[Federal Register Volume 79, Number 66 (Monday, April 7, 2014)]
[Notices]
[Pages 19065-19077]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-07700]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Transmission Infrastructure Program

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of revised program and request for project proposals.

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SUMMARY: The Western Area Power Administration (Western) hereby 
announces its revised Transmission Infrastructure Program (the Program 
or TIP) and its request for new project proposals. The Program 
implements Section 402 of the American Recovery and Reinvestment Act of 
2009 (Recovery Act) for the purpose of 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, to deliver or facilitate the delivery of power generated by 
renewable energy resources constructed, or reasonably expected to be 
constructed, after the date the Recovery Act was enacted. Through the 
publication of this Federal Register notice (FRN or final notice) 
Western is finalizing revisions to this Program effective and seeks new 
project proposals from developers and other parties interested in 
obtaining financing for eligible projects. This final notice adopts and 
reaffirms the principles that the Program is separate and distinct from 
Western's power marketing functions, and each eligible project must 
stand on its own for repayment purposes.

DATES: Revisions to the Program are effective as of May 7, 2014.

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/transmission/TIP/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

[[Page 19066]]

new or upgraded electric power transmission lines and related 
facilities, with at least one terminus within Western's service 
territory, that facilitates the delivery to market of power generated 
by renewable energy resources constructed or reasonably expected to be 
constructed. Western sought public comment on the proposed updates to 
the Program in a 30-day public consultation and comment period as 
announced in a September 27, 2013, FRN (78 FR 59666). At the request of 
numerous parties, the comment period was extended for an additional 30 
days and closed on November 26, 2013. Western received 48 comments from 
43 interested parties and other stakeholders. All comments were 
reviewed and, where appropriate, incorporated into the Program. The 
Discussion of Comments section provides Western's response to the 
comments.

Discussion of Comments

    Western received 48 comments related to the proposed, updated 
Program. To facilitate presentation and discussion of the comments, 
Western placed the comments into four general categories: (1) Comments 
on operation and management of the Program; (2) comments on project 
evaluation and selection; (3) comments on project funding, financing 
and repayment criteria; and (4) other comments. This section provides 
Western's response to the comments received. Where possible, comments 
of a similar nature were consolidated.

1. Comments on Operation and Management of the Program

a. Time and Information Comments
    Summary Comment: Western received numerous comments asking that the 
comment period be extended a second time. Some commenters request that 
Western meet with them to discuss the Program in more detail before 
implementing any revisions, and others want Western to provide 
additional time to elicit comments on what they describe as 
foundational issues and concerns with TIP.
    Response: As referenced above, Western extended the original 30-day 
comment period an additional 30 days in response to concerns raised by 
some commenters. Western must balance the need to consider input from 
stakeholders with the need to implement necessary revisions to the 
Program in a timely fashion. Western has carefully considered all the 
comments it received and has incorporated them, as appropriate, into 
this final notice. Western will not schedule meetings with commenters 
to discuss the Program at this time, but is committed to continual 
evaluation of the Program and is open to the possibility of making 
further adjustments, as appropriate, through an open and transparent 
public process.
    Summary Comment: Prior to the extension of the public comment 
period, Western received numerous preliminary comments that included a 
series of questions about the Program.
    Response: Western responded to the commenters' questions in writing 
on November 15, 2013. The responses are posted on Western's Web site at 
http://ww2.wapa.gov/sites/western/transmission/tip/Documents/FRN_responses.pdf. Subsequently, Western extended the comment period an 
additional 30 days.
    Comment: A commenter stated that the final notice should be laid 
out in a temporal sequence rather than by subject. The commenter also 
said it made more sense to move the requirement to advance $50,000 when 
submitting a project application to the beginning of the notice.
    Response: By describing the process through an overview of the 
project life-cycle, Western is informing project applicants of the 
chronological steps typically encountered during the project 
development phase. As to moving the application charge to the beginning 
of the notice, Western added a reference to the Project Proposal 
section (which appears early in the Project Life-cycle Overview 
section) notifying applicants of the charge.
    Comment: A commenter pointed out that the program-related 
principles in the September 27, 2013 FRN did not match the program-
related principles published in the May 14, 2009 FRN (74 FR 22732).
    Response: The variations in the program-related principles in the 
two FRNs were meant to streamline the text of the principles. There was 
no intent by Western to alter the program-related principles. Western 
has re-instated the program-related principles from the May 14, 2009 
FRN verbatim with two exceptions, which are identified in the 
introduction to Section II (Program Principles).
b. Accounting Practices and Standards Comments
    Summary Comment: Western received several comments questioning the 
accounting methods being used by TIP. They include a request to explain 
what ``appropriate accounting controls'' means and whether TIP 
accounting principles are different than Western's accounting 
principles. It was also suggested that Western track project repayment 
and include it in ``appropriate controls.'' Another comment said the 
September 27, 2013 FRN lacks specificity regarding financial management 
issues.
    Response: During the implementation of TIP, a stand-alone, separate 
Treasury Account Funding Symbol (TAFS) was created for TIP's specific 
use. Western has TAFSs for several functions, including the Colorado 
River Basins Power Marketing Fund and the Falcon and Amistad Fund. None 
of Western's TAFSs can be used for purposes outside of their respective 
appropriation. The same restrictions apply to TIP financial activities. 
Under the TIP TAFS, Western has established and maintains separate 
accounting fund codes, project numbers and work orders within its 
financial management system for all TIP activities and projects. TIP 
has dedicated staff of three financial personnel (financial manager, 
accountant and budget analyst) whose responsibilities include the 
tracking and monitoring of TIP costs and the segregation of TIP's 
financial transactions from Western's preference power financial 
transactions and from all other Western transactions. Western's 
accounting activities, including TIP, follow U.S. Government Standard 
General Ledger (USSGL) and Generally Accepted Accounting Principles 
(GAAP). In addition, TIP is subject to annual financial statement 
audits as well as OMB Circular A123 audit and review (link at 
www.whitehouse.gov/omb/circulars a123) that provide oversight of all 
finance activities.
    Summary Comment: Some commenters asked what accounting methods will 
be used to ensure TIP and non-TIP ancillary services are segregated?
    Response: TIP will use the same accounting methods as the rest of 
Western in tracking ancillary services. However, TIP ancillary services 
accounts will be separate and distinct accounts from Western's non-TIP 
ancillary service accounts.
c. Laws/Rules Comments
    Summary Comment: Western received numerous comments that expressed 
concern over what is perceived as an effort to broaden TIP whereby it 
now provides assistance to applicants that seek to develop a project, 
and that such an effort goes beyond what should be Western's primary 
role in providing loans. Some commenters expressed concern that TIP 
fundamentally changes Western's core mission; that expanding the 
Program

[[Page 19067]]

may go beyond Congress' intent and Western's organic legislation; that 
the Program should not impact preference power customers; and that 
expansion of Western's role could only be done through borrowing from 
the U.S. Treasury or through advances from preference power customers. 
One comment said Congress should defund TIP to reduce the Federal debt. 
Others noted that the September 27, 2013 FRN does not contain any 
articulation that TIP will not impair Western's primary mission of 
delivering hydropower to preference customers, that Western is growing 
its mission at the expense of its preference power customers, and 
Western should provide a justification for TIP's ``new role.''
    Response: Western appreciates these comments. In the course of 
evaluating projects submitted to TIP and working with project 
applicants, Western identified that some projects, though viable and 
possessing promise, were not ready for funding. For example, a project 
could need further development in the area of obtaining a Western 
Electricity Coordinating Council (WECC) path rating before it is ready 
to compete for TIP funding. The May 14, 2009 FRN that established TIP 
identified that the Program would, among other things, ``participate in 
the study, facilitation, financing [and] planning . . . of new or 
upgraded transmission facilities and additions that will help bring 
renewable energy resources to market across the West.'' As TIP has 
staff (e.g., a planning engineer) in place for the purpose of 
evaluating projects, it was deemed efficacious to make them available 
to developers (at the sole expense of the developer) to provide 
assistance in areas such as obtaining WECC path ratings. Making TIP 
staff available in such a manner allows TIP to directly bill developers 
for services rendered and improves the chances a project may receive 
funding and fulfill the statutory purpose of Section 402 of the 
Recovery Act. Previously, TIP used its initial $10 million non-
reimbursable Recovery Act appropriation to cover expenses it incurred 
in reviewing project statements of interest and engaging with 
applicants. Going forward, project applicants must now fund, through 
application charges and advance payments, the work that TIP undertakes 
on a project. This does not change or impair Western's core mission to 
provide hydropower to its preference customers, nor does it require 
additional borrowing from the U.S. Treasury. The assurance that 
Western's preference power customers have not and will not bear the 
cost for assistance provided by TIP to project applicants can be found 
in Section 402 of the Recovery Act, TIP's financial records and this 
final notice. Western's operation of the Program facilitates the 
construction, financing and planning of new and upgraded transmission 
lines and the legislation that gave rise to the Program and Western 
itself. Western does not have the authority to defund the TIP.
    Summary Comment: Several commenters noted that TIP is tremendously 
valuable to the nation, has potential to produce highly beneficial 
public-private partnerships, and is timely and relevant in the pursuit 
of competitive power project for renewables in the West. These 
commenters also noted that project developers, not Western, should be 
responsible for funding any development efforts related to a TIP 
project.
    Response: Western appreciates this comment.
    Summary Comment: Several commenters asked how the May 14, 2009 FRN 
and the September 2013 FRN relate to one another (i.e., does the 
September 27, 2013 FRN supersede the May 14, 2009 FRN, amend it, or 
contain additional program requirements). Commenters said there are 
discrepancies between the two FRNs, ``fast tracking'' of adjustments, 
and that changes in the September 27, 2013 FRN may be an effort to hide 
Western's real intentions. A single FRN that contained all the Program 
requirements was preferred, and an explanation of the differences 
between the May 14, 2009 FRN and the September 27, 2013 FRN was 
requested.
    Response: After receiving public comment, Western established the 
Transmission Infrastructure Program in the May 14, 2009 FRN. As the 
Program took shape, it became evident to Western that aspects of the 
Program (e.g., giving applicants more detailed information about 
submitting a proposal, requiring applicants to pay for Western's 
evaluation of a proposal, defining more commonly used terms) needed to 
be updated. The purpose of the September 27, 2013 FRN was to provide 
notice of proposed TIP updates in a transparent and public manner. 
Western's interest in proposing the changes in the September 27, 2013 
FRN that are being finalized in today's notice is to create a more 
efficient, self-sustaining program that realizes the statutory goals of 
Section 402 of the Recovery Act (Section 301 of the Hoover Power Plant 
Act of 1984)--the upgrading and expansion of the transmission system in 
the West to deliver or facilitate the delivery of renewable energy 
resources. Today's final notice contains all Program requirements and 
includes a section that summarizes the changes among the May 14, 2009 
FRN, the September 27, 2013 FRN and this document.
    Summary Comment: A commenter states that TIP funding will expire in 
2016, before TIP projects can be approved, and project applicants do 
not have sufficient time to perform required transmission line planning 
and the ability to contract with generators of renewable power. The 
commenter posits that without renewable tenants, any new project will 
not be commercially viable or needed and will become a stranded 
transmission asset to be repaid by Western's customers.
    Response: Section 402 of the Recovery Act, the section of the act 
that authorizes Western to loan up to $3.25 billion, amends Section 301 
of the Hoover Power Plant Act of 1984 (Pub. L. 98-381). Unlike other 
sections of the Recovery Act (e.g., Section 403, Set-aside for 
Management and Oversight), Section 402 does not stipulate that funds 
set aside remain available for obligation until a specific date; 
therefore, Western considers the borrowing authority made available 
under Section 402 permanent.
    Summary Comment: Western received several comments that the 
September 27, 2013 FRN appears to have expanded the standard of 
``reasonable expectation,'' potentially meaning that the authority 
could be exercised for a project that is never constructed or does not 
generate enough revenue to ensure repayment.
    Response: No expansion of the ``reasonable expectation'' standard 
is intended. The reference to projects that are constructed or 
reasonably expected to be constructed is taken directly from the 
wording of Section 402 of the Recovery Act. It is possible a project 
that obtains a loan through Western's borrowing authority may not get 
built despite the efforts of Western and the DOE Loan Programs Office 
(LPO) to identify projects that are good candidates for funding. A 
project that cannot demonstrate a committed source of revenue to ensure 
repayment of a loan would not be considered a good candidate to receive 
funding.
    Summary Comment: The May 14, 2009 FRN indicates that Western's 
Administrator must ensure that TIP does not conflict with the 
responsibilities of the existing transmission system. Western's 
response to a comment submitted on the May 14, 2009 FRN regarding the 
Administrator's certification

[[Page 19068]]

responsibility to ensure a proposed new project does not conflict with 
his responsibilities to preference power customers should be added to 
the September 27, 2013 FRN.
    Response: Western notes that today's final notice requires that a 
project considered by TIP will not adversely impact transmission system 
reliability or operations, or any other statutory obligations. Those 
statutory obligations include the Administrator's responsibility to 
abide by contracts to provide Federal hydropower to Western's 
preference power customers.
    Summary Comment: Whenever there is a reference to operations and 
maintenance, there should be a reference to ``replacements.''
    Response: Western has incorporated a reference to ``replacements'' 
in this final notice, where appropriate.
    Summary Comment: Some commenters noted that the September 27, 2013 
FRN did not include language regarding the Administrative Procedure 
Act's (APA) 30-day delayed effective date provision and questioned 
whether the Program changes were substantive.
    Response: The September 27, 2013 FRN proposing updates to the 
Program did contain some substantive changes. The delayed effective 
date provision in Section 553(d) of the APA applies to final notices. 
Because today's notice finalizes the substantive changes proposed in 
the September 27, 2013 FRN, the 30-day provision applies to today's 
final notice.
    Comment: A commenter asserts that the TIP application process is 
now less efficient and more cumbersome than the process outlined in the 
May 14, 2009 FRN. A single application and cost structure with a quick 
decision turnaround is recommended.
    Response: The submission of a project proposal affords Western the 
opportunity to provide project applicant a timely decision on whether a 
project meets the Project Evaluation Criteria, potentially saving the 
applicant considerable time and expense associated with having to 
prepare and submit a full Business Plan Proposal that may not meet the 
criteria. Western will continue to examine ways to expedite the project 
evaluation process in the interest of making the process less 
burdensome for applicants.
    Comment: A commenter questioned the quarterly intake of project 
proposals. To help developers stay on schedule with their project 
development plans, the commenter asked if there was an alternative way 
to review project proposals.
    Response: Western will screen project proposals at a minimum on a 
quarterly basis, but has revised the final notice so it can also screen 
proposals at times other than the beginning of each quarter, as 
necessary.
    Comment: A commenter asked that Western remove the 10-page cap on 
the project proposal so project applicants could provide more detailed 
information.
    Response: Western has removed the 10-page limit on the number of 
pages in a project proposal.
d. Comments on LPO's Role in TIP
    Summary Comment: The DOE LPO should become a backstop when 
``reasonable expectations'' of repayment are not achieved.
    Response: The DOE LPO will provide services to Western during the 
project financing phase, but cannot act as a backstop for Western's 
borrowing authority.
    Summary Comment: Western received several comments pointing out 
LPO's new role. Some commenters said LPO should make the final 
determination if a project meets the ``reasonable expectation of 
repayment'' requirement.
    Response: LPO will play a material role in determining whether a 
loan from Western's borrowing authority should be extended to project 
developers on future TIP projects. Toward that end, the ``reasonable 
expectation of repayment'' (one of the five statutory evaluation 
criteria) will receive extensive due diligence and credit review by 
LPO. The LPO's analysis will be shared with Western's Administrator 
before a determination is made regarding a project's ability to meet 
this core statutory requirement.
    Comment: A commenter supports moving the evaluation of the loan 
application function to LPO, believing that leveraging existing DOE 
staff will keep Program costs down.
    Response: Western appreciates the comment.
 e. Commingling of Resources Comments
    Summary Comment: Western received numerous comments about the 
commingling of resources. In particular, commenters expressed concern 
about non-TIP staff being used to conduct TIP work when they should be 
supporting preference power customers (i.e., that TIP is taking 
resources away from preference power customers, thereby impacting the 
ability of Western employees to concentrate on preference power 
issues). It was noted that a paramount concern of preference customers 
is that so much staff energy and time will be taken up managing the 
Program that routine business matters related to serving preference 
customers will not be met or will be significantly delayed. Others 
considered the use of non-TIP personnel contrary to TIP's core 
principle not to interfere with Western's existing obligations. A 
specific proposal raised by a commenter was to have Western use 
contractors to supplement the TIP staff when necessary.
    Response: Western acknowledges the commenters' concerns. Non-TIP 
staff has been used sparingly on issues that only relate to TIP, and 
the TIP Manager, in conjunction with Western regional managers and 
other supervisors, monitor the involvement of non-TIP staff. Dedicated 
TIP staff work solely on TIP projects--not preference power issues. The 
management of TIP is the responsibility of the TIP Manager, who bills 
all of his/her time to the Program. It is a TIP principle that the 
Program will not adversely impact system reliability, operations or 
other statutory obligations, and TIP has not interfered with Western's 
existing obligations. Western has and will continue to use contractors 
to work on TIP-exclusive matters when necessary. The use of contractors 
provides TIP flexibility in scaling up manpower to match increased 
Program activities while avoiding the need to create a larger, fixed 
staff.
    Summary Comment: Western received numerous comments about project 
beneficiaries being made to bear the entire cost for TIP and that 
preference power customers should not cover any TIP (i.e., project 
development) costs. There was also concern that Western's program 
direction was picking up some of the costs of TIP's accounting system.
    Response: Western acknowledges the commenters' concern that project 
developers and beneficiaries should pay all TIP-related costs. Western 
has and will continue to manage the Program separately from its 
preference power program. Western's protocol for managing the Program 
in this manner is set forth in this final notice (e.g., developers are 
responsible for providing advance funding for expenses TIP may incur 
from the submission of a proposed plan through actual project 
financing). Western agrees with the principle that project 
beneficiaries should pay for project costs and included this 
requirement in the Program principles set forth in the May 14, 2009 
FRN, the September 27, 2013 FRN and today's final notice, though it has 
been refined to require project applicants (not merely beneficiaries) 
to pay for project-related costs. Costs associated with TIP's 
accounting system are paid for through the application of the TIP 
overhead rate

[[Page 19069]]

that developers pay and is not funded through Western's preference 
power program.

2. Comments on Project Evaluation and Selection

    Summary Comment: The May 14, 2009 FRN included 11 elements, of 
which 6 have been removed from the September 27, 2013 FRN. Please 
clarify.
    Response: The evaluation criteria were reduced from 11 to 5 to 
streamline the evaluation process. The 5 criteria in the September 27, 
2013 FRN are directly derived from Section 402 of the Recovery Act.
    Summary Comment: How will standards for creditworthiness be 
established?
    Response: TIP will perform due diligence to determine if an 
applicant possess an adequate level of creditworthiness before deciding 
whether to further engage with the applicant on a project. TIP will 
apply generally accepted creditworthiness standards when making this 
determination.
    Comment: One commenter asked how an applicant would integrate the 
TIP process at different stages of a project.
    Response: Western revised the final notice to allow a project 
developer to submit a Project Proposal and Business Plan Proposal 
concurrently on a project that is more mature in terms of using 
Western's borrowing authority. This process will allow for a more 
expedited review of a project.
    Comment: A commenter that previously submitted a Statement of 
Interest and has a Memorandum of Understanding (MOU) with TIP seeks 
clarification as to how these revisions would apply; specifically, 
would such a project have ``grandfathered'' status?
    Response: The MOUs previously entered into by TIP required each 
party to be responsible for their own costs associated with the 
project. The agreements also permitted either party to terminate the 
agreement at will. As the updates to the Program require project 
applicants to provide advance funding to TIP for the evaluation of a 
project and any development assistance TIP may provide, Western will 
require existing entities with whom it has entered into an MOU to 
execute a revised MOU that stipulates the project applicant will 
provide advance funding for expenses incurred by TIP going forward.
    Comment: A commenter notes that the updates to the Program do not 
address other activities, such as land acquisition. The commenter 
suggests that upon completion of the project development phase, the 
project applicant and Western should negotiate a project finance phase 
agreement that lays out the terms of Western's participation (financial 
and otherwise) in the project.
    Response: In terms of extending Western's borrowing authority, 
Western will rely on the services and direction provided by the LPO in 
setting out the financial terms of the lender-borrower relationship. 
Other terms governing Western's role in a project would be subject to 
negotiation and Western's determination that it is in the best interest 
of the agency to participate in the project beyond making a loan.
    Comment: After noting that the description of major components in 
the September 27, 2013 FRN does not contain much detail about exactly 
how Western will evaluate specific projects, a commenter suggests that 
Western provide a more complete description of the Program (to include 
project evaluation) and solicit public comment.
    Response: Because no two projects are alike, Western does not 
provide detailed information in this final notice on how it will 
evaluate specific projects. The Project Evaluation Criteria set forth 
in the September 27, 2013 FRN establish the core principles that will 
guide Western's evaluation process. Those principles will inform 
Western's review of Project Proposals, Business Plan Proposals, and 
whether a project is developed to the point that it can proceed to loan 
underwriting and is eligible to obtain a loan using Western's borrowing 
authority. Western will, as necessary, work with project applicants in 
providing additional information about the project evaluation process.
    Comment: A commenter notes Western is expecting all aspects of 
project development to be complete, and that this requirement is too 
conservative. The commenter asserts that projects deep into development 
should qualify for TIP funding and Western should hold a public 
workshop to discuss ``project readiness.''
    Response: Western does not expect all projects to be fully 
developed. As noted in a previous comment, Western has revised this 
final notice so a project applicant can submit a Project Proposal and 
Business Plan Proposal concurrently on a project that is more mature, 
as opposed to submitting only a Project Proposal on a project that is 
in the early stages of development. Though it is likely a project well 
into the development phase has achieved or is close to achieving 
significant milestones (e.g., the issuance of a National Environmental 
Policy Act (NEPA) record of decision), only fully developed projects 
that meet Western's Project Evaluation Criteria are eligible for TIP 
funding. Western does not plan to hold a workshop on project readiness 
at this time but will consider the request.
    Comment: Timeline and milestones associated with the transition 
from the project development phase to the project financing phase 
should be clarified. Before committing substantial resources at the 
project development phase, project applicants need certainty that a 
project which completes agreed-upon milestones will advance to the 
project financing phase.
    Response: Western acknowledges project applicant's need to have 
certainty on project milestones. Western anticipates that project 
applicants will submit projects of varying degrees of maturity to TIP. 
As such, it is difficult to establish timelines that would apply to 
every project. There is the expectation, however, that material project 
milestones such as NEPA records of decision, purchase power agreements, 
interconnection agreements and other milestones will be achieved when a 
project transitions from the project development phase to the project 
financing phase.
    Comment: The September 27, 2013 FRN does not address activities 
beyond the issuance of a loan, such as Western's potential role in land 
acquisition. Project applicants and Western should negotiate a 
comprehensive project finance phase agreement that sets forth the full 
terms of Western's participation in a project rather than simply have 
an applicant submit a loan application.
    Response: Western's potential participation in activities beyond 
the issuance of a loan is difficult to quantify as any such 
participation will be project-specific and subject to Western's 
determination that it is in the agency's best interest. If Western 
participates in a project beyond providing financing, it would enter 
into negotiations with a project applicant to establish the terms of 
Western's participation prior to the applicant's submission of a loan 
application.

3. Comments on Project Funding, Financing and Repayment Criteria

    Summary Comment: Western received several comments concerning the 
failure of a TIP project during and after construction and how would 
repayment occur.
    Response: Western is mindful of this potential and the possible 
adverse consequences it could have on the Program. In most cases, long-
term purchase power agreements (PPAs) that provide the revenue to repay 
a TIP loan must be in place before Western would

[[Page 19070]]

consider extending its borrowing authority on a project.
    Comment: How would an applicant demonstrate repayment of borrowed 
funds if no PPAs are in place?
    Response: This would be difficult to do as PPAs are often tied to 
the source of transmission revenue required to repay borrowed funds. 
Section 402 of the Recovery Act mandates that revenue from the use of 
projects funded under this section shall be the only source of revenue 
for repayment of the associated loan and to meet the costs of operating 
and maintaining the new project. Western would review and evaluate the 
proposed source of revenue from a project to determine whether there is 
a reasonable expectation of repayment.
    Summary Comment: The second Program Principle in the September 27, 
2013 FRN appears to have narrowed a project's financial obligation. 
Western should reinstate the wording that appeared in response to a 
comment made on the May 14, 2009 FRN that it would use revenues from 
project beneficiaries as the only source of repayment of all associated 
project costs.
    Response: Program Principle 2, which is directly derived from the 
Recovery Act, is more succinct and precise than the wording in a 
response to a comment on the May 14, 2009 FRN. As this principle is a 
re-statement of the statutory requirement, it does not narrow a 
project's financial obligation.
    Summary Comment: Western must have a plan in place to cover future 
overhead costs. In addition, whenever there is a reference to Western's 
costs there should be a reference to ``including overhead.''
    Response: TIP has developed an overhead rate that it applies to 
direct charges for each project developer with which it is engaged, so 
TIP overhead is already included in TIP costs. The TIP accounting 
department prepares a budget to cover TIP's anticipated overhead 
expenses and adjusts the overhead rate accordingly. Due to a favorable 
outcome on the pre-payment of the loan on a previous TIP project, TIP 
was able to establish a DOE-approved reserve fund to cover TIP-related 
expenses if the payment of TIP overhead falls short in a particular 
year.
    Summary Comment: Western received comments questioning why Western 
is absorbing costs or ``mutually agreeing on an amount'' it will pay on 
a project as part of an Advance Funding Agreement (AFA), given that 
TIP's original startup funding has been exhausted.
    Response: During discussions leading up to an AFA, the project 
developer informs TIP of the nature of assistance it seeks. If TIP has 
the resources available to provide the assistance, the project 
developer pays for the entire amount of the assistance, including 
overhead, in advance. There is no negotiation about TIP paying for any 
assistance it provides and TIP is not absorbing any development costs. 
The only negotiation that takes place is whether the developer provides 
advance funding on a monthly or quarterly basis.
    Summary Comment: Applicants should repay project costs. The intent 
of TIP is to provide project financing and Western should not be 
responsible for funding development efforts related to a TIP project.
    Response: Applicants are required to pay--in advance--for any work 
that TIP performs. TIP personnel do not perform any work unless an 
applicant deposits a requisite sum of money in a Western U.S. Treasury 
account. Through the use of AFAs, annual project service charges, and 
the application of an overhead rate that covers programmatic expenses, 
TIP is a self-sustaining program. Beginning with the initial 
application, through the Business Proposal Plan and into the AFA phase, 
project applicants are responsible for all project-related costs.
    Summary Comment: Western should substantially reduce the $50,000 
application fee, allow more information in the project proposal, and 
share the expenses associated with the Project Proposal and the 
Business Plan Proposal.
    Response: TIP must be a self-sustaining program. It does not 
receive annual appropriations to cover expenses related to the 
submission and evaluation of Project Proposals and Business Plan 
Proposals so it is not in a position to share expenses. The application 
charges are upper estimates of the costs TIP may incur in evaluating 
these proposals. As set forth in the September 27, 2013 FRN, if TIP's 
costs are less than the stated charge, TIP will refund any remaining 
funds or apply them to other charges as directed by the project 
applicant. Western has reduced the overall cost of the charges it will 
assess by $50,000.
    Summary Comment: Several commenters expressed concern about the 
misapplication of the ``beneficiary pays'' concept found in Section 
II.4 of the September 27, 2013 FRN. They suggest shifting from a 
``beneficiary pays'' paradigm to a ``cost creator pays'' paradigm. To 
eliminate any confusion, they request the wording to be changed to 
read, ``Ensure that Project Applicants repay project costs.''
    Response: Western has changed the wording to Section II.4 of this 
final notice to clarify repayment of project costs.
    Summary Comment: Is Western using the original TIP funds to cover 
overhead expenses or are Project Proposal and Business Plan Proposal 
charges covering overhead expenses?
    Response: The overhead rate is included in the number of hours it 
charges project applicants for evaluating Project Proposals and 
Business Plan Proposals.
    Comment: A commenter identified that the Recovery Act does not 
address how repayment of TIP-issued loan would occur if certain 
circumstances occurred. The commenter listed three potential scenarios: 
(1) If a project participant declared bankruptcy or could not meet 
repayment obligations after construction of a project had started; (2) 
if a project participant failed after construction was completed; and 
(3) if a project participant wanted or needed to exit a project. The 
commenter added that there is value in addressing involuntary and 
voluntary withdrawals of project participants at the front end of 
project development rather than focusing only on managing fallout from 
changes later in the project development phase. Finally, the commenter 
asks whether cost subsidy protections could be developed for Western 
customers who are not participating in a project.
    Response: The Recovery Act does not specifically address potential 
circumstances associated with repayment. Each project is distinct and 
it is incumbent on TIP to collaborate with project applicants to 
conduct risk analysis during the development and financing phases to 
address potential issues throughout the project life-cycle. TIP staff 
will conduct analytical reviews of various scenarios that include an 
examination of offtake, ownership and asset transfer so Western can 
make determinations on risks and rewards associated with each project. 
As Western's borrowing authority is not a subsidy-based program, 
Western does not have the authority to provide cost subsidies to 
project applicants.
    Comment: A commenter noted that Western uses the phrase 
``reasonable expectation'' in the September 27, 2013 FRN as the means 
by which it will determine the relative merit of a proposed project. 
With this in mind the commenter asks how the ``reasonable expectation'' 
standard will be developed, implemented and measured; and how an 
applicant can demonstrate the ability to repay a loan if the applicant 
does not have signed purchase power agreements at the time Western is 
making project evaluation decisions.

[[Page 19071]]

    Response: In the course of evaluating a project at the project 
proposal and business plan proposal stages and thereafter, Western will 
employ the ``reasonable expectation of repayment'' standard. The 
standard requires Western to determine if the proposed plan for 
repayment of a loan is financially sound and achievable. A project may 
be better able to meet the standard as it progresses from an initial 
proposal to a more mature, substantive undertaking. For example, one 
would not expect a project at the project proposal stage to include 
PPAs, but it is reasonable to expect that a project in the final stages 
of development would have signed PPAs in place or be close to executing 
them. Extensive due diligence by qualified legal, financial and 
technical experts will be employed to determine if a project meets the 
``reasonable expectation of repayment'' standard.
    Summary Comment: Several commenters wanted more information about 
the Program's loan forgiveness clause found in Section 402 of the 
Recovery Act, as it is unique in the industry. In addition, a commenter 
notes that TIP cannot be implemented if the final notice does not 
address the loan forgiveness provision. In addition to pointing out 
that loans not repaid through a successful project may be forgiven, a 
commenter asks if monies advanced by an applicant will be folded into a 
loan and become a reimbursable item and therefore be subject to loan 
forgiveness; and what the relationship is between the use of funds 
advanced by an applicant and the forgiveness of costs related to a 
project that does not get constructed.
    Response: The forgiveness clause is required by Section 402 of the 
Recovery Act. If circumstances give rise to the forgiveness of a loan, 
Western will implement a loan forgiveness protocol after consulting 
with DOE. The commenter correctly notes that the Recovery Act allows 
for loan forgiveness if there is a remaining balance owed at the end of 
the useful life of a project and funds expended to study projects that 
are considered but not constructed. The Recovery Act requires Western's 
Administrator to certify, prior to committing funds to a project, that 
it is reasonable to expect the project's proceeds will be adequate to 
repay the loan. Money advanced by an applicant would not become part of 
a loan and be subject to loan forgiveness. The status of funds advanced 
by an applicant on a loan that is forgiven would be subject to the 
terms of the financing agreement executed by the parties.
    Comment: A commenter seeks an explanation of how Western derived 
the amounts of the charges it will assess to project applicants.
    Response: Western considered the upper limit of what it might cost 
to review complex Project Proposals and Business Plan Proposals in 
arriving at the application charges. Potentially high hourly rates for 
using technical experts to evaluate proposals was a key component in 
establishing the amounts.
    Comment: A commenter expressed concern that recently added language 
allowing for ``reasonable'' expectations in Project Evaluation Criteria 
1 and 3 will diminish the original intent of the Program to facilitate 
the delivery of renewable energy with no risk to current Western firm 
electric service and transmission customers.
    Response: The Project Evaluation Criteria listed in this final 
notice regarding the reasonable expectation that a project facilitates 
the delivery of renewable energy resources has not changed from the May 
14, 2009 FRN. Similarly, the reasonable expectation that a project will 
generate enough transmission service revenue to repay the loan 
principle, interest and operating costs by the end of the project's 
service life also remains the same.
    Comment: A commenter suggests it might be appropriate for Western 
and project applicants to share expenses associated with Project 
Proposals and Business Plan Proposals if a project demonstrates a 
benefit to existing and planned Western investments.
    Response: Western may consider this suggestion if such a project is 
proposed. For the time being, Western will look to project applicants 
to pay for expenses associated with Project Proposals and Business Plan 
Proposals.
    Comment: A commenter asked for more information about the magnitude 
of costs project applicants are expected to reimburse Western, how 
costs are calculated, and the mechanics of reimbursement once a project 
is accepted by TIP.
    Response: Project Applicants are required to pay in advance (not as 
a reimbursement) for any work Western or LPO performs on a project. The 
charges a project applicant must pay to have Western evaluate a Project 
Proposal and Business Plan Proposal are set forth in this final notice. 
If an applicant decides to enter into an AFA with Western, Western will 
provide rates and related costs associated with work it agrees to 
perform on a project. The AFA will include mutually agreeable terms 
governing the mechanics of how the applicant will provide funding to 
Western.

4. Other Comments

    Comment: One commenter recommended Western form a cross-functional 
stakeholder team (solar industry reps, transmission operators, 
environmental organizations, etc.) to review proposals for new 
transmission to serve regions with superior solar energy resources.
    Response: Western is open to consulting with industry stakeholders 
but this recommendation is outside the scope of the Program. TIP is 
focused on reviewing specific proposals to construct new or upgraded 
transmission facilities that delver or facilitate the delivery of 
renewable energy resources.
    Comment: A commenter notes the Recovery Act clearly suggests that 
ancillary service needs of a TIP project could be met by existing 
federal projects, and that the September 27, 2013 FRN segregates TIP 
project costs and revenues from other Western project costs/revenues. 
With this in mind the commenter asks if the term ``Federal power 
system'' as it appears in the Recovery Act means Western's Desert 
Southwest Region, or a particular project like the Parker-Davis Project 
or Boulder Canyon Project? The commenter also asked what accounting 
procedures and methods will be used to ensure that ancillary service 
costs are segregated.
    Response: The term ``Federal power system'' as used in the Recovery 
Act refers to all projects within the Western Area Power 
Administration. A federal power system could conceivably provide 
ancillary services to a TIP project. No TIP project to date has 
required ancillary services from a Federal Power System. If a future 
project requires these services, Western would establish separate and 
distinct accounts, accounting fund codes and project numbers within its 
financial management system to segregate ancillary service costs.
    Comment: Is the Federal Power System obligated to obtain and 
deliver ancillary services for TIP projects?
    Response: No.
    Comment: The final notice should state that revenues collected from 
ancillary services should be credited to the power system providing the 
service.
    Response: Western has added a statement to this final notice to 
reflect this.
    Comment: A commenter asks whether ``replacements'' should be added 
to Program Principle 2.b?
    Response: The word ``replacements'' has been added to Program 
Principle 2.b.
    Comment: A commenter states that TIP staff have stated that they 
``don't

[[Page 19072]]

want to be bothered'' responding to inquiries from customers about the 
proposals set forth in the September 27, 2013 FRN.
    Response: Western has no knowledge that its staff has responded in 
this manner. If the commenter has specific information regarding this 
alleged statement it should provide that information to Western.
    Summary Comment: Western received several comments about the 
wording in the May 14, 2009 FRN that Western's excess capacity ``needed 
to serve its preference power customers'' should be reinstated.
    Response: The wording at issue appeared in the Supplementary 
Information: Background section of the May 14, 2009 FRN. The September 
27, 2013 FRN did not include the ``needed to serve'' wording and made 
other minor wording changes (e.g., added ``OATT on file with the 
Federal Energy Regulatory Commission'') for purposes of making this 
sentence more technically correct and less awkward. The reference to 
Western's ``excess capacity on its transmission system'' covers the 
capacity beyond that needed to serve its preference power customers.
    Comment: A commenter encourages Western to include transmission 
rates established through a robust anchor tenant process (in accordance 
with FERC orders) as meeting the principle of ``using a public process 
to set transmission rates.''
    Response: Western will take this suggestion under advisement.
    Comment: The September 27, 2013 FRN does not adequately address 
risks to commercial developers or how TIP will protect commercial 
developers from costs Western incurs in performing its preference power 
program, nor does the FRN mention TIP's plan to keep overhead rates in 
check or how it will keep costs attributable to other projects or non-
TIP program requirements separate.
    Response: Western has acknowledged the concern that project 
developers and beneficiaries should pay all TIP-related costs, and 
Western acknowledges the concern that commercial developers should not 
bear any costs associated with Western's preference power program. 
Accordingly, Western will continue to manage TIP separately from its 
preference power program and maintain stand-alone Treasury Account 
Funding Symbols (TAFS) for TIP's exclusive use. With the knowledge that 
project applicants are responsible for paying TIP's overhead rate, 
Western closely monitors its Program expenses.
    Comment: A commenter notes that the September 27, 2013 FRN does not 
address how proprietary commercial data will be protected from Freedom 
of Information Act requests.
    Response: Wording from the May 14, 2009 FRN addressing Western's 
handling of confidential business information has been incorporated 
into this final notice in Section III.D.
    Comment: A commenter suggests that the final notice include a 
protocol for resolution of conflicts of interest that may arise when 
public power interests differ from competitive power project sponsor 
pursuits.
    Response: This suggestion is outside the scope of the Program.
    Comment: A commenter notes that commercial developers may value 
TIP's non-financial development assistance such as federal siting 
authority for lands or interconnection requests, and the final notice 
should address the various ways projects originate and develop. The 
transferability of financing and development assistance should also be 
addressed.
    Response: TIP's main purpose is to provide funding to projects that 
deliver or facilitate the delivery of renewable energy resources; 
however, the provision of non-financial development assistance is 
inextricably linked to the issuance of a loan using Western's borrowing 
authority. The transferability of financing and development assistance 
will be considered on a case-by-case basis.

Consolidated Summary of Changes From the May 14, 2009 FRN to the 
September 27, 2013 FRN, and From the September 27, 2013 FRN to This 
Final Notice

    Pursuant to the request of several commenters, this section 
identifies how the September 27, 2013 FRN (2013 FRN) and this final 
notice differ from the May 14, 2009 FRN (2009 FRN) that established the 
Transmission Infrastructure Program.
    The introductory paragraph (``Western's Transmission Infrastructure 
Program'') in the 2009 FRN, the 2013 FRN and this final notice remains 
fundamentally the same. This final notice recognizes, however, that 
many proposed projects when first presented to Western are not mature 
enough to compete for financing from Western's borrowing authority; 
accordingly it allows applicants to seek guidance from TIP staff to 
address areas of concern that may hinder a project's ability to obtain 
funding.
    The Table of Contents in the 2009 FRN was modified when the 2013 
FRN was published. The Table of Contents in the 2013 FRN deleted the 
project-related principles section and added new sections on project 
life-cycle overview and funding during the project development phase. 
The only change in the Table of Contents in today's final notice is the 
addition of sections on Project Development and Operations & 
Maintenance, and Project Rates and Repayment. These sections, which 
previously appeared in the 2009 FRN, have been included in this final 
notice for purposes of having one all-inclusive document that sets 
forth all the guidelines for the Program. The Definitions section was 
expanded from the 2009 FRN to the 2013 FRN so interested parties could 
have more precise information about the content and meaning of 
frequently used terms. The 2013 FRN and this final notice delete the 
terms ``Administrator'' and ``Entity'' as those definitions were deemed 
to be well-understood by the prospective audience. It should be noted 
that Western has changed the name of ``Statement of Interest'' in the 
2013 FRN to ``Project Proposal'' in this final notice, has added a 
definition of ``Public Interest,'' and deleted the term ``Project 
Beneficiary.''
    The Project-Related Principles set forth in the 2009 FRN were 
deleted. Principles 1-4 were part of the Project Evaluation Criteria 
section in the 2009 FRN, so it appeared redundant to include them 
separately. Project-Related Principles 1-4 appear in the Project 
Evaluation Criteria of the 2013 FRN and today's final notice.
    Project-Related Principle 4 (use of a public process to set rates 
for any Western transmission capacity that results from the agency's 
participation in development of a project) in the 2009 FRN was deleted 
from the 2013 FRN as it is part of Western's reaffirmation to adhere to 
project rates and repayment policies and practices (see Section VI of 
the 2013 FRN). Similarly, Project-Related Principles 5 (capability to 
obtain and deliver ancillary services) and 6 (use proceeds from the 
sale of transmission to repay principal and interest, ancillary 
services and operations and maintenance costs) of the 2009 FRN are 
imbedded in Project Evaluation Criteria 3 and 4, respectively, of the 
2013 FRN and this final notice. The Program-Related Principles set 
forth in the 2009 FRN, 2013 FRN and today's final notice remain the 
same.
    The concepts identified in Section III (Project Funding) of the 
2009 FRN appear in Section V (Funding During the Project Development 
Phase) of the 2013 FRN and today's final notice. Western has added 
wording to this final notice that appeared in the 2009 FRN regarding 
how it will isolate TIP

[[Page 19073]]

financial accounting transactions in its existing financial management 
system. The statement in Section III of the 2009 FRN that Western will 
look for public-private partnerships to maximize the use of its 
borrowing authority was deleted from the 2013 FRN and this final notice 
as that concept (i.e., leveraging Western's borrowing authority 
funding) is captured in the ``Western's Transmission Infrastructure 
Program'' overview.
    The only changes in the Program-Related Principles from the 2009 
Notice to this final notice are: (1) ``and related facilities'' has 
been added to Program Principles 1 and 3 to comport with the wording of 
the Recovery Act; (2) ``replacements'' has been added to Program 
Principle 2.b; and (3) ``project beneficiaries'' has been changed to 
``Project Applicants'' in Program Principle 4. The Project Evaluation 
Criteria set forth in the 2009 FRN has been reduced from 11 elements to 
5 elements based on Western's determination that the core elements set 
forth in the Recovery Act should be the means by which a proposal is 
evaluated. Though Project Evaluation Criteria 5 (potential economic 
developments of a project) and 6 (priority for projects that satisfy 
Western's OATT) that appeared in the 2009 FRN are still noteworthy, 
they are not deemed to rise to the same level of importance as the 
statutory criteria. Project Evaluation Criteria 8 (technical merits and 
feasibility of a project), 9 (financial stability and capability of 
project partners), 10 (project readiness) and 11 (project partners' 
participation in region-wide transmission planning) that appeared in 
the 2009 FRN were deleted from the Project Evaluation Criteria in the 
2013 FRN and this final notice. Each of these important aspects of a 
project will nevertheless be reviewed by Western in determining whether 
an applicant's Business Plan Proposal is financially, technically, 
commercially and legally viable.
    Western has added back the wording that appeared in Section IV.C 
(Project Evaluation, Policies and Procedures) of the 2009 FRN but not 
the 2013 FRN. These policies and procedures govern the Program's 
establishment of additional project evaluation criteria, ability to use 
outside experts in evaluating projects, and how Western will treat 
confidential information submitted to the Program. For transparency and 
ease of use, Western has also added back the Project Development and 
Operations and Maintenance, and Project Rates and Repayment sections 
that appeared in the 2009 FRN. The Project Development and Operations & 
Maintenance policies and procedures were revised to clarify that 
Western will consider proposed projects in accordance with the 
requirements of its OATT.
    Western has modified the charges applicants must pay when they 
submit Project Proposals and Business Plan Proposals. Under the 2009 
FRN, Project Applicants were not required to pay any charge to have 
Western evaluate a Statement of Interest or any other project-related 
documents. The 2013 FRN required Project Applicants to pay $50,000 upon 
submission of a Project Proposal and $250,000 when submitting as 
Business Plan Proposal. In the interest of accommodating applicants 
that have well-developed projects and who seek an expedited project 
review, Western will allow applicants to submit Project Proposals and 
Business Plan Proposals concurrently. Applicants may now either submit 
a Project Proposal and Business Plan Proposal at the same time along 
with a $250,000 payment, or submit $50,000 when presenting a Project 
Proposal and the remaining balance of $200,000 when presenting a 
Business Plan Proposal.
    The 10 page limit that applied to Statements of Interest (now 
Project Proposals) in the 2013 FRN has been eliminated.
    The 2013 FRN established that Western would screen Project 
Proposals 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. This final notice 
permits Western to screen Project Proposals at other times if 
necessary.

Western's Transmission Infrastructure Program

    Western's Transmission Infrastructure Program implements Section 
402 of the Recovery Act by identifying, prioritizing and participating 
in the study, facilitation, financing, planning, operating, maintaining 
and constructing new or upgraded transmission lines and related 
facilities to bring renewable energy resources to market across the 
western United States. A main objective of the Program is to encourage 
non-Federal participation to leverage Western's borrowing authority. 
Recognizing that most proposed transmission projects are, when first 
presented to Western, not mature enough to compete for financing 
through Western's borrowing authority, the Program allows applicants to 
leverage the expertise of TIP personnel in obtaining guidance on how to 
develop certain aspects of a project so it can compete more favorably 
for funding.
    The program consists of the components set forth below.

Table of Contents

I. Definitions
II. Program Principles
III. Project Evaluation Criteria
IV. Project Life-Cycle Overview
V. Funding During the Project Development Phase
VI. Project Development and Operations & Maintenance
VII. Project Rates and Repayment
VIII. Request for Submission of New Project Proposals

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.
    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) Facilitates the delivery to 
market of power generated by renewable energy resources constructed or 
reasonably expected to be constructed, (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 format and use standard industry 
conventions or templates provided by Western.

[[Page 19074]]

    Memorandum of Understanding (MOU): The document that sets forth an 
understanding between Western and a Project Applicant after Western has 
approved a Project Applicant's Project Proposal. An MOU precedes the 
applicant's submission of a Business Plan Proposal.
    Project Applicant: Term used to refer to an entity that submits a 
Project Proposal and Business Plan Proposal.
    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 Project 
Proposal 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 submission of a loan application. Project 
Applicants may request the assistance of Program personnel during this 
phase.
    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.
    Project Proposal: The document submitted by a Project Applicant 
that outlines its proposed project. The first step in the TIP 
Development Phase, there is no limit on the number of pages for a 
Project Proposal. A Project Proposal must, at a minimum, include a 
detailed description of the proposed project (including transmission 
route information, if applicable, and a preliminary financial 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.
    Public Interest: That which generally benefits the public at large. 
For purposes of determining whether a proposed project is in the 
``public interest,'' Western will examine the intent of the Recovery 
Act, existing transmission infrastructure needs, economic impacts and 
the environmental impacts.

II. Program Principles

    In a May 14, 2009 Federal Register notice (FRN), Western identified 
the principles it would use to provide overarching guidance in 
implementing 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 
14, 2009 FRN. For convenience, the Program-Related Principles are set 
forth below. Consistent with its borrowing authority, Western will 
ensure the Program:
    1. Provides an opportunity, 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 under 
this authority.
    2. Uses revenues from projects developed under this authority as 
the only source of revenue for,
    a. Repayment of the associated loan for the project;
    b. payment of expenses for ancillary services, and operation and 
maintenance and replacements; and
    c. payments for ancillary services that will be credited to the 
existing power system providing these services, when the existing 
Federal power system is the source of the ancillary services.
    3. Maintain appropriate controls to ensure, for accounting and 
repayment purposes, each transmission line and related facility project 
in which Western participates under this authority is treated separate 
and distinct from:
    a. Each other such project; and
    b. all other Western power and transmission facilities.
    4. Ensure that Project Applicants repay project costs.

III. Project Evaluation Criteria

    1. Consistent with the requirements set forth in the Recovery Act, 
Western will evaluate projects based on the following criteria:
    a. Facilitates the delivery to market of power generated by 
renewable resources constructed or reasonably expected to be 
constructed.
    b. has at least one terminus within Western's service territory.
    c. 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.
    d. will not adversely impact system reliability or operations, or 
other statutory obligations.
    e. is in the public interest.
    2. Western will establish additional criteria to evaluate proposed 
projects as necessary.
    3. Western may, at its discretion, use outside experts to assist in 
evaluating proposed project seeking funding under this authority. 
Western will use its current acquisition practices to retain any 
contractors to assist in project evaluation and will use the specific 
regulations in the Federal Acquisition Regulation to address any 
organizational conflicts of interest.
    4. Western will treat data submitted by project participants 
related to this authority, including project descriptions, 
participation and financing arrangements by other parties, as available 
to the public consistent with the Freedom of Information Act (FOIA) (5 
U.S.C. 552 et seq.) and DOE's implementing regulations at 10 CFR Part 
1004. Participants may request confidential treatment of all or part of 
a submitted document under FOIA's exemption for ``Confidential Business 
Information'' and must mark the material as confidential. Materials so 
designated and which meet the criteria stipulated in the FOIA and DOE's 
implementing regulations will be treated as exempt from FOIA inquiries.

IV. Project Life-Cycle Overview

    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 is fully developed and ready to submit 
a complete and comprehensive application to obtain funding through the 
use of Western's borrowing authority), the expectation is that each 
project will need some additional work before it completes 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 for the life of the loan (i.e., until all 
payments and other amounts due have been repaid).

[[Page 19075]]

1. 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 a Project Proposal; (2) project initiation, 
which involves the development of a more substantial business proposal 
and initiation of due diligence for each project that advances beyond a 
Project Proposal; 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.
a. Project Proposal
    The review process begins when a Project Applicant submits a 
Project Proposal. Western will post instructions on submitting Project 
Proposals on its Web site. In the interest of accommodating applicants 
that have well-developed projects and who seek an expedited project 
review, Western will allow applicants to submit a Project Proposal and 
Business Plan Proposal concurrently. Applicants will be required to pay 
Western a minimum of $50,000 upon the submission of a Project Proposal 
to cover the costs associated with Western's review of the proposal. 
For more information on specific charges, refer to Section V (Funding 
During the Project Development Phase) of this final notice.
    Project Proposals can be submitted anytime at the Program Web site 
using the http://ww2.wapa.gov/sites/Western/transmission/TIP/Pages/default.aspx link.
    Then, on or about the beginning of each quarter (approximately 
January 1, April 1, July 1, and October 1), Western will screen Project 
Proposals 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, however, decide to screen Project Proposals at 
times other than the beginning of each quarter, as necessary. Western 
may contact Project Applicants for clarifications during the review 
period, but will not engage in material discussions about a Project 
Proposal. Western will make its determination no later than 30 business 
days after reviewing a proposal.
    If Western determines that a Project Proposal 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, return 
unused funds, and take no further action on the proposal. Project 
Applicants who submit a Project Proposal that does not comport with the 
Project Evaluation Criteria will be invited to submit a revised Project 
Proposal. If Western determines that a Project Proposal 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 a Project Proposal. Those costs are addressed in 
Section V below.
b. Memorandum of Understanding (MOU)
    Project Applicants who submit a Project Proposal 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 
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 Project Proposal meets 
all the established evaluation criteria.
c. 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 and replacement 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 guidance that the 
Project Applicant seeks to obtain.
     Relevant information concerning required approvals, 
permits, licenses, 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.

[[Page 19076]]

    At the Project Applicant's expense, Western will perform a project 
evaluation and due diligence review of a Business Plan Proposal to 
determine if the proposal is deficient in these or any other material 
respects, and will offer, in writing, to work with the Project 
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, it will invite the Project 
Applicant to enter into an Advance Funding Agreement (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.
d. 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.
e. 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; analysis of options 
for 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.

2. 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.

3. 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

1. Policies and Procedures

a. Accounting Principles
    Western will use generally accepted accounting principles and 
practices in recording and tracking all expenses and revenue 
transactions for each project. Western will isolate TIP financial 
accounting transactions in its existing financial management system.
b. Program Funding
    The Program must be financially self-sustaining. As such, expenses 
incurred by Western in reviewing Project Proposals 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.
c. Allocation of Expenses--Project Proposal and Business Plan Proposal
    i. Western's estimates that it can cost up to $50,000 to review and 
screen a Project Proposal and $200,000 to review a Business Plan 
Proposal. Accordingly, Western will require Project Applicants who 
concurrently submit a Project Proposal and Business Plan Proposal to 
make a one-time payment of $250,000 to cover anticipated expenses. In 
the alternative, Project Applicants who desire to initially submit only 
a Project Proposal will be required to make a payment of $50,000 to the 
Program, with the expectation that a $200,000 payment will be submitted 
along with a Business Plan Proposal. Project Applicants who anticipate 
submitting a project should have adequate financial resources on-hand 
to cover these expenses. Project Applicants should contact the TIP 
office to make arrangements for this payment. Failure to make the 
appropriate payment will result in Western taking no action to review a 
Project Proposal and/or a Business Plan Proposal. A Project Applicant 
may elect to apply funds remaining (if any) from its $50,000 Project 
Proposal payment that are in Western's control to the $200,000 Business 
Plan Proposal charge.
    ii. If, in the course of reviewing a Project Proposal or Business 
Plan Proposal, Western determines that there are insufficient funds to 
cover its expenses, Western will promptly inform the Project Applicant 
of the insufficiency and request adequate additional funding to 
complete its review. In addition, if Western determines during the 
review of a Project Proposal that a project does not meet or is 
reasonably expected not to meet all of the Project Evaluation Criteria, 
Western will so notify the applicant and return any funds in excess of 
actual costs incurred by Western in reviewing the proposal to the 
applicant. In a similar fashion, if Western determines that a Business 
Plan Proposal is not financially, technically, and commercially viable, 
it will notify the Project Applicant and return any funds paid by the 
Project Applicant in excess of actual costs incurred by Western in 
evaluating the proposal.
d. 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

[[Page 19077]]

remaining (if any) from previous payments that are in Western's control 
to the mutually agreed upon amount.

VI. Project Development, Operations & Maintenance

 1. Project Development and Operations & Maintenance

a. Applicability
    All projects funded under this authority.

2. Policies and Practices

    a. For study, facility development, construction and other related 
purposes, Western will consider projects constructed under its 
authority under Section 402 of the Recovery Act in accordance with 
procedures and requirements for arranging for transmission service or 
interconnection under its OATT, or related interconnection agreements. 
Western will, as necessary, use appropriate project management methods 
for all transmission projects approved for funding under this 
authority.
    b. Available transfer capability surplus to Western's needs will be 
made available in a nondiscriminatory manner consistent with FERC open 
access transmission rules, Federal statutes, and Western policies.
    c. Western will comply with all other applicable Federal laws, 
regulations and policies, including National Environmental Policy Act 
of 1969, Federal Acquisition Regulation, and other applicable 
provisions of the Recovery Act.

VII. Project Rates and Repayment

1. Applicability

    a. All projects funded under this authority.

2. Policies and Practices

    a. The repayment requirements and applicable transmission rates 
will be designed so that proceeds from a project meet the repayment 
obligation.
    b. Before project development, Western will confirm the reasonable 
likelihood that the project will generate enough transmission service 
revenue to meet Western's financial repayment obligations including 
principal investment, operating costs including overhead, accrued 
interest, and other appropriate costs.
    c. Transmission rates for transmission capacity controlled by 
Western will be developed in a public process following applicable 
requirements outlined in 10 CFR part 903 and RA6120.2, and set by the 
Administrator as specified in relevant DOE orders.

VIII. Request for Submission of New Project Proposals

    With the revised Program now in place, TIP encourages interested 
parties to submit Project Proposals to construct, finance, facilitate, 
plan, operate, maintain, or study construction of new or upgraded 
electric power transmission lines and related facilities with at least 
one terminus within Western's service territory, that deliver or 
facilitate the delivery of power generated by renewable energy 
resources. On or about the beginning of each quarter (approximately 
January 1, April 1, July 1, and October 1) or, if necessary, at other 
times. Western will screen Project Proposals 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 will make its 
determination no later than 30 business days after reviewing a Project 
Proposal and promptly notify the Project Applicant in writing.

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: February 20, 2014.
Mark A. Gabriel,
Administrator.
[FR Doc. 2014-07700 Filed 4-4-14; 8:45 am]
BILLING CODE 6450-01-P