[Federal Register: April 9, 2002 (Volume 67, Number 68)]
[Proposed Rules]
[Page 17018-17020]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09ap02-22]
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DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Part 1710
RIN 0572-AB80
Useful Life of Facility Determination
AGENCY: Rural Utilities Service, USDA.
ACTION: Proposed rule.
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SUMMARY: The Rural Utilities Service (RUS) proposes to eliminate the
requirement to use depreciation rates as found in Bulletin 183-1, for
determining the useful life of a facility. If the proposed useful life
of a facility is deemed inappropriate by RUS, other means to establish
an appropriate term for the loan will apply. Current reliance on the
fixed range of depreciation rates found in Bulletin 183-1, to be used
across the country, has been determined to not be as appropriate as
looking at proposals on a case-by-case basis. This proposed rule is
made as part of the RUS efforts to continually look for ways to
streamline lending requirements and make regulations useful and direct.
[[Page 17019]]
DATES: Written comments must be received by RUS or carry a postmark or
equivalent no later than May 9, 2002.
ADDRESSES: Written comments should be addressed to F. Lamont Heppe,
Jr., Director, Program Development and Regulatory Analysis, Rural
Utilities Service, U.S. Department of Agriculture, STOP 1522, 1400
Independence Ave., SW., Washington, DC 20250-1522. RUS requests a
signed original and three copies of all comments (7 CFR 1700.4).
Comments will be available for public inspection during regular
business hours (7 CFR 1.27(b)).
FOR FURTHER INFORMATION CONTACT: Patrick R. Sarver, Management Analyst,
Rural Utilities Service, Electric Program, Room 4024 South Building,
Stop 1560, 1400 Independence Ave., SW., Washington, DC 20250-1560,
Telephone: 202-690-2992, FAX: 202-690-0717, E-mail:
psarver@rus.usda.gov.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This proposed rule has been determined to be not significant for
purposes of Executive Order 12866 and, therefore, has not been reviewed
by the Office of Management and Budget (OMB).
Executive Order 12372
This 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 titled
``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 12988
This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. RUS has determined that this proposed rule meets
the applicable standards provided in section 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 effect 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 are required, must be
exhausted before an action against the Department or its agencies may
be initiated.
Regulatory Flexibility Act Certification
In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.), the Administrator of RUS has determined that this rule will not
have significant impact on a substantial number of small entities. The
RUS electric loan program provides loans and loan guarantees to
borrowers at interest rates and terms that are more favorable than
those generally available from the private sector. Small entities are
not subjected to any requirements, which are not applied equally to
large entities. RUS borrowers, as a result of obtaining federal
financing, receive economic benefits that exceed any direct cost
associated with RUS regulations and requirements.
Information Collection and Recordkeeping Requirements
This rule contains no additional information collection or
recordkeeping requirements under OMB control number 0572-0032 that
would require approval under the Paperwork Reduction Act of 1995 (44
U.S.C. Chapter 35).
Unfunded Mandates
This proposed rule contains no Federal mandates (under the
regulatory provision of title II of the Unfunded Mandates Reform Act of
1995) for State, local, and tribal governments or the private sector.
Thus, this proposed rule is not subject to the requirements of sections
202 and 205 of the Unfunded Mandates Reform Act.
National Environmental Policy Act Certification
The Administrator of RUS has determined that this proposed rule
will not significantly affect the quality of the human environment as
defined by the National Environmental Policy Act of 1969 (42 U.S.C.
4321 et seq.). Therefore, this action does not require an environmental
impact statement or assessment.
Catalog of Federal Domestic Assistance
The program described by this proposed rule is listed in the
Catalog of Federal Domestic Assistance Programs under No. 10.850, Rural
Electrification Loans and Loan Guarantees. This catalog is available on
a subscription basis from the Superintendent of Documents, U.S.
Government Printing Office, Washington, DC 20402-9325, telephone number
(202) 512-1800.
Background
RUS is authorized to make loans and loan guarantees with a final
maturity of up to 35 years. When determining the useful life of a
facility to be financed, current regulations require that the useful
life determination be consistent with the borrower's proposed
depreciation rates for facilities. If the depreciation rates are deemed
inappropriate by RUS, then the depreciation rates listed in RUS
Bulletin 183-1 will apply. RUS Bulletin 183-1, last updated in 1977,
provides the borrower depreciation rates by asset class, which is meant
to be used by all borrowers across the country. The standard
depreciation rates that are published in Bulletin 183-1 are presented
as a range of rates to allow for the recognition of locational and
situational differences.
Depreciation is the allocation of asset costs over the period that
the asset provides a benefit. The system of allocation should correctly
match cost with related revenue, while recognizing the declining
service value of the asset. Both use and usefulness of the asset
influence the rate of depreciation. Appropriate determination of
depreciation for a particular asset should consider the past experience
with similar assets, the asset's present condition and the factory's
maintenance policy. Other considerations include technological and
industry trends, and local environmental conditions.
In the electric utility industry depreciation is designed to
allocate the costs of electric plant, including net salvage (cost of
removal less salvage), over the estimated useful life of the plant. The
depreciation rates, therefore, include components for estimated cost of
removal and net salvage. In recent years net salvage has, in many
cases, become a significant factor in depreciation rates. As a result,
without knowing the net salvage components the depreciation rates
cannot readily be converted to determine the estimated useful life of
electric plant.
Because of the growing difficulty in determining the net salvage
value and the resulting difficulty in accurately determining useful
life, RUS is proposing to eliminate the requirement for a useful life
determination based upon the depreciation rates as found in Bulletin
183-1. If the useful life being proposed by the borrower is not
satisfactory to RUS, the depreciation rates listed in RUS Bulletin 183-
1 will no longer be used in lieu there of. Instead, RUS proposes using
an independent evaluation, the manufacturer's estimated useful-life or
RUS experience with like-property as alternatives to an unsatisfactory
proposal made by the borrower. RUS views this new back-stop approach to
reviewing and approving the
[[Page 17020]]
determination of the useful life of a facility as a more appropriate
method. The increased difficulties in establishing net salvage values
and recent experience in using the fixed range of depreciation rates as
found in Bulletin 183-1, dictates a more flexible approach.
The RUS is proposing this change to regulations as part of its
ongoing effort to minimize administrative burden, streamline the loan
process, and update regulations to reflect current requirements. This
proposed change in regulations will provide greater latitude in
establishing the useful life of a facility being financed but at the
same time maintain RUS approval for making the determination.
List of Subjects in 7 CFR Part 1710
Electric power, Electric utilities, Loan programs--energy,
Reporting and recordkeeping requirements, Rural areas.
For the reasons set forth in the preamble, chapter XVII of title 7
of the Code of Federal Regulations, is proposed to be amended as
follows:
PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO
INSURED AND GUARANTEED ELECTRIC LOANS
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
2. Amend Sec. 1710.115 by revising paragraph (b) to read as
follows:
Sec. 1710.115 Final maturity.
* * * * *
(b) Loans made or guaranteed by RUS for facilities owned by the
borrower generally must be repaid with interest within a period, up to
35 years, that approximates the expected useful life of the facilities
financed. The expected useful life shall be based on the weighted
average of the useful lives that the borrower proposes for the
facilities financed by the loan, provided that the proposed useful
lives are deemed appropriate by RUS. RUS Form 740c, Cost Estimates and
Loan Budget for Electric Borrowers, submitted as part of the loan
application must include, as a note, either a statement certifying that
at least 90 percent of the loan funds are for facilities that have a
useful life of 33 years or longer, or a schedule showing the costs and
useful life of those facilities with a useful life of less than 33
years. If the useful life determination proposed by the borrower is not
deemed appropriate by RUS, RUS will base expected useful life on an
independent evaluation, the manufacturer's estimated useful-life or RUS
experience with like-property, as applicable. Final maturities for
loans for the implementation of programs for demand side management and
energy resource conservation and on and off grid renewable energy
sources not owned by the borrower will be determined by RUS. Due to the
uncertainty of predictions over an extended period of time, RUS may add
up to 2 years to the composite average useful life of the facilities in
order to determine final maturity.
* * * * *
Dated: March 27, 2002.
Blaine D. Stockton,
Acting Administrator, Rural Utilities Service.
[FR Doc. 02-8484 Filed 4-8-02; 8:45 am]
BILLING CODE 3410-15-P