With respect to each generation and transmission loan application, processed by REA in accordance with the foregoing procedures, the Administrator should, in order to avoid dilatory tactics or protracted delays on the part of either party in such negotiations, establish a publicly announced period of time during which the survey, determinations, and negotiations will be carried on prior to a definite cutoff date set by the Administrator. The committee is opposed to the imposition of dual rates in power supply contracts and believes that the cooperatives should state their needs clearly and concretely, and that the suppliers of power should in turn clearly set forth the terms and conditions of power supply contracts. The committee expects the Administrator to examine into all complaints which may come to his attention concerning territorial disputes between REA cooperatives and commercial power companies, except in States having adequate statutory provisions for determining territorial and service rights, and report to the committee in January of each year the salient facts involved, the disposition of the complaints, and the basis for such dispositions. The committee instructs the Administrator of REA to report to both the Senate and House Appropriations Committees in writing 60 days in advance of approving allocations of funds for acquiring or building generating plants of over $2 million and major transmission lines and such other information as the committee may request. The committee concurs in the recommendations in the House committee report that the Administrator of REA should not make section V loans in competition with private sources of credit, or as a replacement or substitution for loan funds available under the Area Redevelopment Act, Public Law 87-27. Such loans should be very limited. The committee requests the Administrator of REA to provide it with a summary of pending section V loan applications as well as a copy of his certification to the Secretary on the necessity for making these loans. CONFERENCE REPORT ON H.R. 6754, 1964 APPROPRIATIONS BILL Amendment No. 37.—Salaries and expenses: Appropriates $11,247,000 instead of $11,162,000 as proposed by the House and $11,287,000 as proposed by the Senate. Regulations including changes, to carry out provisions in the reports of the House and Senate committees shall be printed in the Federal Register within 90 days of enactment of this act. The managers on the part of the House disagree with the statements in the Senate report on pages 28 and 29 which require the Administrator (1) to certify to the Comptroller General and the Congress and (2) to give notice of applications to the committees 60 days in advance of approval. They agree that any REA cooperative which is an applicant for a generation or transmission loan shall be made a party to any subsequent negotiations between the Administrator and the power supplier on contract arrangements. Mr. CLAPP. I might briefly summarize at this time. The House committee last year, in its report, made certain recommendations with respect to our procedures on generation and transmission loans and section 5 loans. With respect to generation and transmission loans, it directed that we should make a survey before loaning any further funds for these purposes and that in cases where there were existing or proposed contracts we should, if these contracts are deemed unreasonable, be sure to give the supplier a statement as to the particulars in which we regarded them as unreasonable, give the supplier an opportunity and assist him in any way we could to make them reasonable, and make the loan only if he neglected or failed or refused to do so. We were also directed to certify to the Secretary of Agriculture in connection with any future generation or transmission loans, that the survey had been made and that these steps had been followed. ACTIONS TAKEN BY REA PURSUANT TO HOUSE AND SENATE REPORTS Bulletin 111-3, which was issued February 24, outlines the procedures and policies which we now follow in response to this language of the House committee and also in response to language of the Senate committee generally endorsing the House language and adding certain procedures with respect to generation and transmission loans of over $2 million. Briefly, this bulletin provides that we do not make any generation or transmission loan without making the survey as recommended by the committee. And we make the certification to the Secretary, when such a loan is made, that the survey has been made and that the loan is necessary, based upon our normal criteria for generation and transmission loans, either because it is needed to construct facilities to implement an existing contract, or a proposed contract with an existing power supplier, or because it is needed to provide facilities or service for which there is no existing or proposed contract from any other power supplier, or in the case of the type of situation specifically spelled out by the committee language, where there are existing contracts or proposed contracts which we have regarded as unreasonable; that we have in the course of the survey advised the supplier in what way these contracts or proposals are unreasonable, and given the supplier an opportunity to make them reasonable; and that the loan is made and is necessary because in spite of these efforts the contracts or proposals have not in fact been made reasonable. In connection with the generation and transmission loans of over $2 million, to which the Senate committee addressed its report, we make a more detailed certification which is supplied to the Comptroller General and the Senate and the House of Representatives as directed by these respective bodies. This not only certifies to the fact the survey has been made, but it also supplies information in response to 11 specific questions set forth in the committee report. The second bulletin, 20-2, is a revision of an existing bulletin on electric loan policies for section 4 loans, which contains new procedures pertaining to notification to the committees of Congress and also notification of those loan applications which are closed without loan. We have three directives from the Senate committee with respect to this type of notification. One is contained in the Senate report accompanying the Agricultural Appropriation Act of 1948, and this directs us to notify the Appropriations Committees of both Houses at least 30 days in advance before a loan for generation is made. In 1961, in the Senate committee's report accompanying the Agricultural Appropriations Act of 1962, the committee asked us to notify it of loans made for generation and transmission. Then in the report accompanying the Agricultural Appropriation Act of 1964, they directed us to notify the Appropriations Committees of both Houses 60 days in advance of making any loans for generation and transmission of more than $2 million. Now, this bulletin is responsive to these directions and provides that this notification shall be made subject to the wishes of the respective House. In view of the fact that the statement of the House managers, accompanying the conference report on the Appropriations Act of 1964, disagreed with this requirement of notification as well as the requirement of certification to the Comptroller General, and the Houses of Congress on the larger loans, we have framed our regulations so the information is available to the Houses as they shall so direct. The third bulletin deals with section 5 loan policy. This is responsive to language in the reports of both the House and the Senate committees directing us to be sure that no section 5 loans are made which are in competition with existing sources of credit and directing that we certify to the Secretary of Agriculture in the case of these loans, where they are made, that they are necessary. The bulletin as issued today is a revision of the previous bulletin relating to section 5financing. It tightens the requirements with respect to proof of the lack of availability of this financing from other sources and provides for the certification of the necessity of these loans when they are made in a form of certification to the Secretary of Agriculture. This, Mr. Chairman, I think summarizes the purpose and the nature of these responses to the committee language. (The following was submitted for the record:) U.S. DEPARTMENT OF AGRICULTURE, REA BULLETIN 111-3 Subject: Power supply surveys. I. Purpose. This bulletin sets forth REA policy with regard to power supply surveys and certifications thereto by the Administrator in relation to the approval of loans for generation or transmission facilities. II. General. The terms and conditions of power supply arrangements are major and critical factors in the ability of REA borrowers to carry forward the rural electrification program. REA has the responsibility to assist borrowers. in achieving the most advantageous power supply arrangements to accomplish the objectives of the Rural Electrification Act and, without prejudice to the accomplishment of these objectives, to conserve REA loan funds. REA will undertake power supply surveys to assure adequate review of existing and proposed power supply alternatives and to encourage closer cooperation between REA borrowers and other electric power suppliers. III. Policy. A. Requests for power supply surveys: Any REA borrower or potential borrower may request REA to make a survey of any specific power supply problem or its power supply needs. Such request shall provide a full description of existing power supply contracts and arrangements, a statement of any special problems, and a general summary of power supply needs, copies of any proposals made by existing or other suppliers, and a summary of negotiations pertaining to current or anticipated problems and needs. Distribution-type systems should submit such request and information to the area office; power-type systems should submit such request and information to the Power Supply Division. B. Conduct of survey: If the Administrator determines to undertake the requested power supply survey, the survey shall be so conducted as to provide an adequate review of the applicant's power supply problems and needs, existing or proposed power supply arrangements, if any, and such other potential power supply arrangements which, in the judgment of the Administrator, may contribute to the solution of those problems and needs. Where the Administrator finds existing or proposed contracts with power suppliers are unreasonable for purposes of the Rural Electrification Act, the supplier under such contracts or proposals will be advised wherein they are unreasonable, and REA will endeavor to have the contracts or proposals made reasonable. The REA borrower or potential borrower shall be made a party to any negotiations between REA and such power supplier. When necessary to avoid dilatory tactics or protracted delays, the Administrator shall advise the parties in such cases of a definite time limit for negotiations under the survey and a final cut-off date for all proposals which are to be considered in evaluation of loan applications related to the problems and needs covered by the survey. C. Requirement for consideration of loan application: No loans for generation or transmission facilities will be made until a power supply survey has been completed by REA. No application for financing of generation or transmission facilities requiring a loan for either or both in an amount of more than $2 million will be accepted for consideration by REA unless (a) a power supply survey has been completed, or (b) it is determined by the Administrator that completion of the survey requires full review of proposed REA-financed generation or transmis sion facilities. D. Certification of loans for generation or transmission: No loan for generation or transmission facilities will be made except in compliance with bulletin 20-6, "Loans for Generation and Transmission," dated May 31, 1961, and upon certification by the Administrator to the Secretary of Agriculture that the loan has been approved after the completion of a power supply survey which shows that the loan is (a) needed to construct facilities to implement an existing contract or a proposed contract with the existing power supplier; or (b) needed to provide facilities or service for which there is no existing or proposed contract from any other power supplier; or (c) needed because existing and proposed contracts to provide the facilities or service to be financed were found to be unreasonable, each supplier involved was so advised, REA attempted to have such contracts made reasonable, and the existing or other proposed suppliers had failed or refused to do so within the time set by the Administrator. Loans for generation or transmission facilities of more than $2 million shall be similarly certified to the Comptroller General. They shall also be certified to the Senate and the House of Representatives of the United States, as directed by the respective bodies. Certification of each generation or transmission loan in excess of $2 million shall be accompanied by the following information: 1. The name and address of the applicant borrower and the date of the application. 2. Description and estimated cost of the proposed generation facilities. Indicate if the proposed facilities are the initial or additional unit or units of a plant comprised of one or more units. 3. Description and estimated cost of proposed transmission facilities, including any immediate or future plans to interconnect with other transmission systems. 4. Description of any long-range plans the applicant may have for construction of additional generation and transmission facilities and the estimated cost of the planned facilities. 5. Comparison of the estimated costs of generation by the applicant borrower with the cost of power available from existing suppliers, including the final offer by the private supplier including terms and conditions he offered to meet applicant's long-term energy needs. 6. Summary of the efforts made by the applicant and by REA to obtain the applicant's power and energy requirements from existing power suppliers and the reasons why such efforts have not been successful. 7. Explanation of the applicant's reasons for seeking an REA loan. 8. The amount of electric energy which the applicant will cease to purchase from present power suppliers upon construction of the generating plant for which REA financing is being sought. 9. Explanation of the extent to which the feasibility of the requested loan for generation and transmission facilities depends upon the use of a portion of the facilities by others (including Federal power marketing agencies). 10. Details of the applicant's plans to sell or otherwise make available any of the power and energy from the proposed generation facilities to others (including Federal power marketing agencies). 11. Names of State agencies and commissions having jurisdiction over the applicant borrowers. NORMAN M. CLAPP, Administrator. Index: Generation facilities: Power supply surveys; Loans: Power supply surveys; transmission facilities: Power supply surveys. U.S. DEPARTMENT OF AGRICULTURE, REVISION OF REA BULLETIN 20-2 Attached is a revised REA Bulletin 20-2, "Electric Loan Policy for Section 4 Loans." This revision incorporates power supply survey policy relating to the acceptance for consideration by REA of loan applications for generation or transmission in excess of $2 million. It also incorporates procedures relating to notifications to Appropriations Committees of the U.S. Senate and House of Representatives of receipt of loan applications for generation or transmission purposes, notifications. 81-270-64-pt. 4- -2 to the Appropriations Committee of the Senate of actions taken on such applications, and procedures for applications closed without loan. This revised bulletin supersedes REA Bulletin 20-2 dated July 18, 1962. Subject: Electric loan policy for section 4 loans. I. Purpose. To express Rural Electrification Administration policy concerning loans under section 4 of the Rural Electrification Act. II. Section 4 of the Rural Electrification Act.-This section provides in part: A. "The Administrator is authorized *** to make loans for rural electrification to persons, corporations, States, Territories, and subdivisions and agencies thereof, municipalities, peoples' utility districts and cooperative, nonprofit, or limited-dividend associations organized under the laws of any State or Territory of the United States; for the purpose of financing the construction and operation of generating plants, electric transmission and distribution lines or systems for the furnishing of electric energy to persons in rural areas who are not receiving central station service ***'"` B. "*** the Administrator, in making such loans shall give preference to States, Territories, and subdivisions and agencies thereof, municipalities, peoples' utility districts, and cooperative, nonprofit, or limited-dividend associations, the projects of which comply with the requirements of this Act." C. "Such loans shall be on such terms and conditions relating to the expenditure of the moneys loaned and the security therefor as the Administrator shall determine and may be made payable in whole or in part out of the income: Provided further, That all such loans shall be self-liquidating within a period of not to exceed thirty-five years, and shall bear interest at the rate of 2 per centum per annum D. "Loans under this section *** shall not be made unless the Administrator finds and certifies that in his judgment the security therefor is reasonably adequate and such loan will be repaid within the time agreed." E. "*** no loan for the construction, operation, or enlargement of any generating plant shall be made unless the consent of the State authority having jurisdiction in the premises is first obtained." III. Definition of rural area.-Section 13 of the act provides in part that: "As used in this Act the term 'rural area' shall be deemed to mean any area of the United States not included within the boundaries of any city, village, or borough having a population in excess of fifteen hundred inhabitants, and such term shall be deemed to include both the farm and nonfarm population thereof ***”. IV. General policy.— A. To facilitate borrowers' financial and system planning loans will be made as promptly as possible within the availability of loan funds, consistent with the provisions of the Rural Electrification Act and the policies and statements of loan purposes set forth herein. B. In accordance with the objectives of the act and the obligations undertaken in the loan contract, borrowers are strongly urged to provide electric service on an area coverage basis to the maximum extent possible. C. Loan applications for distribution facilities generally should be based on the amount of new loan funds required during the next 2 years to enable a borrower to construct adequate facilities in an effective and efficient manner. However, loan applications for distribution, transmission, or generation facilities may be based on estimates of loan fund requirements for more than 2 years where necessary to assure the availability of essential facilities. D. In reviewing loan applications, the amount and management of a borrower's general funds will be considered by REA on the basis of the guidelines contained in REA Bulletin 1-7. A loan application must be supported by a detailed analysis of general funds clearly justifying the amount and form of its deposits and investments where (1) a borrower has general funds exceeding 20 percent of total plant; or (2) a borrower has more than one-fourth of its general funds deposited or invested other than as recommended in REA Bulletin 1-7; or (3) the borrower is specifically requested to provide such an analysis. |