[Federal Register: May 7, 2003 (Volume 68, Number 88)]
[Rules and Regulations]
[Page 24335-24336]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07my03-1]
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Rules and Regulations
Federal Register
________________________________________________________________________
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
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
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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: Final rule.
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SUMMARY: The Rural Utilities Service (RUS) is changing the requirement
to use depreciation rates for determining loan terms. Depreciation
rates contain other variables such as cost of removal and salvage value
which preclude using these rates to determine useful life of a facility
when these other variables are unknown. RUS depreciation requirements
for financial statement purposes remain in effect.
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 solely on depreciation rates has been
determined to not be as appropriate as looking at proposals on a case-
by-case basis. This rule is made as part of the RUS efforts to
continually look for ways to streamline lending requirements and make
regulations useful and direct.
EFFECTIVE DATE: May 7, 2003.
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 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 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
It has been determined that the Regulatory Flexibility Act is not
applicable to this rule since the Rural Utilities Service 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.
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 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 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 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. The final maturity is based on the useful
life of the facilities to be financed. When determining the useful life
of such facilities, current regulations require that the useful life
determination be consistent with the borrower's proposed depreciation
rates for facilities. The depreciation requirements contained in RUS
Bulletin 183-1 remain in effect for financial statement preparation and
allocation of asset costs. However, depreciation rates cannot be
readily converted to determine a facility's useful life.
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.
RUS will continue to allow borrowers the option of utilizing the
depreciation rates contained in RUS Bulletin 183-1 and avoid the cost
of individual
[[Page 24336]]
depreciation studies to determine the components of its depreciation
rates. This rule will eliminate the requirement for a useful life
determination based solely 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 for loan term
calculation. RUS will consider 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 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.
This rule change was first issued as a proposed rule and published
in the Federal Register, Vol. 67, No. 68, Tuesday, April 9, 2002. One
comment was received in full support of the rule change and provided
specific reasons why reliance on Bulletin 183-1 alone may not be the
best method for determining the useful life of a facility. The RUS is
making 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 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.
0
For the reasons set forth in the preamble, chapter XVII of title 7 of
the Code of Federal Regulations, is amended as follows:
PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO
INSURED AND GUARANTEED ELECTRIC LOANS
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. 1710.115 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 17, 2003.
Hilda Gay Legg,
Administrator, Rural Utilities Service.
[FR Doc. 03-11241 Filed 5-6-03; 8:45 am]
BILLING CODE 3410-15-P