[Federal Register Volume 86, Number 129 (Friday, July 9, 2021)]
[Rules and Regulations]
[Pages 36193-36199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-14358]



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 Rules and Regulations
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
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  Federal Register / Vol. 86, No. 129 / Friday, July 9, 2021 / Rules 
and Regulations  

[[Page 36193]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Parts 1710, 1714, 1717, 1718, 1721, 1726, 1730, and 1767

[RUS-21-ELECTRIC-0003]
RIN 0572-AC53


Streamlining Electric Program Procedures

AGENCY: Rural Utilities Service, U.S. Department of Agriculture (USDA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Rural Utilities Service (RUS), a Rural Development agency 
of the United States Department of Agriculture (USDA), is revising 
several regulations to streamline its procedures for Electric Program 
borrowers, including its loan application requirements, approval of 
construction work plans, contract bidding procedures, contact approval 
procedures, system operation and maintenance reviews, long-range 
engineering plans and system design procedures. Additionally, 
unnecessary sections in the regulations will be removed.

DATES: This rule is effective September 7, 2021.

FOR FURTHER INFORMATION CONTACT: Luis Bernal, Deputy Assistant 
Administrator, Office of Customer Service and Technical Assistance, 
Rural Utilities Service, U.S. Department of Agriculture, STOP 1569, 
1400 Independence Ave. SW, Washington, DC 20250-0787, telephone: (202) 
720-1900. Email: [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Rural Development is a mission area within the U.S. Department of 
Agriculture (USDA) comprising the Rural Utilities Service, Rural 
Housing Service, and Rural Business-Cooperative Service. Rural 
Development's mission is to increase economic opportunity and improve 
the quality of life for all rural Americans. Rural Development meets 
its mission by providing loans, loan guarantees, grants, and technical 
assistance through numerous programs aimed at creating and improving 
housing, business, and infrastructure throughout rural America. The 
Rural Utilities Service (RUS) loan, loan guarantee, and grant programs 
act as a catalyst for economic and community development. By financing 
improvements to rural electric, water and waste, and telecommunications 
and broadband infrastructure, RUS also plays a significant role in 
improving other measures of quality of life in rural America, including 
public health and safety, environmental protection and culture and 
historic preservation.
    RUS Electric Program loans, loan guarantees and grants finance the 
construction and improvement of rural electric infrastructure. In an 
effort by the RUS Electric Program to administer its program in an 
efficient and effective manner while improving its customer service and 
experience, and in response to requests from the RUS Electric Program 
borrowers, the Electric Program undertook a systematic review of 
regulations and procedures in place to administer its program. On July 
9, 2019, Streamlining Electric Program Procedures (84 FR 32607) was 
published in the Federal Register. That regulation streamlined some 
pre- and post-loan procedures to be made more efficient and to reduce 
regulatory burden on Electric Program borrowers while still ensuring 
RUS loans remained adequately secured and ensuring that loan funds 
would be repaid in the time agreed upon.
    This rulemaking is part of the Electric Program's continuing effort 
to improve customer service for its borrowers and to create a more 
efficient work process for its staff. This rulemaking will continue to 
streamline Electric Program procedures and revise regulations; 
including, removing unnecessary and outdated regulations and 
simplifying other policies and procedures that impose burdensome 
requirements on borrowers and applicants.
    To implement this change, the Agency will publish this as a final 
rule. The Administrative Procedure Act exempts from prior notice rules, 
any actions, ``relating to agency management or personnel or to public 
property, loans, grants, benefits, or contracts'' (5 U.S.C. 553(b)(A)).

II. Summary of Changes to Rule

    (a) Changes to 7 CFR part 1710 ``General and Pre-Loan Policies and 
Procedures Common to Electric Loans and Guarantees'' include:
    (1) Section 1710.109(c)(1) was updated to remove outdated language 
and to increase the general fund reimbursement period from 24 to 48 
months. This will provide borrowers with more flexibility for when they 
can submit a loan application. It also parallels with the construction 
workplan period which is typically 48 months.
    (2) Section 1710.251 was updated to make conforming changes from 
prior rulemakings. Paragraph (c)(7) was changed to ``Outdoor Lights'' 
for more flexibility and paragraph (c)(13) was added to provide 
borrowers with more clarification on eligible items approved for RUS 
financing.
    (3) Section 1710.252(b) was revised to change the coverage period 
of construction workplans to typically 4 years. This is a conforming 
change from a prior rulemaking that streamlined when construction 
workplans must be approved.
    (4) Section 1710.501(a)(3) was updated to clarify that the RUS Form 
740c will be used to justify the loan amount and not be an exclusive 
list of projects which could be financed. This change will provide 
greater financing flexibility to the borrowers.
    (b) Changes to 7 CFR part 1714--``Pre-Loan Policies and Procedures 
for Insured Electric Loans'' include removing outdated language and 
updating information on the fund advance period. The updated language 
will clarify the loan fund advance period to conform to the 
requirements of the Antideficiency Act, 31 U.S.C. 1341.
    (c) Changes to 7 CFR part 1717--``Post-Loan Policies and Procedures 
Common to Insured and Guaranteed Electric Loans include:
    (1) Section 1717.154(c) was amended to increase the general funds 
reimbursement period to 48 months. This is a conforming change to go 
with the modification made to Sec.  1710.109(c)(1).
    (2) Section 1717.604(b) was revised to removed outdated language 
that references the requirement that long-

[[Page 36194]]

range engineering plans must be approved by RUS. This is a conforming 
change to a prior rulemaking.
    (3) Section 1717.608(b) was amended to change the current approval 
requirement to a notification and to increase the threshold for the 
notification. This change will reduce the amount of oversight for the 
borrower. Paragraph (c) was amended to change the RUS approval of Power 
Supply Arrangements and any amendments to a term of 5 years. This will 
decrease the wait time for borrowers. Both of these changes will allow 
the Agency to focus resources on contracts with potentially higher 
risks.
    (4) Section 1717.616 introductory text was revised to apply to all 
borrowers and different coverage ratios will be reviewed on a case by 
case basis. Paragraph (b) was revised to remove the specific ratios 
with a cross reference to Sec.  1710.114(b) and ``other financial 
requirements as established by their Mortgages, Loan Contracts and/or 
other Security Agreements'' was added. These changes provide the 
borrowers with more flexibility on ratios they are required to meet to 
sell property.
    (5) Section 1717.854(c)(2) was amended to reduce the equity 
requirement related to RUS advance approval for lien sharing from 27 to 
20 percent. This will reduce the number of borrowers that need to 
obtain prior approval before borrowing funds from an outside lender.
    (d) Changes to 7 CFR part 1718--``Loan Security Documents for 
Electric Borrowers'' include removing appendix A to subpart B and 
appendix A to subpart C. These were removed because copies of the model 
mortgage and loan contract are available upon request as noted in 
Sec. Sec.  1718.54 and 1718.104. Also, in Sec.  1718.54, the reference 
to Administrative Services Division was removed for consistency.
    (e) Changes to 7 CFR part 1721--``Post-Loan Policies and Procedures 
for Insured Electric Loans'' include revising Sec.  1721.1(a) to 
identify those projects for which loan funds may be advanced and remove 
the requirement to amend an approved loan. This change provides greater 
financing flexibility for borrowers.
    (f) Changes to 7 CFR part 1726--``Electric System Construction 
Policies and Procedures'' include:
    (1) Section 1726.35 was revised to remove outdated references, 
allow a borrower to submit a certification statement in lieu of three 
copies of each contract (conforming change to prior rulemaking) and to 
provide for electronic submission of documents.
    (2) Sections 1726.51(b) and 1726.77(b) were revised to increase the 
contract procurement limits and to allow for some Cost-Plus/Hourly 
contracts. These changes will provide greater flexibility to the 
borrowers related to contracting as well as reduce the number of 
requests submitted to the Agency for review and action.
    (3) Section 1726.77(c) was revised to increase the limits for 
requiring contract approval and to set the contract approval threshold 
to be the same for all borrowers. This change simplifies the program 
regulation and potentially minimizes misinterpretation.
    (4) Section 1726.150(b) was revised to increase contract 
procurement limits for headquarters buildings. This change is expected 
to create flexibility for the borrower.
    (5) Section 1726.176 introductory text was revised to add Automated 
Meter Reading/Automated Metering Infrastructure to the list of items 
covered in the regulation. Paragraph (b)(3) was revised to set contract 
approval thresholds to be the same for all borrowers to simplify the 
program regulation and potentially minimize misinterpretation.
    (6) Section 1726.403(c)(2)(ii) was revised to provide that a 
borrower may now submit a certification statement in lieu of closeout 
documents. It was also modified to remove the instruction that the 
closeout documents are to be submitted through the General Field 
Representative. These changes are intended to create process efficiency 
for the borrower.
    (g) Changes to 7 CFR part 1730--``Electric System Operations and 
Maintenance'' include removing appendix A to subpart B and revising 
Sec.  1730.23 to read ``The RUS Form 300 is available from RUS and 
shall be used when required by this part.'' RUS seeks to remove 
appendix A to subpart B to adapt program rules so that the program can 
be delivered effectively, efficiently and consistent with the current 
industry developments and technology changes.
    (h) Changes to 7 CFR part 1767--``Accounting Requirements for RUS 
Electric Borrowers'' include modifications to Sec.  1767.41 Number 119 
``Special Equipment'' to provide clarification and additional guidance 
related to the treatment of Special Equipment.

III. Executive Orders and Acts

Executive Order 12866

    This final rule has been determined to be non-significant for 
purposes of Executive Order (E.O.) 12866 and therefore has not been 
reviewed by the Office of Management and Budget (OMB).

Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as not a major rule, as defined by 5 U.S.C. 804(2).

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) number assigned 
to the Rural Electrification Loans and Loan Guarantees Program is 
10.850. The Catalog is available on the internet at https://beta.sam.gov/. The Government Publishing Office (GPO) prints and sells 
the CFDA to interested buyers. For information about purchasing the 
Catalog of Federal Domestic Assistance from GPO, call the 
Superintendent of Documents at (202) 512-1800 or toll free at (866) 
512-1800, or access GPO's online bookstore at https://bookstore.gpo.gov.

Executive Order 12372, Intergovernmental Review of Federal Programs

    This rule is excluded from the scope of Executive Order 12372, 
Intergovernmental Consultation, which may require a consultation with 
State and local officials. See the final rule related notice entitled, 
``Department Programs and Activities Excluded from Executive Order 
12372'' (50 FR 47034) advising that RUS loans and loan guarantees were 
not covered by Executive Order 12372.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    The Agency has determined that this final rule does not have a 
substantial direct effect on one or more Indian tribe(s) or on either 
the relationship or the distribution of powers and responsibilities 
between the Federal Government and Indian tribes. Thus, this final rule 
is not subject to the requirements of Executive Order 13175. 
Consequently, the Agency will not conduct tribal consultation sessions. 
If a Tribe determines that this rule has implications of which RUS is 
not aware and would like to request government-to-government 
consultation on this rule, please contact USDA Rural Development's 
Native American Coordinator at (720) 544-2911 or [email protected].

Executive Order 12988, Civil Justice Reform

    This final rule has been reviewed under Executive Order 12988, 
Civil

[[Page 36195]]

Justice Reform. In accordance with this final rule: (1) All State and 
local laws and regulations that are in conflict with this rule will be 
preempted; (2) No retroactive effect will be given to this rule; and 
(3) Administrative proceedings of the National Appeals Division (7 CFR 
part 11) must be exhausted before bringing suit in court challenging 
action taken under this rule.

National Environmental Policy Act

    In accordance with the National Environmental Policy Act of 1969, 
Public Law 91-190, this final rule has been reviewed in accordance with 
7 CFR part 1970 (``Environmental Policies and Procedures''). The Agency 
has determined that (i) this action meets the criteria established in 7 
CFR 1970.53(f); (ii) no extraordinary circumstances exist; and (iii) 
the action is not ``connected'' to other actions with potentially 
significant impacts, is not considered a ``cumulative action'' and is 
not precluded by 40 CFR 1506.1. Therefore, the Agency has determined 
that the action does not have a significant effect on the human 
environment, and therefore neither an Environmental Assessment nor an 
Environmental Impact Statement is required.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, RUS 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with Federal mandates that may 
result in expenditures to State, local, or tribal governments, in the 
aggregate, or to the private sector, of $100 million or more in any one 
year. When such a statement is needed for a rule, section 205 of the 
UMRA generally requires RUS to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, most 
cost-effective, or least burdensome alternative that achieves the 
objectives of the rule.
    This final rule contains no Federal mandates (under the regulatory 
provisions of title II of the UMRA) for State, local, and tribal 
governments or the private sector. Therefore, this final rule is not 
subject to the requirements of sections 202 and 205 of the UMRA.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act (APA) or any other statute. This final 
rule; however, is not subject to the APA under 5 U.S.C. 553(a)(2) and 5 
U.S.C. 553(b)(3)(A) nor any other statute.

Executive Order 13132, Federalism

    It has been determined, under E.O. 13132, Federalism, that the 
policies contained in this final rule do not have any substantial 
direct effect on states, on the relationship between the National 
Government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
final rule impose substantial direct compliance costs on state and 
local governments. Therefore, consultation with the states is not 
required.

E-Government Act Compliance

    The Agency is committed to complying with the E-Government Act of 
2002, Public Law 107-347, which requires Government agencies in general 
to provide the public the option of submitting information or 
transacting business electronically to the maximum extent possible and 
to promote the use of the internet and other information technologies 
to provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Information Collection and Recordkeeping Requirements

    The information collection and record-keeping requirements 
contained in this rule are approved by the Office of Management and 
Budget (OMB) under OMB Control Numbers 0572-0003, 0572-0025, 0572-0032, 
0572-0100, 0572-0114, 0572-0107, and 0572-0123.

Civil Rights Impact Analysis

    Rural Development, a mission area for which RUS is an agency, has 
reviewed this rule in accordance with USDA Regulation 4300-4, Civil 
Rights Impact Analysis,'' to identify any major civil rights impacts 
the rule might have on program participants on the basis of age, race, 
color, national origin, sex, or disability. After review and analysis 
of the rule and available data, it has been determined that based on 
the analysis of the program purpose, application submission and 
eligibility criteria, issuance of this final rule is not likely to 
negatively impact very low, low and moderate-income populations, 
minority populations, women, Indian tribes or persons with disability, 
by virtue of their race, color, national origin, sex, age, disability, 
or marital or familial status. No major civil rights impact is likely 
to result from this rule.

USDA Non-Discrimination Statement

    In accordance with Federal civil rights law and U.S. Department of 
Agriculture (USDA) civil rights regulations and policies, the USDA, its 
Agencies, offices, and employees, and institutions participating in or 
administering USDA programs are prohibited from discriminating based on 
race, color, national origin, religion, sex, gender identity (including 
gender expression), sexual orientation, disability, age, marital 
status, family/parental status, income derived from a public assistance 
program, political beliefs, or reprisal or retaliation for prior civil 
rights activity, in any program or activity conducted or funded by USDA 
(not all bases apply to all programs). Remedies and complaint filing 
deadlines vary by program or incident.
    Persons with disabilities who require alternative means of 
communication for program information (e.g., Braille, large print, 
audiotape, American Sign Language, etc.) should contact the responsible 
Agency or USDA's TARGET Center at (202) 720-2600 (voice and TTY) or 
contact USDA through the Federal Relay Service at (800) 877-8339. 
Additionally, program information may be made available in languages 
other than English.
    To file a program discrimination complaint, complete the USDA 
Program Discrimination Complaint Form, AD-3027, found online at https://www.usda.gov/oascr/how-to-file-a-program-discrimination-complaint and 
at any USDA office or write a letter addressed to USDA and provide in 
the letter all of the information requested in the form. To request a 
copy of the complaint form, call (866) 632-9992. Submit your completed 
form or letter to USDA by: (1) Mail: U.S. Department of Agriculture 
Office of Adjudication, 1400 Independence Avenue SW, Washington, DC 
20250-9410; (2) Fax: (202) 690-7442; or (3) Email: [email protected] USDA is 
an equal opportunity provider, employer, and lender.

List of Subjects

7 CFR Part 1710

    Electric power, Grant programs--energy, Loan programs--energy, 
Reporting and recordkeeping requirements, Rural areas.

7 CFR Part 1714

    Electric power, Loan programs--energy, Rural areas.

[[Page 36196]]

7 CFR Part 1717

    Administrative practice and procedure, Electric power, Electric 
power rates, Electric utilities, Intergovernmental relations, 
Investments, Loan programs--energy, Reporting and recordkeeping 
requirements, Rural areas.

7 CFR Part 1718

    Administrative practice and procedure, Electric power, Electric 
utilities, Loan programs--energy, Reporting and recordkeeping, Rural 
areas.

7 CFR Part 1721

    Electric power, Loan programs--energy, Rural areas.

7 CFR Parts 1726 and 1730

    Electric power, Loan programs--energy, Reporting and recordkeeping 
requirements, Rural areas.

7 CFR Part 1767

    Electric power, Loan programs-- energy, Rural areas, Uniform System 
of Accounts.

    For the reasons set forth in the preamble, RUS amends 7 CFR parts 
1710, 1714, 1717, 1718, 1721, 1726, 1730, and 1767 as follows:

PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO 
ELECTRIC LOANS AND GUARANTEES

0
1. The authority citation for part 1710 continues to read as follows:

    Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.

Subpart C--Loan Purposes and Basic Policies

0
2. Amend Sec.  1710.109 by revising paragraph (c) to read as follows:


Sec.  1710.109  Reimbursement of general funds and interim financing.

* * * * *
    (c) The period immediately preceding the current loan period for 
which reimbursement and replacement of interim financing is authorized 
under paragraph (b) of this section is 48 months. Policies for 
reimbursement of general funds and interim financing following certain 
mergers, consolidations, and transfers of systems substantially in 
their entirety are set forth in 7 CFR 1717.154.
* * * * *

Subpart F--Construction Work Plans and Related Studies

0
3. Amend Sec.  1710.251 by:
0
a. Revising the first sentence of paragraph (b);
0
b. Revising paragraph (c)(7);
0
c. Revising the last sentence of paragraph (c)(11);
0
d. Revising paragraph (c)(12); and
0
e. Adding paragraph (c)(13).
    The revisions and addition read as follows:


Sec.  1710.251  Construction work plans--distribution borrowers.

* * * * *
    (b) A distribution borrower's CWP shall typically cover a 
construction period of 4 years and includes all facilities to be 
constructed which are eligible for RUS financing, whether or not RUS 
financial assistance will be sought or be available for certain 
facilities. * * *
    (c) * * *
    (7) Outdoor lights;
* * * * *
    (11) * * * To be eligible for financing, such equipment must be 
owned by the borrower, although it may be located inside or outside a 
consumer's premises;
    (12) The cost of engineering, architectural, environmental, and 
other studies and plans needed to support the construction of 
facilities, when such cost is capitalized as part of the cost of the 
facilities; and
    (13) Other items that are specifically determined by RUS as being 
eligible for financing prior to inclusion in the CWP.

0
4. Amend Sec.  1710.252(b) by revising the first sentence to read as 
follows:


Sec.  1710.252  Construction work plans--power supply borrowers.

* * * * *
    (b) Typically a power supply borrower's CWP shall cover a period of 
4 years. * * *
* * * * *

Subpart I--Application Requirements and Procedures for Loans

0
5. Amend Sec.  1710.501 by revising paragraph (a)(3) introductory text 
to read as follows:


Sec.  1710.501  Loan application documents.

* * * * *
    (a) * * *
    (3) RUS Form 740c, Cost Estimates and Loan Budget for Electric 
Borrowers. This form together with its attachments lists the 
construction, equipment, facilities, and other cost estimates from the 
construction work plan or engineering and cost studies. The projects 
and related costs, included on this form, shall be used to justify the 
loan amount and are not meant to be an exclusive list of those projects 
that could receive funds under this loan. In addition, to be included 
on this form, the project must have received written documentation of 
RUS concluding its environmental review. The advance of loan funds for 
projects shall be governed by 7 CFR part 1721. The date on page one (1) 
of the RUS Form 740c is the beginning date of the loan period. RUS Form 
740c also includes the following information, exhibits, and 
attachments:
* * * * *

PART 1714--PRE-LOAN POLICIES AND PROCEDURES FOR INSURED ELECTRIC 
LOANS

0
6. The authority citation for part 1714 continues to read as follows:

    Authority: 7 U.S.C. 901 et seq.; 1921 et seq.; and 6941 et seq.

Subpart B--Terms of Insured Loans

0
7. Amend Sec.  1714.56 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  1714.56  Fund advance period.

    (a) The fund advance period begins on the date of the loan note and 
will last no longer than five years after September 30 of the fifth 
year after the fiscal year of obligation. The fiscal year of obligation 
is identified in loan documentation associated with each loan. The 
Administrator may extend the fund advance period on any loan if the 
borrower meets the requirements of paragraph (b) of this section. 
However, under no circumstances shall the RUS ever make or approve an 
advance, regardless of the last day for an advance on the loan note or 
any extension by the Administrator, later than September 30 of the 
fifth year after the fiscal year of obligation if such date would 
result in the RUS obligating or permitting advance of funds contrary to 
the Antideficiency Act, 31 U.S.C. 1341.
    (b) The Administrator may agree to an extension of the fund advance 
period for loans if the borrower demonstrates, to the satisfaction of 
the Administrator, that the loan funds continue to be needed for 
approved loan purposes (i.e., facilities included in a RUS approved 
construction work plan). Policies for extension of the fund advance 
period following certain mergers, consolidations, and transfers of 
systems substantially in their entirety are set forth in 7 CFR 
1717.156.
* * * * *

[[Page 36197]]

PART 1717--POST-LOAN POLICIES AND PROCEDURES COMMON TO INSURED AND 
GUARANTEED ELECTRIC LOANS

0
8. The authority citation for part 1717 continues to read as follows:

    Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.

Subpart D--Mergers and Consolidations of Electric Borrowers


Sec.  1717.154  [Amended]

0
9. Amend Sec.  1717.154(c)(1) by removing the number ``24'' in the 
second sentence and adding ``48'' in its place.

Subpart M--Operational Controls

0
10. Amend Sec.  1717.604 by revising paragraphs (b) and (c) to read as 
follows:


Sec.  1717.604  Long-range engineering plans and construction work 
plans.

* * * * *
    (b) Applications for financing from RUS must be supported by a CWP 
approved by RUS.
    (c) RUS approval is not required for CWPs if the borrower does not 
intend to seek RUS financing for any of the facilities, equipment, or 
other purposes included in those plans. However, if requested by RUS, a 
borrower must provide an informational copy of such plans to RUS.

0
11. Amend Sec.  1717.608 by revising paragraphs (b) and (c)(1) to read 
as follows:


Sec.  1717.608  RUS approval of contracts.

* * * * *
    (b) Large retail power contracts. RUS is required to be notified of 
contracts to sell electric power to retail customers if the contract is 
for longer than 5 years and the kWh sales or kW demand for any year 
covered by the contract exceeds 25 percent of the borrower's total kWh 
sales or maximum kW demand for the year immediately preceding execution 
of the contract. The requirement in this paragraph (b) applies 
regardless of the source of funding of any plant extensions, additions 
or improvements that may be involved in connection with the contract.
    (c) * * *
    (1) Power supply contracts (including but not limited to economy 
energy sales and emergency power and energy sales), interconnection 
agreements, interchange agreements, wheeling agreements, pooling 
agreements, and any other similar power supply arrangements subject to 
approval by RUS are deemed approved if they have a term of 5 years or 
less. Amendments to said power supply arrangements are also deemed 
approved provided that the amendment does not extend the term of the 
arrangement for more than 5 years beyond the date of the amendment.
* * * * *

0
12. Amend Sec.  1717.616 by revising the introductory text and 
paragraph (b) to read as follows:


Sec.  1717.616  Sale, lease, or transfer of capital assets.

    A borrower may, without the prior approval of RUS, sell, lease, or 
transfer any capital asset if the following conditions are met:
* * * * *
    (b) In the most recent year for which data is available, the 
borrower has met its coverage ratios as set in 7 CFR part 1710.114(b) 
or other financial requirements as established by their Mortgages, Loan 
Contracts, and/or other Security Agreements;
* * * * *

Subpart R--Lien Accommodations and Subordinations for 100 Percent 
Private Financing


Sec.  1717.854  [Amended]

0
13. Amend Sec.  1717.854(c)(2) by removing the number ``27'' and adding 
``20'' in its place.

PART 1718--LOAN SECURITY DOCUMENTS FOR ELECTRIC BORROWERS

0
14. The authority citation for part 1718 continues to read as follows:

    Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.

Subpart B--Mortgage for Distribution Borrowers


Sec.  1718.54  [Amended]

0
15. Amend Sec.  1718.54 introductory text by removing ``Administrative 
Services Division.''

Appendix A to Subpart B [Removed]

0
16. Remove appendix A to subpart B.

Subpart C--Loan Contracts With Distribution Borrowers

Appendix A to Subpart C [Removed]

0
17. Remove appendix A to subpart C.

PART 1721--POST-LOAN POLICIES AND PROCEDURES FOR INSURED ELECTRIC 
LOANS

0
18. The authority citation for part 1721 continues to read as follows:

    Authority: 7 U.S.C. 901 et seq.; 1921 et seq.; and 6941 et seq.

Subpart A--Advance of Funds

0
19. Amend Sec.  1721.1 by revising paragraph (a) to read as follows:


Sec.  1721.1  Advances.

    (a) Purpose and amount. With the exception of minor projects which 
are addressed in paragraph (b) of this section and generation projects 
which need to be included on a RUS Form 740c or an amendment to a RUS 
Form 740c, loan funds will be advanced for projects which are included 
in a RUS approved construction work plan (CWP), Energy Efficiency and 
Conservation Program work plan (EEWP), or approved amendment to either, 
have received written documentation of RUS concluding its environmental 
reviews and have complied with all Contracting and Bidding Procedures 
included in 7 CFR part 1726. Loan fund advances can be requested in an 
amount representing actual costs incurred.
* * * * *

PART 1726--ELECTRIC SYSTEM CONSTRUCTION POLICIES AND PROCEDURES

0
20. The authority citation for part 1726 continues to read as follows:

    Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.

Subpart A--General

0
21. Amend Sec.  1726.35 by revising paragraphs (a), (c) introductory 
text, (c)(3), and (d) to read as follows:


Sec.  1726.35  Submission of documents to RUS.

    (a) Where to send documents. Documents required to be submitted to 
RUS under this part are to be sent electronically to RUS, unless 
otherwise directed.
* * * * *
    (c) Contracts requiring RUS approval. The borrower shall submit to 
RUS, one copy of each contract that is subject to RUS approval under 
subparts B through F of this part. Any contract submitted by the 
borrower contract must be accompanied by:
* * * * *
    (3) One copy of an executed contractor's bond on RUS approved bond 
forms as required in the contract form and one copy of the bid bond or 
copy of the certified check.
* * * * *
    (d) Contract amendments requiring RUS approval. The borrower must

[[Page 36198]]

submit to RUS, one copy of each contract amendment which is subject to 
RUS approval under Sec.  1726.24(b). Each contract amendment submittal 
to RUS must be accompanied by a bond extension, where necessary.
* * * * *

Subpart B--Distribution Facilities

0
22. Amend Sec.  1726.51 by revising paragraph (b) to read as follows:


Sec.  1726.51  Distribution line construction.

* * * * *
    (b) Procurement procedures. (1) It is the responsibility of each 
borrower to determine the procurement method that best meets its needs 
to award contracts in amounts of up to a cumulative total of $750,000 
or three percent of NUP (not to exceed $6,000,000), whichever is 
greater, per calendar year of distribution line construction (including 
minor modifications or improvements), exclusive of the cost of owner 
furnished materials and equipment. Borrowers may award Cost-Plus/Hourly 
contracts as part of these borrower responsibility limits up to a 
cumulative total of $250,000 or one percent of NUP (not to exceed 
$2,000,000), whichever is greater, per calendar year of distribution 
line construction (including minor modifications or improvements), 
exclusive of the cost of owner furnished materials and equipment.
    (2) The borrower shall use formal competitive bidding for all other 
distribution line contract construction unless the RUS specifically 
approves an alternative method. The dollar amounts of contracts bid 
using the formal competitive bidding procedure do not apply to the 
cumulative total stipulated in paragraph (b)(1) of this section.
    (3) An amendment which increases the scope of the contract by 
adding a project is not considered competitively bid, therefore, the 
dollar amount of that amendment does apply to the cumulative total 
stipulated in paragraph (b)(1) of this section.
* * * * *

Subpart C--Substation and Transmission Facilities

0
23. Amend Sec.  1726.77 by revising paragraphs (b) and (c) to read as 
follows:


Sec.  1726.77  Substation and transmission line construction.

* * * * *
    (b) Procurement procedures. (1) It is the responsibility of each 
borrower to determine the procurement method that best meets its needs 
to award contracts in amounts of up to a cumulative total of $750,000 
or three percent of NUP (not to exceed $6,000,000), whichever is 
greater, per calendar year of substation and transmission line 
construction (including minor modifications or improvements), exclusive 
of the cost of owner furnished materials and equipment. Borrowers may 
award Cost-Plus/Hourly contracts as part of these borrower 
responsibility limits up to a cumulative total of $250,000 or one 
percent of NUP (not to exceed $2,000,000), whichever is greater, per 
calendar year of substation and transmission line construction 
(including minor modifications or improvements), exclusive of the cost 
of owner furnished materials and equipment.
    (2) The borrower shall use formal competitive bidding for all other 
contract construction unless RUS specifically approves an alternative 
method. The dollar amount of contracts bid using the formal competitive 
bidding procedure do not apply to the cumulative total stipulated in 
paragraph (b)(1) of this section.
    (3) An amendment which increases the scope of the contract by 
adding a project is not considered competitively bid, therefore, the 
dollar amount of that amendment does apply to the cumulative total 
stipulated in paragraph (b)(1) of this section.
    (c) Contract approval. Individual contracts in the amount of 
$750,000 or more or three percent of NUP (not to exceed $6,000,000), 
whichever is greater, exclusive of the cost of owner furnished 
materials and equipment, are subject to RUS approval.

Subpart E--Buildings

0
24. Amend Sec.  1726.150 by revising paragraph (b) to read as follows:


Sec.  1726.150  Headquarters buildings.

* * * * *
    (b) Procurement procedures. A borrower may use Multiparty Lump Sum 
Quotations to award contracts in amounts of up to a cumulative total of 
$1,500,000 or three percent of NUP (not to exceed $10,000,000), 
whichever is greater, per calendar year of headquarters construction 
(including minor modifications or improvements). The borrower shall use 
formal competitive bidding for all other headquarters contract 
construction unless RUS specifically approves an alternative method.
* * * * *

Subpart F--General Plant

0
25. Amend Sec.  1726.176 by revising the introductory text and 
paragraph (b)(3) to read as follows:


Sec.  1726.176  Communications and control facilities.

    This section covers the purchase of microwave, fiber, power line 
carrier, and other communications technologies or systems, including 
load control and supervisory control and data acquisition (SCADA) 
systems, automated meter reading/automated metering infrastructure 
(AMR/AMI), or other smart grid technologies. Mobile radio systems are 
covered as general plant materials in Sec.  1726.175.
* * * * *
    (b) * * *
    (3) Contract approval. Individual contracts in amounts of $750,000 
or more or one percent of NUP (not to exceed $5,000,000 for all 
borrowers), whichever is greater, exclusive of the cost of owner 
furnished materials and equipment, are subject to RUS approval.

Subpart J--Contract Closeout

0
26. Amend Sec.  1726.403 by revising paragraph (c)(2)(ii) introductory 
text to read as follows:


Sec.  1726.403  Project construction contract closeout.

* * * * *
    (c) * * *
    (2) * * *
    (ii) For contracts subject to RUS approval, the borrower will 
submit either a certification or the following closeout documents for 
RUS approval:
* * * * *

PART 1730--ELECTRIC SYSTEM OPERATIONS AND MAINTENANCE

0
27. The authority citation for part 1730 continues to read as follows:

    Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.

Subpart B--Operations and Maintenance Requirements

0
28. Revise Sec.  1730.23 to read as follows:


Sec.  1730.23  Review rating summary, RUS Form 300.

    The RUS Form 300 is available from RUS and shall be used when 
required by this part.

Appendix A to Subpart B [Removed]

0
29. Remove appendix A to subpart B.

PART 1767--ACCOUNTING REQUIREMENTS FOR RUS ELECTRIC BORROWERS

0
30. The authority citation for part 1767 continues to read as follows:

    Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.

[[Page 36199]]

Subpart B--Uniform System of Accounts

0
31. Amend Sec.  1767.41 by revising entry 119 to read as follows:


Sec.  1767.41  Accounting methods and procedures required of all RUS 
borrowers.

* * * * *
119 Special Equipment
    Special Equipment items are classified separately from work order 
items. The USoA provides accounting that differs from that used for 
other types of materials. The cost of new, special equipment items 
shall be capitalized at the time of purchase; it shall not be charged 
to Account 154 as is the case with other materials. The first 
installation cost, as well as all incidental costs necessary to prepare 
the equipment for use, shall be capitalized with the material upon 
purchase. All subsequent costs of removing, resetting, changing, 
renewing oil, and repairing constitute operations and maintenance 
expenses. The capitalized cost of special equipment items, including 
the first installation, shall be removed from the electric plant 
accounts only when the items are abandoned or retired from the system. 
Borrowers may request a waiver from the special equipment accounting 
requirements as described later in this section.
    Special Equipment Items include the following:
    1. Reclosers and Sectionalizers recorded in Account 365, Conductor 
and Devices
    2. Transformers, Capacitors and Voltage Regulators recorded in 
Account 368, Line Transformers
    3. Meters, Meter Sockets, current and potential transformers, and 
other metering equipment recorded in Account 379, Meters
    4. Load Control Devices recorded in Account 371, Installations on 
Customers' Premises (See Interpretation No. 118)

    Note: Equipment installed in a substation is not considered 
special equipment.

    Special equipment items which are classified as nonusable shall be 
segregated in the warehouse and retired from service. The Summary of 
Special Equipment Costs shall be retitled Summary of Special Equipment 
Costs Retired and used for this purpose. A journal entry reflecting 
this information shall be prepared and posted to the books. Since loan 
funds for special equipment, including first installation costs, are 
approved for advance by the Rural Development upon receipt of the 
borrower's written estimate of funds required, and not on the basis of 
an Inventory of Work Orders, it is improper to take a credit for any 
salvage involved in the retirement of special equipment on the 
Inventory of Work Orders.
    Electric borrowers that wish to receive a waiver from the special 
equipment accounting requirements should submit a letter request to 
Rural Development. In order to expedite these requests the letter to 
Rural Development should state that the borrower will adhere to the 
following requirements to account for special equipment using the work 
order procedure rather than the special equipment accounting procedures 
prescribed by Rural Development:
    1. New purchases of special equipment items are to be charged to 
Account 154, Materials and Supplies, upon purchase.
    2. Labor, material and overhead costs associated with the initial 
installation and all subsequent installations of special equipment are 
recorded on construction work orders and charged to the appropriate 
plant accounts upon closeout of the construction work order.
    3. Labor and overhead costs associated with the removal of special 
equipment items, whether the items removed are placed in inventory or 
permanently retired and disposed of, are recorded on retirement work 
orders and charged or credited to the depreciation reserve account upon 
closeout of the retirement work order.
    4. The special equipment items retired and salvaged for reuse are 
returned to the materials and supplies account at the average material 
cost in the materials and supplies account and credited to the 
depreciation reserve upon closeout of the retirement work order.
    In addition to recognition of the requirements noted above, the 
borrower should indicate how it plans to account for the items of 
special equipment that have been charged to the plant accounts but not 
installed (in inventory). Two acceptable methods to account for this 
equipment are: (1) Leave the equipment in the plant accounts until the 
inventory is depleted and charge only new purchases to materials and 
supplies, or (2) credit the plant accounts for the installed cost of 
the equipment in inventory, charge the equipment cost to materials and 
supplies, and charge the installation cost to the appropriate 
operations expense account. Also, under the second method, the borrower 
must submit a ``negative'' special equipment summary to Rural 
Development to return to the balance in reserve for the current loan 
the installed cost of special equipment in inventory on the date of 
transition.
* * * * *

Christopher A. McLean,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2021-14358 Filed 7-8-21; 8:45 am]
BILLING CODE 3410-15-P