[Federal Register Volume 77, Number 144 (Thursday, July 26, 2012)]
[Proposed Rules]
[Pages 43723-43734]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-17784]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 77, No. 144 / Thursday, July 26, 2012 /
Proposed Rules
[[Page 43723]]
DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Parts 1710, 1717, 1721, 1724, and 1730
RIN 0572-AC19
Energy Efficiency and Conservation Loan Program
AGENCY: Rural Utilities Service, USDA.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Rural Utilities Service (RUS or Agency) is proposing
policies and procedures for loan and guarantee financial assistance in
support of energy efficiency programs (EE Programs) sponsored and
implemented by electric utilities for the benefit of rural persons in
their service territory. This notice of proposed rulemaking proposes
changes to RUS regulations on General and Pre-Loan Policies and
Procedures Common to Electric Loans and Guarantees. This regulation was
finalized December 20, 1993. The notice of proposed rulemaking also
proposes conforming amendments to additional RUS regulations. Under
Section two of the Rural Electric Act, RUS is authorized to assist
electric borrowers in implementing demand side management, energy
efficiency and conservation programs, and on-grid and off-grid
renewable energy systems. The scope of this proposed regulation falls
within the authority of the Act.
DATES: Comments must be submitted on or before September 24, 2012.
ADDRESSES: Submit comments by either of the following methods: Federal
eRulemaking Portal: Go to http://www.regulations.gov. Follow the
instructions for submitting comments.
Postal Mail/Commercial Delivery: Please send your comments
addressed to Michele Brooks, Director, Program Development and
Regulatory Analysis, USDA Rural Development, 1400 Independence Avenue
SW., STOP 1522, Room 5162, Washington, DC 20250-1522.
Other Information: Additional information about Rural Development
and its programs is available on the Internet at http://www.rurdev.usda.gov/index.html.
FOR FURTHER INFORMATION CONTACT: Gerard Moore, USDA-Rural Utilities
Service, 1400 Independence Avenue SW., Stop 1569, Washington, DC 20250-
1569, telephone (202) 205-9692 or email to [email protected].
SUPPLEMENTARY INFORMATION:
Executive Summary: The Rural Utilities Service (RUS or Agency) is
proposing policies and procedures for loan and guarantee financial
assistance in support of energy efficiency programs (EE Programs)
sponsored and implemented by electric utilities for the benefit of
rural persons in their service territory. This notice of proposed
rulemaking is designed to supplement the policies contained in 7 CFR
part 1710, GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO
ELECTRIC LOANS AND GUARANTEES, which were finalized in December 1993.
Under Section 2(a) of the Rural Electrification Act of 1936 (7 U.S.C.
902(a)), the Secretary of Agriculture is explicitly ``authorized and
empowered to make loans in the several States and Territories of the
United States * * * for the purpose of assisting electric borrowers to
implement demand side management, energy efficiency and conservation
programs, and on-grid and off-grid renewable energy systems.'' As
noted, Section 6101 of the 2008 Farm Bill inserted the words ``and
energy efficiency'' into this provision. In order to implement this new
focus of the program, RUS proposes to amend 7 CFR part 1710 by adding a
new subpart H entitled ``Energy Efficiency and Conservation Loan
Program.''
The goals of an eligible Energy Efficiency Program that could be
funded under this program under this proposed subpart may include: (1)
Increasing energy efficiency at the end user level, (2) modifying
electric load such that there is a reduction in overall system demand,
(3) effecting a more efficient use of existing electric distribution,
transmission and generation facilities, (4) attracting new businesses
and create jobs in rural communities by investing in energy efficiency,
and (5) encouraging the use of renewable energy fuels for both demand
side management and the reduction of conventional fossil fuel use
within the service territory.
The Energy Efficiency and Conservation Loan Program may include
loans supporting energy efficiency activities undertaken by the utility
itself, the finance of energy efficiency projects undertaken by others
and investments made by the utility to accomplish their obligations
under utility energy services contracts.
Impacts
The new Subpart H. for the Energy Efficiency and Conservation Loan
Program can have several economic impacts. The benefits include: (1)
The value of purchased energy saved; (2) the value of corresponding
avoided generation, transmission and/or distribution; (3) reserve
investments as may be displaced or deferred by program activities; and
(4) savings in energy bills.
The proposed loan program is estimated to have a maximum funding
level of $250 million annually. The estimated administrative cost to
the applicant and federal government are relatively low, at about
$740,000 total for applicants, and about $1.7 million for the Federal
government.
Executive Order 12866 and 13563
This proposed rule has been reviewed under Executive Order (EO)
12866, ``Regulatory Planning and Review,'' 58 FR 51735 (Oct. 4, 1993),
and has been determined to be significant by the Office of Management
and Budget. The EO defines a ``significant regulatory action'' as one
that is likely to result in a rule that may: (1) Have an annual effect
on the economy of $100 million or more or adversely affect, in a
material way, the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local, or tribal governments or communities; (2) Create a serious
inconsistency or otherwise interfere with an action taken or planned by
another agency; (3) Materially alter the budgetary impact of
entitlements, grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) Raise novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in this EO. As required by OMB circular A-4
the regulatory impact analysis will be
[[Page 43724]]
published along with this proposed rule on regulations.gov
The agency has also reviewed this regulation pursuant to Executive
Order 13563, issued on January 18, 2011 (76 FR 3281, Jan. 21, 2011). EO
13563 is supplemental to and explicitly reaffirms the principles,
structures, and definitions governing regulatory review established in
Executive Order 12866. To the extent permitted by law, agencies are
required by Executive Order 13563 to: (1) Propose or adopt a regulation
only upon a reasoned determination that its benefits justify its costs
(recognizing that some benefits and costs are difficult to quantify);
(2) tailor regulations to impose the least burden on society,
consistent with obtaining regulatory objectives, taking into account,
among other things, and to the extent practicable, the costs of
cumulative regulations; (3) select, in choosing among alternative
regulatory approaches, those approaches that maximize net benefits
(including potential economic, environmental, public health and safety,
and other advantages; distributive impacts; and equity); (4) to the
extent feasible, specify performance objectives, rather than specifying
the behavior or manner of compliance that regulated entities must
adopt; and (5) identify and assess available alternatives to direct
regulation, including providing economic incentives to encourage the
desired behavior, such as user fees or marketable permits, or providing
information upon which choices can be made by the public.
The Agency conducted a benefit-cost analysis to fulfill the
requirements of EO 12866 and 13563. In this analysis, the Agency
identifies potential benefits and costs of the Energy Efficiency and
Conservation Loan Program to borrowers, and RUS. The analysis contains
quantitative estimates of the burden to the public and the Federal
government and qualitative descriptions of the expected economic,
environmental, and energy impacts associated with the Energy Efficiency
and Conservation Loan Program.
Catalog of Federal Domestic Assistance
The program described by this proposed rule is an eligible purpose/
subsidiary program of the Electrification Loans and Loan Guarantee
program as listed in the Catalog of Federal Domestic Assistance
Programs under number 10.850, Rural Electrification Loans and Loan
Guarantees. The Catalog is available on the Internet at http://www.cfda.gov.
Executive Order 12372
This proposed rule is excluded from the scope of Executive Order
12372, Intergovernmental Consultation, which may require 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).
Paperwork Reduction Act of 1995
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
chapter 35), comments are invited on this information collection for
which the Agency has requested approval from the Office of Management
and Budget (OMB).
Comments on this proposed rule must be received by September 24,
2012.
Comments are invited on (a) whether the collection of information
is necessary for the proper performance of the functions of the Agency,
including whether the information will have practical utility; (b) the
accuracy of the Agency's estimate of burden including the validity of
the methodology and assumption used; (c) ways to enhance the quality,
utility and clarity of the information to be collected; and (d) ways to
minimize the burden of the collection of information on those who are
to respond, including through the use of appropriate automated,
electronic, mechanical, or other technological collection techniques on
other forms or information technology.
Comments may be sent to Michele Brooks, Director, Program
Development and Regulatory Analysis, Rural Development, U.S. Department
of Agriculture, 1400 Independence Avenue SW., Stop 1522, Room 5162
South Building, Washington, DC 20250.
Title: Energy Efficiency and Conservation Loan Program.
Type of Request: New information collection.
Abstract: The Agency manages loan programs in accordance with the
Rural Electrification Act of 1936, 7 U.S.C. 901 et seq., as amended (RE
Act), which expressly provides for assisting electric borrowers in
their implementation of demand side management (DSM), EE Programs and
energy conservation programs. This proposed rulemaking expands upon the
policies and procedures which are specific to loans for EE Programs. As
a practical matter, energy efficiency investment includes the eligible
purposes of DSM and energy conservation as well as investments
resulting in the better management of existing loads or a reduction in
investment needed for additional electric facilities.
The implementation of effective EE Programs by utilities also
benefits rural America by creating jobs and these programs stimulate
the economy by catalyzing material and equipment orders needed to
implement the programs.
Title 7 CFR part 1710 General and Pre-loan Policies and Procedures
Common to Electric Loans and Guarantees, subpart H, Energy Efficiency
Programs, will provide for insured or guaranteed loans to new or
existing borrowers for EE Programs undertaken by them in their service
territory.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 8 hours per response.
Respondents: Not for profit organizations, business or other for
profit.
Estimated Number of Respondents: 20.
Estimated Number of Responses per Respondent: 1.
Estimated Annual Responses: 20.
Estimated Total Annual Burden on Respondents: 160 hours.
Copies of this information collection can be obtained from Thomas
P. Dickson, Program Development and Regulatory Analysis, USDA Rural
Development, 1400 Independence Avenue SW., STOP 1522, Room 5164,
Washington, DC 20250-1522. Telephone: 202-690-4492.
All responses to this information collection and recordkeeping
notice will be summarized and included in the request for OMB approval.
All comments will also become a matter of public record.
E-Government Act Compliance
The Agency is committed to the E-Government Act, which requires
Government agencies in general to provide the public the option of
submitting information or transacting business electronically to the
maximum extent possible.
National Environmental Policy Act Certification
In accordance with the National Environmental Policy Act of 1969
(42 U.S.C. 4321 et seq.), the Agency will prepare a Programmatic
Environmental Assessment (PEA) for this loan program activity as part
of this rulemaking process. The PEA will be prepared pursuant to the
National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et
seq.), the Council on Environmental Quality's (CEQ) regulations for
implementing NEPA (40 CFR parts 1500-1508), and RUS' NEPA
[[Page 43725]]
implementing regulations, Environmental Policies and Procedures (7 CFR
part 1794). A notice will be published in the Federal Register
announcing the availability of this PEA for public review. No
obligations under this proposed new subpart will be processed until the
Agency has made a determination of environmental finding for the
actions contemplated in the proposed new subpart.
Regulatory Flexibility Act Certification
It has been determined the Regulatory Flexibility Act is not
applicable to this rule since the RUS is not required by 5 U.S.C. 551
et seq. or any other provision of law to publish a notice of proposed
rulemaking with respect to the subject matter of this rule.
Unfunded Mandates
This rule contains no Federal mandates (under the regulatory
provisions of title II of the Unfunded Mandates Reform Act of 1995) for
State, local, and tribal governments or for the private sector.
Therefore, this rule is not subject to the requirements of section 202
and 205 of the Unfunded Mandates Reform Act of 1995.
Executive Order 12988
This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. The Agency has determined that this proposed rule
meets the applicable standards in Sec. 3 of the Executive Order. In
addition, all state and local laws and regulations that are in conflict
with this rule will be preempted, no retroactive effort will be given
to this rule, and, in accordance with section 212(e) of the Department
of Agriculture Reorganization Act of 1994 (7 U.S.C. 6912(e)),
administrative appeals procedures, if any, must be exhausted before any
action against the Department or its agencies may be initiated.
Executive Order 13132, Federalism
The policies contained in this rule do not have any substantial
direct effect on states and local governments, on the relationship
between the national government and the states and locals, or on the
distribution of power and responsibilities among the various levels of
government. Nor does this rule impose substantial direct compliance
costs on state and local governments. Therefore, consultation with the
states is not required.
Executive Order 13175, Consultation and Coordination With Indian Tribal
Governments
This executive order imposes requirements on Rural Development in
the development of regulatory policies that have tribal implications or
preempt tribal laws. Between October 2010 and January 2011, the United
States Department of Agriculture (USDA) hosted seven regional
regulation Tribal consultation sessions to gain input by elected Tribal
officials or their designees concerning the impact of this rule on
Tribal governments, communities, and individuals. These sessions
established a baseline of consultation for future actions, should any
be necessary, regarding this rule. As a result of the input received
during these sessions, Rural Development has determined that the
proposed 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 proposed rule is not subject to the requirements of
Executive Order 13175. If a tribe determines that this rule has
implications of which Rural Development is not aware and would like to
engage in consultation with Rural Development on this rule, please
contact Rural Development's Native American Coordinator at (720) 544-
2911 or [email protected].
Background
RUS proposes to amend 7 CFR part 1710 by adding a new subpart H
entitled ``Energy Efficiency and Conservation Loan Program''. Under
Section 2(a) of the Rural Electrification Act of 1936 (7 U.S.C.
902(a)), the Secretary of Agriculture is explicitly ``authorized and
empowered to make loans in the several States and Territories of the
United States * * * for the purpose of assisting electric borrowers to
implement demand side management, energy efficiency and conservation
programs, and on-grid and off-grid renewable energy systems.'' As
noted, Section 6101 of the 2008 Farm Bill inserted the words ``and
energy efficiency'' into this provision which was originally added as
an amendment to the RE Act by the Rural Electrification Loan
Restructuring Act of 1993 (``RELRA'') (Pub. L. 103-129 sec.
2(c)(1)(B)).\1\ Energy conservation was a part of the Agency's mission
even before RELRA explicitly recognized this. In 1980, RUS developed an
Energy Resources Conservation Program by issuing RUS Bulletin 20-23,
Section 12 Extensions for Energy Resources Conservation Loans, dated
December 8, 1980).\2\ Commonly known as the ERC Loan Program, the
Administrator used his broad discretion under the RE Act to employ
Section 11 of the RE Act, authority to extend the time for payments as
the foundation for creating the ``ERC Loan Program.'' RUS did not make
ERC Loans directly. It operated the program by entering into agreements
with its borrowers to defer amortization of their loans in order for
the borrowers to fund energy conservation improvements. The electric
cooperatives made loans to their members out of the cash flow resulting
from the deferments they received from RUS on their own loans. Even
though RUS did not make the ERC loans itself, it provided financial
assistance to rural consumers by using the electric cooperatives as
intermediaries. Congress subsequently amended Section 12 to expand it,
first in 1990 to enable deferments to enable borrowers to provide
financing to local businesses to stimulate rural economic development
and again in 2008 to authorize energy efficiency and use audits and to
install energy efficient measures or devices to reduce demand on
electric systems. The recent grant of additional authority in Section 3
of the RE Act to make loans and guarantees for energy efficiency, as
contrasted with authority to merely defer payments on direct loans, has
become increasingly significant as percentage of the RUS portfolio
represented by direct loans continues to amortize. In recent times the
Agency delivers nearly all of its electric program assistance in the
form of loan guarantees. As a guarantor, RUS does not have the same
discretion to defer payments that it does when it is the lender.
Consequently, RUS has determined that it is now necessary and
appropriate to develop a loan program for this RE Act purpose.
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\1\ Senator Patrick Leahy, as the Chairman of the Senate
Committee on Agriculture, Nutrition and Forestry, explained this
provision in a letter dated June 18, 1993 to Senator Jim Sasser, the
Chairman of the Senate Committee on the Budget, as follows: ``These
amendments also permit REA [RUS] to make loans for demand side
management and energy conservation program[s] which are required by
some state agencies. They are also often the most cost effective
methods of meeting the energy needs of rural areas.''
\2\ This Bulletin was rescinded in 2002 when RUS updated and
codified the ERC Loan Program as 7 CFR Part 1721, subpart B. (See 67
FR 484, January 4, 2002).
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``The REA Act, 7 U.S.C. 904, commits to the discretion of the
Administrator the making of loans for rural electrification * * *.''
Alabama Power Co. v. Ala. Elec. Coop., 394 F.2d 672 at 675 (CA 5) cert.
denied 393 U.S. 1000
[[Page 43726]]
(1968). ``REA is the administrative agency charged by Congress with
responsibility for facilitating rural electrification. REA was intended
by Congress to determine the appropriate course of conduct to
accomplish the legislative purpose.'' Public Utility District No. 1 of
Franklin County v. Big Bend Electric Cooperative, Inc., 618 F.2d 601 at
603 (CA 9 1980). By broadly adding ``energy efficiency'' in the 2008
Farm Bill as a legislative purpose for the RE Act loans, Congress left
it to the Administrator's discretion to fashion the appropriate method
to accomplish this purpose. Drawing on more than three decades of
experience in using electric cooperatives as local intermediaries to
accomplish RE Act objectives at the consumer level, RUS is proposing to
deliver this energy efficiency program drawing upon its favorable past
successes with using its electric borrowers as intermediaries.
RUS anticipates that borrowers under this subpart will be
generation and transmission (G&T) borrowers or their distribution
members or unaffiliated distribution borrowers who are current on their
loan payments and in compliance with their loan documents. RUS will
only make loans for these purposes to electric utility systems. RUS
also anticipates that the EE improvements installation work may be
contracted by either the utility or the ultimate recipient, or
performed directly by employees of the borrower, at the discretion of
the utility designing the EE Program. In all cases, the Eligible
Borrower is expected to hold title to the receivables funded by the RUS
loan.
RUS is authorized by the RE Act to make loans to implement DSM, EE
Programs and conservation programs, and on-grid and off-grid renewable
energy systems. Energy Efficiency in this regulation can be defined as
the degree a system or component performs its designated function with
minimum consumption of resources. Renewable energy systems have a
specific role in this regulation. Renewable generation can be used as
load modifiers. Load modifiers can increase the efficiency of energy
consumption from the utilities perspective and are highly effective at
decreasing energy used by decreasing load during system peaks.
Renewable energy and conservation savings associated with this
regulation are from the utilities perspective, though the energy
savings could be realized by both the consumer and utility, depending
on the type of project, as the utility is the RUS borrower and is
culpable for repayment of the loan. Energy efficiency as contemplated
in this proposed regulation may, depending on the given project,
accomplish either DSM, energy conservation, or both. The goals of an
eligible EE Program under this proposed subpart may include one or more
of the following: (1) To increase energy efficiency at the end user
level, (2) to modify electric load such that there is a reduction in
overall system demand, (3) to effect a more efficient use of existing
electric distribution, transmission and generation facilities, and (4)
to attract new businesses and create jobs in rural communities by
investing in energy efficiency, and (5) to encourage the use of
renewable energy fuels to accomplish either DSM or a reduction in the
consumption of conventional fossil fuel within the service territory.
The primary differences between the existing energy resource
conservation program codified in subpart B of 7 CFR part 1721 (ERC
program) and the EE Program proposed in this rulemaking are: (1) The
existing ERC program is limited to direct loan principal deferments and
is not available for RUS guaranteed loans, (2) the list of eligible
loan purposes for this proposed program is more expansive than for the
ERC program and, where applicable, emphasizes that the assets in
question must be characterized as an integral part of the Consumer's
real property that would typically transfer with the title under
applicable state law, and (3) the term of financing available under
this proposed subpart is longer than the term allowed for principal
deferments under the ERC loan program.
Rural electric cooperatives are proponents of energy efficiency
measures. According to the National Rural Electric Cooperative
Association, 73% of co-ops plan on significantly expanding existing
efficiency programs in the next two years, 70% of co-ops offer
financial incentives to promote greater energy efficiency, 96% of co-
ops have some form of energy efficiency program in place, cooperatives
are responsible for nearly 25% of residential peak load management
capacity and cooperatives have 10% of retail electricity sales but are
responsible for 20% of actual peak demand reduction. Representatives
from rural electric cooperatives have commented that access to low
interest funds can be the difference between success and failure for an
energy efficiency program.
Eligible EE Programs may be comprised of a variety of activities,
performed by either the utility or third parties. This proposed rule
sets forth the policies and procedures related to eligible EE Programs
where the RUS will finance: (1) Energy efficiency activities undertaken
by the utility itself, (2) loans made by the utility to finance energy
efficiency projects undertaken by others and (3) investments made by
the utility to accomplish their obligations under utility energy
services contracts. The types of activities that are eligible for RUS
financing under this subpart include but are not limited to: (1)
Residential and commercial energy audits, (2) community awareness and
outreach programs, (3) services, materials and equipment provided by a
qualified local contractor to improve energy efficiency at the Consumer
level, and (4) energy efficiency loans made by the utility to its
customers. RUS is considering allowing fuel switching as an eligible
activity under this regulation. Fuel switching would not be designed to
be a permanent change from one fuel to another, rather a method to
handle peak loads during limited time periods. A description of EE
Programs that would qualify for RUS financing may be found in the
proposed Sec. 1710.405. Eligible investments are listed in the
proposed Sec. 1710.406. Finally, eligible borrowers are defined in the
proposed Sec. 1710.404.
The term ``Energy efficiency'' is used in this part to refer to
eligible load modification investments as well as traditional energy
efficiency projects. A program to finance photovoltaic (solar)
installations, for example, would typically be classified as
distributed renewable generation, not energy efficiency. Distributed
solar investments, however, including those made by individual
Consumers, may also impact the load profile of the interconnected
utility in a positive way, or facilitate demand side management, and
they would be an eligible purpose for this program where any associated
power flow from them into the grid is incidental. Small scale renewable
energy systems that are constructed with the primary purpose of
supplying energy to the grid would not be considered an energy
efficiency investment under this loan program. Such small scale
renewable energy systems may be financed under this Agency's
traditional loan programs. The operative distinctions between eligible
investments under this proposed subpart and the regular loan program
are (1) these assets would ordinarily be on the customer side of the
meter and (2) to the extent these assets deliver electricity to the
grid, it will not exceed an incidental amount. This rulemaking proposes
that the small scale renewable energy system investments financed on
the Consumer side of the meter under
[[Page 43727]]
this program will be presumed to be incidental where the nameplate
generation capacity is less than 50% of the average anticipated
electrical load associated with the end user.
Some programs designed by utilities may have the utility initially
owning an asset even though it is located on a Consumer's premise and
the asset is later conveyed to the Consumer after it is paid for or a
period of time has elapsed. Where this is the case, RUS is proposing
that the application include an additional or revised Schedule C to the
RUS mortgage listing these assets as Excepted Property under the RUS
mortgage, so as to preclude the assets being captured under the after
acquired clause that is standard in the RUS mortgage codified in 7 CFR
part 1718. It is the intent of RUS that a release of lien need not be
executed by the Agency for the utility to convey to the Consumer clear
title to these assets when this Schedule C is recorded.
This proposed rulemaking recognizes that energy may take a variety
of forms, not just electricity. The criteria to be met by eligible
programs include energy efficiency as measured by Btu \3\ input
relative to Btu output, in order to facilitate the widest and greatest
contribution by the rural utility in optimizing the energy consumption
profile of its service territory. The proposed rulemaking also provides
that an eligible program must demonstrate that the financial strength
of the electric utility is not harmed by EE Program activities funded
under this proposed new subpart.
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\3\ British Thermal Unit.
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An important distinction between eligible energy efficiency assets
to be financed under this new subpart H and other energy efficiency
activities is that the assets located at a Consumer's premises, whether
or not title is to be held by the utility must, for the most part, be
considered an integral part of the real property that would typically
transfer with the title under applicable State law (a specified
exception relates to lighting) in order to be financed pursuant to an
eligible program under this proposed rulemaking.
Eligible programs may provide that the utility will recoup all or
part of the costs from specific ratepayers on whose behalf an
investment has been made. Recoupment may take the form of Consumer loan
repayment or a dedicated tariff. An eligible program under this part
must show that the payment terms and loan term offered to the Consumer
are generally correlated with the expected life of the applicable
assets. An eligible program must also offer an undertaking that funds
collected from ratepayers in excess of the current amortization
requirements for the RUS loan will be redeployed for EE Program
purposes or used to prepay the RUS loan. These prepayments would be in
addition to scheduled principal and interest debt service payments.
Applications for program financings under this subpart must fully
describe a Business Plan that meets the requirements of Sec. 1710.407.
The Agency recognizes that energy efficiency investments that
reduce energy consumption at the Consumer premises (for instance those
that affect the power factor) may prompt a need for investments at the
system level to sustain the reliability and stability of the grid. The
business plan called for in this proposed rulemaking must identify the
related system investment to be identified as part of the EE Program,
but these system level investments would be reflected in the utility's
construction work plan and financed as part of a traditional loan
application.
It is not required that an eligible program fund energy audits
performed at Consumer premises. However, if the utility proposes to
provide audits the rulemaking proposes that the program must also
include a provision for assisting Consumers in implementing changes
suggested by the audit in those cases where the recommended investments
are expected to achieve minimum performance objectives. A program that
funds energy audits without providing assistance for implementing audit
recommendations included in the audit would not be an eligible program
and only those activities that meet minimum performance objectives are
eligible to be funded under this program. Only those audit
recommendations that taken together will achieve an overall reduction
in annualized energy consumption at a specific premise of at least 10%
may be financed with RUS loan funds under this subpart.
The list of eligible investments and activities that a qualified
plan may incorporate is not intended to be exhaustive. The intent is to
facilitate flexibility for the utility's EE Program consistent with the
resources and Consumer profiles in its service territory.
Performance thresholds have been established in this regulation.
The objective of these thresholds is to ensure a minimum increase in
energy efficiency for a given system. This approach also ensures that
any energy efficiency upgrades will not be marginal. These thresholds
appear as percent increases in system efficiency. At this time there
are no standards to apply to each of these systems.
This proposed lending program is designed for utility-designed and
directed EE Programs. As such it anticipates that eligible loan
purposes will include program administrative and other soft costs, such
as marketing expenses, where not more than four percent of the loan
budget may be used for these purposes. A utility's program may include
acting as an intermediary lender, where the utility uses RUS financing
to make Consumer loans to finance these investments on the Consumers'
premises. Where this is the case, this rulemaking proposes to cap the
interest rate at one percent that the utility can charge.
The process for applying for EE Program loans is intended to
largely conform to the Agency's existing process for loans relating to
other eligible purposes. Accordingly, the requirements discussed
throughout 7 CFR part 1710 are proposed to apply equally to EE Program
loans unless otherwise stated after giving effect to the proposed
conforming amendments incorporated in this rulemaking. Expenditures by
the utility will be reimbursed by the Agency after the fact pursuant to
an inventory of work orders system as is typical for our existing loan
process. The analytical material needed to support an EE Program loan
is different from what is needed to analyze a generation or
transmission loan. Accordingly, the proposed subpart H elaborates on
what is needed for RUS to approve an EE Program and loans to execute
the program. EE Program activity will be captured under a separate
energy efficiency work plan. Energy efficiency investments will not be
listed on the traditional construction work plan that applies to
utility assets financed by RUS.
As with other loans made pursuant to 7 CFR part 1710, a borrower's
Environmental Report (ER) is expected to accompany the energy
efficiency work plan associated with the loan request. The ER is in
accordance with 7 CFR 1794. This Part contains the policies and
procedures of the Rural Utilities Service for implementing the
requirements of the National Environmental Policy Act. In the case of
an EE Program loan, this ER will be expected to reference the PEA as
completed by the Agency for EE Program loans, and identify any
investments that are proposed in the work plan that were not captured
in the PEA.
This new subpart H is not intended to be duplicative of
requirements
[[Page 43728]]
otherwise prescribed in part 1710, but rather, adaptive. It identifies
requirements that are unique to loans made under the proposed subpart H
to finance EE Programs. It addresses federal requirements that arise
when our direct borrower acts as an intermediary lender to accomplish
the investments outlined in an approved EE program. Where there is an
express conflict with requirements elsewhere in part 1710, the
provisions of the proposed subpart H would apply, but otherwise this
proposed subpart H is not intended to supplant the applicability of the
rest of part 1710 or other applicable parts in the Code of Federal
Regulations.
Subpart H, as required with for all of 1710, will work with DOE,
following the requirements set of by the Rural Electrification Act of
1936, Section 16 that states: ``the Secretary in making or guaranteeing
loans for the construction, operations, or enlargement of generating
plants or electric transmission lines or systems shall consider such
general criteria consistent with the provisions of this Act as may be
published by the Secretary of Energy.''
Comments Are Specifically Invited on the Following Questions
1. What should be the threshold for determining when small scale
renewable energy systems on the Consumer side of the meter is presumed
incidental and thereby qualify for reimbursement under this program?
2. What is the appropriate markup above the Treasury-based interest
rate paid to RUS that the utility should be allowed to add to cover its
administrative costs in the interest rate it establishes for Consumer
loans funded under this proposed subpart?
3. What is the appropriate performance thresholds that should be
set to ensure products purchased with loan funds are significantly more
energy efficient than conventional products, have reasonable payback
periods, and perform at least as well as conventional products? Are the
percentage energy efficiency improvements for specific projects
appropriate measures for this program's energy efficiency standards?
Should this rule reference existing energy efficiency standards or
criteria such as those from ENERGY STAR, FEMP, ANSI, or other voluntary
consensus standards as a means of ensuring products purchased with loan
funds are significantly more energy efficiency than conventional
products?
4. Should fuel switching be an eligible activity under this
programmatic regulation? Should the agency consider any net increases
in conventional fossil fuel consumption or emissions due to fuel
switching even though the utility's electrical load may be reduced
during peak periods? Would limiting fuel switching projects to 50% of
the average anticipated electrical load associated with the end user,
adequately address any concerns with potential emissions or overall
energy generation increases?
5. RUS requests comment on the one percent cap on interest rates
that utilities may charge under this program, where the utility uses
RUS financing to make Consumer loans to finance these investments on
the Consumers' premises. RUS also requests comment on the four percent
limit of the loan budget that may be used on administration and other
soft costs, such as marketing expenses.
6. RUS requests comment on the appropriate funding cap for this
program. Should it be $250 million?
List of Subjects
7 CFR Part 1710
Electric power, Loan programs--energy, Reporting and recordkeeping
requirements, Rural areas.
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 1721
Electric power, Loan programs energy, Rural areas.
7 CFR Part 1724
Electric power, Loan programs--energy, Reporting and recordkeeping
requirements, Rural areas.
7 CFR Part 1730
Electric power, Loan programs--energy, Reporting and recordkeeping
requirements, Rural areas.
For reasons set forth in the preamble, the Agency proposes to amend
7 CFR chapter XVII as follows:
PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO
ELECTRIC LOANS AND GUARANTEES
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 A--General
2. In Sec. 1710.2(a) revise the definition of ``Demand side
management'' and add a new definition of ``Eligible Energy Efficiency
Programs'' in alphabetical order to read as follows:
Sec. 1710.2 Definitions and rules of construction.
(a) * * *
Demand side management (DSM) means the deliberate planning and/or
implementation of activities to influence Consumer use of electricity
provided by a distribution borrower to produce beneficial modifications
to the system load profile. Beneficial modifications to the system load
profile ordinarily improve load factor or otherwise help in utilizing
electric system resources to best advantage consistent with acceptable
standards of service and lowest system cost. Load profile modifications
are characterized as peak clipping, valley filling, load shifting,
strategic conservation, strategic load growth, and flexible load
profile. (See, for example, publications of the Electric Power Research
Institute (EPRI), 3412 Hillview Avenue, Palo Alto, CA 94304, especially
``Demand-Side Management Glossary'' EPRI TR-101158, Project 1940-25,
Final Report, October 1992.) DSM includes energy conservation programs.
It does not include sources of electrical energy such as renewable
energy systems unless the power flow into the grid from such an
interconnected resource is incidental to the operation of the source. A
small scale renewable energy source with a nameplate capacity 50
percent or less than the average anticipated load of the associated end
user(s) is presumed to be incidental.
* * * * *
Eligible Energy Efficiency and Conservation Programs (Eligible EE
Program) means an energy efficiency and conservation program that meets
the requirements of subpart H of this part.
* * * * *
Subpart C--Loan Purposes and Basic Policies
Sec. 1710.100 [Amended]
3. In Sec. 1710.100, amend the first sentence by adding the words
``efficiency and'' before ``energy conservation.''
Sec. 1710.101 [Amended]
4. In Sec. 1710.101, amend the second sentence of paragraph (b) by
adding the word ``direct'' before ``loans to individual Consumers.''
Sec. 1710.102 [Amended]
5. Amend Sec. 1710.102 as follows:
a. Amend the first sentence of paragraph (a) of by adding ``energy
[[Page 43729]]
efficiency and'' before ``energy conservation.''
b. Amend the first sentence of paragraph (b) by adding ``energy
efficiency and'' before ``energy conservation.''
6. Amend Sec. 1710.106 by adding a new paragraph (a)(6), and
revising paragraphs (c)(1) and (d) to read as follows:
Sec. 1710.106 Uses of loan funds.
(a) * * *
(6) Eligible Energy Efficiency and Conservation Programs pursuant
to subpart H of this part.
* * * * *
(c) * * *
(1) Electric facilities, equipment, appliances, or wiring located
inside the premises of the Consumer, except for assets financed
pursuant to an Eligible EE Program, and qualifying items included in a
loan for demand side management or energy resource conservation
programs, or small scale renewable energy systems.
* * * * *
(d) A distribution borrower may request a loan period of up to 4
years. Except in the case of loans for new generating and associated
transmission facilities, a power supply borrower may request a loan
period of not more than 4 years for transmission and substation
facilities and improvements or replacements of generation facilities.
The loan period for new generating facilities and DSM activities will
be determined on a case by case basis. The Administrator may approve a
loan period shorter than the period requested by the borrower, if in
the Administrator's sole discretion, a loan made for the longer period
would fail to meet RUS requirements for loan feasibility and loan
security set forth in Sec. Sec. 1710.112 and 1710.113, respectively.
* * * * *
Sec. 1710.109 [Amended]
7. In Sec. 1710.109 amend the first sentence of paragraph (a) by
adding the words ``energy efficiency and conservation program work
plan,'' after ``construction work plan.''
8. Amend Sec. 1710.115 by adding a new paragraph (c) to read as
follows:
Sec. 1710.115 Final maturity.
* * * * *
(c) The term for loans made to finance Eligible EE Programs will be
determined in accordance with Sec. 1710.408 of this part.
* * * * *
Sec. 1710.120 [Amended]
9. In Sec. 1710.120 add the words ``energy efficiency and
conservation program work plans,'' after ``construction work plans,''
Subpart D--Basic Requirements for Loan Approval
10. Amend Sec. 1710.152 by adding a new paragraph (e) to read as
follows:
Sec. 1710.152 Primary support documents.
* * * * *
(e) EE Program work plan (EEPWP). In the case of a loan application
to finance an Eligible Energy Efficient Program, an EE Program work
plan shall be prepared in lieu of a traditional CWP required pursuant
to paragraph (b) of this section. The requirements for an EEPWP are set
forth in Sec. 1710.255 and in subpart H of this part.
Subpart E--Load Forecasts
11. Amend Sec. 1710.202 by adding a new paragraph (d) to read as
follows:
Sec. 1710.202 Requirement to prepare a load forecast--power supply
borrowers.
* * * * *
(d) Notwithstanding paragraphs (a) through (c) of this section, a
power supply borrower that has an outstanding loan for an Eligible EE
Program is required to maintain an approved load forecast and an
approved load forecast work plan on an ongoing basis.
12. Amend Sec. 1710.203 by adding a new paragraph (f) to read as
follows:
Sec. 1710.203 Requirement to prepare a load forecast--distribution
borrowers.
* * * * *
(f) Notwithstanding paragraphs (a) through (e) of this section, a
distribution borrower that has an outstanding loan for an Eligible EE
Program is required to maintain an approved load forecast and an
approved load forecast work plan on an ongoing basis.
Sec. 1710.205 [Amended]
13. In Sec. 1710.205 amend paragraph (b)(5) by adding the words
``and energy efficiency and conservation program'' after ``demand side
management''.
Subpart F--Construction Work Plans and Related Studies
14. Add Sec. 1710.255 to subpart F to read as follows:
Sec. 1710.255 Energy efficiency work plans--energy efficiency
borrowers.
(a) All energy efficiency borrowers must maintain a current EEWP
approved by their board of directors covering all new construction,
improvements, replacements, and retirements of energy efficiency
related equipment and activities;
(b) An energy efficiency borrower's EEWP shall cover a period of
between 2 and 4 years, and include all facilities to be constructed or
improved which are eligible for RUS financing, whether or not RUS
financial assistance will be sought or be available for certain
facilities. The term for any RUS financing provided for the facilities
may be up to 30 years for ground source heat pump systems and up to 15
years for all other energy efficiency improvements and installations.
The construction period covered by an EEWP in support of a loan
application shall not be shorter than the loan period requested for
financing of the facilities;
(c) The borrower's EEWP may only include facilities, equipment and
other activities that have been approved by RUS as a part of an
Eligible Energy Efficiency and Conservation Program pursuant to subpart
H of this part;
(d) The borrower's EEWP must be consistent with the documentation
provided as part of the current RUS approved EE Program as outlined in
Sec. 1710.410(c); and
(e) The borrower's EEWP must include an estimated schedule for the
implementation of included projects.
Subpart G--Long Range Financial Forecasts
15. Amend Sec. 1710.300 by redesignating paragraphs (d)(3) through
(d)(5) as paragraphs (d)(4) through (d)(6) respectively; and adding a
new paragraph (d)(3) to read as follows:
Sec. 1710.300 General.
* * * * *
(d) * * *
(3) RUS-approved EE Program work plan;
* * * * *
Sec. 1710.302 [Amended]
16. In Sec. 1710.302 amend paragraph (d)(5) by removing the
reference ``Sec. 1710.300(d)(5)'' and adding in its place ``Sec.
1710.300(d)(6)''.
Subpart I--Application Requirements and Procedures for Loans
17a. In subpart I, redesignate Sec. Sec. 1710.400 through 1710.407
as Sec. Sec. 1710.500 through 1710.507, respectively.
17b. Add subpart H consisting of Sec. Sec. 1710.400 through
1710.499, to read as follows:
Subpart H--Energy Efficiency and Conservation Loan Program
Sec.
1710.400 Purpose.
[[Page 43730]]
1710.401 RUS Policy.
1710.402 Scope.
1710.403 General.
1710.404 Definitions.
1710.405 Eligible energy efficiency and conservation programs.
1710.406 Eligible activities and investments.
1710.407 Business plan.
1710.408 Quality assurance plan.
1710.409 Loan provisions.
1710.410 Application documents.
1710.411 Analytical support documentation.
1710.412 Borrower accounting methods, management reporting and
audits
1710.413 Compliance with other laws and regulations.
1710.414-1710.499 [Reserved]
Subpart H--Energy Efficiency and Conservation Loan Program
Sec. 1710.400 Purpose.
This subpart establishes policies and requirements that apply to
loans and loan guarantees to finance Energy Efficiency and Conservation
programs (EE Programs) undertaken by an eligible utility system to
finance demand side management, energy efficiency and conservation, or
on-grid and off-grid renewable energy system programs that will result
in the better management of their system load growth, a more beneficial
load profile, or greater optimization of the use of alternative energy
resources in their service territory.
Sec. 1710.401 RUS policy.
EE Programs under this part may be financed at the distribution
level or by an electric generation and transmission provider. RUS
encourages borrowers to coordinate with the relevant member systems
regarding their intention to implement a program financed under this
part. RUS also encourages borrowers to leverage funds available under
this subpart with State, local, or other funding sources that may be
available to implement such programs.
Sec. 1710.402 Scope.
This subpart adapts and modifies, but does not supplant, the
requirements for all borrowers set forth elsewhere where the purpose of
the loan is to finance an approved EE program. In the event there is
overlap or conflict between this subpart and the provisions of this
part 1710 or other parts of the Code of Federal Regulations, the
provisions of this subpart will apply for loans made or guaranteed
pursuant to this subpart.
Sec. 1710.403 General.
EE Programs financed under this subpart may be directed at all
forms of energy consumed within a utility's service territory, not just
electricity, where the electric utility is in a position to facilitate
the optimization of the energy consumption profile within its service
territory and do so in a way that enhances the financial or physical
performance of the rural electric system and enables the repayment of
the energy efficiency loan.
Sec. 1710.404 Definitions.
For the purpose of this subpart, the following terms shall have the
following meanings. In the event there is overlap or conflict between
the definitions contained in Sec. 1710.2, the definitions set forth
below will apply for loans made or guaranteed pursuant to this subpart.
British thermal unit (Btu) means the quantity of heat required to
raise one pound of water one degree Fahrenheit.
Cost effective means the cost of an EE Program is less than the
financial benefit of the program over time. The cost of a program for
this purposes shall include the costs of incentives, measurement and
verification activity and administrative costs, and the benefits shall
include the value of energy saved, the value of corresponding avoided
generation, transmission or distribution and reserve investments as may
be displaced or deferred by program activities.
Demand means the electrical load averaged over a specified interval
of time. Demand is expressed in kilowatts, kilovolt amperes, kilovars,
amperes, or other suitable units. The interval of time is generally 15
minutes, 30 minutes, or 60 minutes.
Demand savings means the quantifiable reduction in the load
requirement for electric power, usually expressed in kilowatts (kW) or
megawatts (MW) such that it reduces the cost to serve the load.
Eligible borrower means a utility system that has direct or
indirect responsibility for providing retail electric service to
persons in a rural area.
Energy audit means an inspection and analysis of energy flows in a
building, process, or system with the goal of identifying opportunities
to enhance energy efficiency. The activity should result in an
objective standard- based technical report containing recommendations
for improving the energy efficiency. The report should also include a
cost benefit analysis reflecting the estimated benefits and costs of
pursuing each recommendation.
Energy efficiency and conservation measures means equipment,
materials and practices that when installed and used at a Consumer's
premise result in a verifiable reduction in energy consumption,
measured in Btus, or demand as measured in Btu-hours, or both, at the
point of purchase relative to a base level of output. The ultimate goal
is the reduction of utility energy needs.
Energy efficiency and Conservation program (EE Program) means a
program of activities undertaken or financed by a utility within its
service territory to reduce the amount or rate of energy used by
Consumers relative to a base level of output.
HVAC means heating, ventilation, and air conditioning.
Load means the Power delivered to power utilization equipment
performing its normal function.
Load factor means the ratio of the average load over a designated
period of time to the peak load occurring in the same period.
Net Utility Plant means Total Utility Plant net of accumulated
depreciation.
Peak demand (or maximum demand) means the highest demand measured
over a selected period of time, e.g., one month.
Peak demand reduction means a decrease in electrical demand on an
electric utility system during the system's peak period, calculated as
the reduction in maximum average demand achieved over a specified
interval of time.
Power means the rate of generating, transferring, or using energy.
The basic unit is the watt, where one Watt is approximately 3.41213
Btu/hr.
Re-lamping means the initial conversion of bulbs or light fixtures
to more efficient lighting technology but not the replacement of like
kind bulbs or fixtures after the initial conversion.
Seasonal Energy Efficiency Rating (SEER) means the commonly used
measure of efficiency of Consumer central air conditioners and heat
pumps. It is the ratio of cooling output divided by electric energy
input (Btu/Wh).
SI means the International System of Units: the modern metric
system.
Smart Grid Investments means capital expenditures for devices or
systems that are capable of providing real time, two way (utility and
Consumer) information and control protocols for individual Consumer
owned or operated appliances and equipment, usually through a Consumer
interface or smart meter.
Ultimate Recipient means a Consumer that receives a loan from a
borrower under this subpart.
Utility Energy Services Contract (UESC) means a contract whereby a
utility provides a Consumer with comprehensive energy efficiency
improvement services or demand reduction services.
[[Page 43731]]
Utility System means an entity in the business of providing retail
electric service to Consumers (distribution entity) or an entity in the
business of providing wholesale electric supply to distribution
entities (generation entity) or an entity in the business of providing
transmission service to distribution or generation entities
(transmission entity), where, in each case, the entities provide the
applicable service using self-owned or controlled assets under a
published tariff that the entity and any associated regulatory agency
may adjust.
Watt means the SI unit of power equal to a rate of energy transfer
(or the rate at which work is done), of one joule per second.
Sec. 1710.405 Eligible energy efficiency and conservation programs.
(a) General. Eligible EE Programs shall:
(1) Be developed and implemented by an Eligible borrower and
applied within its service territory;
(2) Consist of eligible activities and investments as provided in
Sec. 1710.406
(3) Provide for the use of State and local funds where available to
supplement RUS loan funds;
(4) Incorporate the applicant's policy applicable to the
interconnection of distributed resources;
(5) Incorporate a business plan that meets the requirements of
Sec. 1710.407;
(6) Incorporate a quality assurance plan that meets the
requirements of Sec. 1710.408;
(7) Demonstrate that the program can be expected to be Cost
effective;
(8) Demonstrate that the program will have no net negative
cumulative impact on the borrower's financial condition over the time
period contemplated in the analytical support documents provided
pursuant to Sec. 1710.411;
(9) Demonstrate energy savings or peak demand reduction for the
service territory overall; and
(10) Be approved in writing by RUS prior to the investment of funds
for which reimbursement will be requested.
(b) Financial Structures. Eligible EE Programs may provide for
direct recoupment of expenditures for eligible activities and
investment from Consumers as follows:
(1) Loans made to Consumers located in a rural area where--
(i) The Consumers may be wholesale or retail;
(ii) The loans may be secured or unsecured;
(iii) The loan receivables are owned by the Eligible Borrower;
(iv) The loans are made or serviced directly by the Eligible
Borrower or by a financial institution pursuant to a contractual
relationship between the Eligible Borrower and the financial
institution;
(v) Due diligence is performed to confirm the repayment ability of
the Consumer;
(vi) Loans are funded only upon completion of the project financed
or to reimburse startup costs that have been incurred;
(vii) The rate charged the Consumer is less than or equal to the
direct Treasury rate established daily by the United States Treasury
pursuant to Sec. 1710.51(a)(1) or Sec. 1710.52, as applicable, plus
1%, as of the date the Consumer loan is approved; and
(viii) Loans are not used to refinance a preexisting loan.
(2) A tariff that is specific to an identified rural Consumer,
premise or class of ratepayer; or
(3) Other financial recoupment mechanisms as may be approved by
RUS.
(c) Period of Performance--(1) Performance Thresholds. (i) Eligible
EE Programs activities that are listed under Sec. 1710.406(b) should
be designed to achieve the applicable operating performance thresholds
within one year of the date of installation of the facilities.
(ii) All activities other than those included in subparagraph
(c)(1)(i) above should be designed to achieve the applicable operating
performance targets within the time period contemplated by the analytic
support documents for the overall EE Program as approved by RUS.
(2) Cost effectiveness. Eligible EE Programs must demonstrate that
Cost effectiveness as measured for the program overall will be achieved
within five years of initial funding.
Sec. 1710.406 Eligible activities and investments.
(a) General. Eligible program activities and investments:
(1) Shall be designed to improve energy efficiency or managed
demand on the customer side of the meter;
(2) Shall be Cost effective in the aggregate after giving effect to
all activities and investments contemplated in the approved EE Program;
and
(3) May apply to all Consumer classes.
(b) Eligible activities and investments. Eligible program
activities and investments may include, but are not limited to, the
following:
(1) Energy efficiency and conservation measures where assets
financed at a Consumer premises can be characterized as an integral
part of the real property that would typically transfer with the title
under applicable state law.
(2) Small Scale Renewable Energy Systems, including--
(i) On or Off Grid Renewable energy systems;
(ii) Fuel cells;
(3) Demand side management (DSM) investments excluding Smart Grid
Investments;
(4) Energy audits;
(5) Utility Energy Services Contracts;
(6) Consumer education and outreach programs;
(7) Power factor correction equipment on the Consumer side of the
meter;
(8) Re-lamping to more energy efficient lighting; and
(9) Other activities and investments as approved by RUS as part of
the EE Program
(c) Intermediary lending. EE Program loan funds may be used for
direct re-lending to Consumers where the requirements of Sec.
1710.405(b) are met
(d) Performance thresholds.
(1) Energy efficiency and conservation measures:
(i) Appliance upgrades must achieve a reduction in energy
consumption for the appliance equal to or greater than 20%;
(ii) Cooling system improvements must be designed to achieve a SEER
increase of not less than 20%, and the improved SEER rating must be
greater than or equal to the minimum applicable SEER standard
promulgated by the U.S. Department of Energy for the cooling system;
(iii) Building envelope improvements must be designed to achieve a
reduction of annualized baseline energy consumption (measured in Btus)
greater than 10% for the building;
(2) Energy audit recommendations. Only those recommendations that
taken together will achieve an overall reduction in annualized energy
consumption of at least 10% at the Consumer premises covered by the
audit may be financed with RUS loan funds under this subpart.
(3) Heating system improvements must demonstrate an annualized
energy reduction in Btu consumption equal to or greater than 20%.
(4) Activities not otherwise listed in this paragraph (d) must
demonstrate energy savings which will be determined on a case by case
basis by RUS, but in any event not less than a 10% improvement in
energy efficiency.
(e) The borrowers shall follow a bulletin or such other publication
as RUS deems appropriate that contains and describes best practices for
energy efficiency and conservation measures associated with different
technologies. RUS will make this bulletin or publication publicly
available and
[[Page 43732]]
revise it from time to time as RUS deems it necessary.
Sec. 1710.407 Business plan.
An Eligible EE Program must have a business plan for implementing
the program. The business plan must have the following elements:
(a) Executive summary. The executive summary shall capture the
overall objectives to be met by the Eligible EE Program and the
timeframe in which they are expected to be achieved.
(b) Organizational background. The background section shall include
descriptions of the management team responsible for implementing the
Eligible EE Program.
(c) Marketing plan. The marketing section should identify the
target Consumers, promotional activities to be pursued and target
penetration rates by Consumer category and investment activity.
(d) Operations plan. The operations plan shall include but is not
limited to:
(1) A list of the activities and investments to be implemented
under the EE Program and the Btu savings goal targeted for each
category;
(2) An estimate of the dollar amount of investment by the utility
for each category of activities and investments listed under paragraph
(d)(1) of this section;
(3) A staffing plan that identifies whether and how outsourced
contractors or subcontractors will be used to deliver the program;
(4) A description of the process for documenting and perfecting
collateral arrangements for Consumer loans, if applicable; and
(5) The overall Btu savings to be accomplished over the life of the
EE Program.
(e) Financial Plan. The financial plan shall include but is not
limited to:
(1) A schedule showing sources and uses of funds for the program;
(2) An itemized budget for each activity and investment category
listed in the operations plan;
(3) A Cost effectiveness forecast for each activity and investment
category listed in the operations plan;
(4) Where applicable, provision for Consumer loan loss reserves.
These loan loss reserves will not be funded by RUS.
(5) Identify expected loan delinquency and default rates and report
annually on deviations from the expected rates
(f) Risk analysis. The business plan shall include an evaluation of
the financial and operational risk associated with each activity and
investment category listed in the operations plan, including an
estimate of prospective Consumer loan losses consistent with the loan
loss reserve to be established pursuant to subparagraph (e)(4) above.
(g) The borrowers shall follow a bulletin or such other publication
as RUS deems appropriate that contains and describes best practices for
energy efficiency business plans. RUS will make this bulletin or
publication publicly available and revise it from time to time as RUS
deems it necessary.
Sec. 1710.408 Quality assurance plan.
An Eligible EE Program must have a quality assurance plan as part
of the program. The quality assurance plan must have the following
elements:
(a) Quality assurance assessments shall include the use of
qualified energy managers or professional engineers to evaluate program
activities and investments;
(b) Energy audits shall be performed for energy efficiency
investments involving the building envelope at a Consumer premises;
(c) Energy audits must be performed by certified energy auditors;
and
(d) Follow up audits shall be performed within one year after
installation on all investments made to confirm whether efficiency
improvement expectations are being met.
(e) In cases involving energy efficiency upgrades to a single
system (such as a ground source heat pump) the new system must be
designed and installed by certified and insured professionals
acceptable to the utility.
(f) Industry or manufacturer standard performance tests, as
applicable, shall be required on any system upgraded as a result of an
EE Program. This testing shall indicate the installed system is meeting
its designed performance parameters.
(g) In some programs the utility may elect to recommend independent
contractors who can perform energy efficiency related work for their
customers. In these cases utilities shall monitor the work done by the
contractors and confirm that the contractors are performing quality
work. Utilities should remove substandard contractors from their
recommended lists if the subcontractors fail to perform at a
satisfactory level.
(h) Contractors not hired by the utility may not act as agents of
the utility in performing work financed under this subpart.
(i) The borrowers shall follow a bulletin or other publication that
RUS deems appropriate and contains and describes best practices for
energy efficiency quality assurance plans. RUS will make this bulletin
or publication publicly available and revise it from time to time as
RUS deems it necessary.
Sec. 1710.409 Loan provisions.
(a) Loan term. The maximum term for loans under this subpart shall
be 15 years unless the loans relate to ground source loop investments.
The maximum term for loans for ground source loop investments only
shall be 30 years. Ground source loop investments as the term is used
in this paragraph do not include ancillary equipment related to ground
source heat pump systems.
(b) Loan feasibility. Loan feasibility must be demonstrated for all
loans made under this subpart. Loans made under this subpart shall be
secured.
(c) Reimbursement for completed projects. (1) A borrower may
request an initial advance not to exceed five percent of the total loan
amount for working capital purposes to implement an eligible EE
Program;
(2) Except for the initial advance provided for in paragraph (c)(1)
of this section, all advances under this subpart shall be used for
reimbursement of expenditures relating to a completed activity or
investment; and
(3) Advances shall be in accordance with RUS procedures.
(d) Loan amounts. (1) Cumulative loan amounts outstanding under
this subpart may not exceed 100% of Net Utility Plant less total
outstanding debt inclusive of any loan applied for under this subpart;
and
(2) Financing for Consumer education and outreach programs may not
exceed 4% of the total loan amount.
(3) The Rural Utilities Service reserves the right to place a cap
on both the total amount of funds an eligible entity can apply for, as
well as a cap on the total amount of funds the energy efficiency and
Conservation program can utilize in the appropriations. These caps will
be announced regularly through the Federal Register.
Sec. 1710.410 Application documents.
The required application documentation listed in this section is
not all inclusive but is specific to Eligible borrowers requesting a
loan under this subpart and in most cases is supplemental to the
general requirements for loan applications provided for in this part
1710:
(a) A letter from the Borrower's General Manager requesting a loan
under this subpart.
(b) A copy of the board resolution establishing the EE Program that
reflects an undertaking that funds collected in excess of then current
amortization requirements for the related RUS loan will be redeployed
for EE Program
[[Page 43733]]
purposes or used to prepay the RUS loan.
(c) Current RUS-approved EE Program documentation that includes:
(1) A Business Plan that meets the requirements of Sec. 1710.407;
(2) A Quality Assurance Plan that meets the requirements of Sec.
1710.408;
(3) Analytical support documentation that meets the requirements of
Sec. 1710.411;
(4) A copy of RUS' written approval of the EE Program.
(d) An EE Program work plan that meets the requirements of Sec.
1710.255;
(e) A statement of whether an initial working capital advance
pursuant to Sec. 1710.409(c)(1) is included in the loan budget
together with a schedule of how these funds will be used.
(f) A proposed draft Schedule C pursuant to 7 CFR part 1718 that
lists assets to be financed under this subpart as excepted property
under the RUS mortgage, as applicable.
Sec. 1710.411 Analytical support documentation.
Applications for loans under this subpart may only be made for
eligible activities and investments included in an RUS-approved EE
Program. In addition to a business plan and operations plan, a request
for EE program approval must include analytical support documentation
that demonstrates the program meets the requirements of Sec. 1710.303
and assures RUS of the operational and financial integrity of the EE
Program. This documentation must include, but is not necessarily
limited to, the following:
(a) A comparison of the utility's projected annual growth in demand
after incorporating the EE Program together with an updated baseline
forecast on file with RUS, where each includes an inventory of energy
consuming devices used by customers in the service territory and a
specific time horizon as determined by the utility for meeting the
performance objectives established by them for the EE Program;
(b) An itemized estimate of the energy savings and peak demand
reduction to be obtained for each category of eligible activities and
investments to be pursued;
(c) An evaluation of the Cost effectiveness of each category of
eligible activities and investments to be pursued under the EE Program;
(d) Demonstration that the required periods of performance under
Sec. 1710.405(c) can reasonably be expected to be met;
(e) A report of discussions and coordination conducted with the
power supplier, where applicable, issues identified as a result, and
the outcome of this effort.
(f) An estimate of the amount of direct investment in utility-owned
generation that will be deferred as a result of the EE Program;
(g) A description of efforts to identify state and local sources of
funding and, if available, how they are to be integrated in the
financing of the EE Program; and
(h) Copies of sample documentation used by the utility in
administering its EE Program.
(i) Such other documents and reports as the Administrator may
require.
Sec. 1710.412 Borrower accounting methods, management reporting and
audits.
Nothing in this subpart changes a Borrower's obligation to comply
with RUS's accounting, monitoring and reporting requirements. In
addition thereto, the Administrator may also require additional
management reports that provide the agency with a means of evaluating
the extent to which the goals and objectives identified in the EE Plan
are being accomplished.
Sec. 1710.413 Compliance with other laws and regulations.
Nothing in this subpart changes a Borrower's obligation to comply
with all laws and regulations to which it is subject.
Sec. Sec. 1710.414-1710.499 [Reserved]
PART 1717--POST-LOAN POLICIES AND PROCEDURES COMMON TO INSURED AND
GUARANTEED ELECTRIC LOANS
18. 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 R--Lien Accommodations and Subordinations for 100 Percent
Private Financing
19. Amend Sec. 1717.852 by revising paragraph (b)(2)(ii) to read
as follows:
Sec. 1717.852 Financing purposes.
* * * * *
(b) * * *
(2) * * *
(ii) Renewable energy systems and RUS-approved programs of demand
side management, energy efficiency and energy conservation; and
* * * * *
PART 1721--POST-LOAN POLICIES AND PROCEDURES FOR INSURED AND
GUARANTEED ELECTRIC LOANS
20. The authority citation for part 1721 continues to read as
follows:
Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.
Subpart A--Advance of Funds
21. 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,
insured loan funds will be advanced only for projects that are included
in an RUS approved borrower's construction work plan (CWP), EE Program
work plan (EEWP), or approved amendment, and in an approved loan as
amended. Loan fund advances can be requested in an amount representing
actual costs incurred.
* * * * *
PART 1724--ELECTRIC ENGINEERING, ARCHITECTURAL SERVICES AND DESIGN
POLICIES AND PROCEDURES
22. The authority citation for part 1724 continues to read as
follows:
Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.
Subpart C--Engineering Services
23. Amend Sec. 1724.30 by revising paragraph (a) to read as
follows:
Sec. 1724.30 Borrowers' requirements--engineering services.
* * * * *
(a) Each borrower shall select one or more qualified persons to
perform the engineering services involved in the planning (including
the development of an EE Program eligible for financing pursuant to
subpart H of part 1710 of this chapter, design, and construction
management of the system.
* * * * *
PART 1730--ELECTRIC SYSTEM OPERATIONS AND MAINTENANCE
24. 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
25. Amend Appendix A to subpart B of Part 1730 by adding a new
paragraph 13.f. to read as follows:
[[Page 43734]]
Appendix A to Subpart B of Part 1730--Review Rating Summary, RUS Form
300
* * * * *
13. * * *
f. Energy Efficiency and Conservation Program quality assurance
compliance--Rating:----
* * * * *
Dated: July 16, 2012.
Jonathan Adelstein,
Administrator, Rural Utilities Service.
[FR Doc. 2012-17784 Filed 7-25-12; 8:45 am]
BILLING CODE P