 
forth in the May 2009 Notice.

Environmental Compliance

    In compliance with the National Environmental Policy Act of 1969 
(NEPA) (42 U.S.C. 4321, et seq.), the Council on Environmental Quality 
Regulations for implementing NEPA (40 CFR parts 1500-1508), and the DOE 
NEPA Implementing Procedures and Guidelines (10 CFR part 1021), Western 
has determined that this action fits within category A13, Procedural 
Documents, of Appendix A to Subpart D of Part 1021 and is categorically 
excluded from NEPA analysis. Future actions under this authority will 
undergo appropriate NEPA analysis.

    Dated: September 6, 2013.
Mark A. Gabriel,
Administrator.
[FR Doc. 2013-23604 Filed 9-26-13; 8:45 am]
BILLING CODE 6450-01-P