4638 Federal Register / Vol. 74, No. 15 / Monday, January 26, 2009 / Rules and Regulations 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 990 

[Docket Number FR–5057–F–02] 

RIN 2577–AC66 

Public Housing Operating Fund 

Program; Increased Terms of Energy 

Performance Contracts 

AGENCY: Office of the Assistant 

Secretary for Public and Indian 

Housing, HUD. 

ACTION: Final rule. 

SUMMARY: This rule makes final the 

conforming amendments to the 

regulations of the Public Housing 

Operating Fund Program to reflect 

recent statutory amendments allowing 

for: (1) The maximum term of an energy 

performance contract (EPC) between a 

public housing authority (PHA) and an 

entity other than HUD to be up to 20 

years, and (2) the extension of an 

existing EPC, without reprocurement, to 

a period of no more than 20 years, to 

allow additional energy conservation 

improvements. The increase in the 

maximum EPC term, which was limited 

to 12 years, is provided by statutory 

amendments and will enable longer 

payback periods for energy conservation 

measures. This final rule adopts an 

October 16, 2008 interim rule without 

change. 

DATES: Effective Date: February 25, 

2009. 

FOR FURTHER INFORMATION CONTACT: 

David J. Reeves, Deputy Assistant 

Secretary, Departmental Real Estate 

Assessment Center, Office of Public and 

Indian Housing, Department of Housing 

and Urban Development, 451 7th Street, 

SW., Room 2000, Washington, DC 

20410–5000; telephone number 202– 

475–8906 (this is not a toll-free 

number). Individuals with speech or 

hearing impairments may access this 

number through TTY by calling the tollfree Federal Information Relay Service 

at 800–877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 9(e) of the United States 

Housing Act of 1937 (42 U.S.C. 1437 et 

seq.) (1937 Act) establishes an Operating 

Fund for the purpose of making 

assistance available to PHAs to operate 

and manage public housing. HUD’s 

regulations implementing section 9(e) of 

the 1937 Act are located at 24 CFR part 

990 (entitled ‘‘The Public Housing 

Operating Fund Program’’). The part 990 

regulations contain the policies and 

procedures governing the Operating 

Fund allocation formula used by HUD 

to distribute operating subsidies to 

PHAs. 

On September 19, 2005, at 70 FR 

54984, HUD published a final rule 

amending the regulations at 24 CFR part 

990 to provide a new formula for 

distributing operating subsidies to PHAs 

and to establish requirements that PHAs 

convert to asset management. The 

September 19, 2005, final rule provides 

PHAs with incentives for energy 

conservation and utility rate reduction. 

The energy conservation methods may 

include, but are not limited to, physical 

improvements financed by a loan from 

a bank, utility, or governmental entity; 

management of costs under a 

performance contract; or a shared 

savings agreement with a private energy 

company. The final rule also provided, 

in § 990.185(a), that the term of the 

contract under which these energy 

conservation measures are taken cannot 

exceed 12 years. 

On August 8, 2005, President Bush 

signed into law the Energy Policy Act of 

2005 (Pub. L. 109–58, 119 Stat. 594) 

(Energy Policy Act). Subtitle D of the 

Energy Policy Act amended section 9 of 

the 1937 Act to promote the use in 

public housing of innovative 

approaches to achieve programmatic 

efficiency and reduce utility costs. 

Specifically, section 151 of the Energy 

Policy Act amended section 9(e)(2)(C) of 

the 1937 Act, which governs the 

treatment of waste and utility savings 

under the Operating Fund allocation 

formula. The amendment made by 

section 151 of the Energy Policy Act 

provides that qualifying contracts for 

energy conservation improvements may 

have terms of not more than 20 years. 

(See 119 Stat. 647–648.) The Energy 

Policy Act also amended the Operating 

Fund treatment of savings resulting 

from such contracts. It allows for longer 

payback periods for retrofits, including 

windows, heating system replacements, 

wall insulation, site-based generation, 

advanced energy saving technologies, 

including renewable energy generation, 

and other such retrofits. 

The Consolidated Appropriations Act, 

2008 (Pub. L. 110–161, 121 Stat. 1844, 

approved December 26, 2007), amended 

section 9(e)(2)(C) of the 1937 Act (42 

U.S.C. 1437g(e)(2)(C)), by adding the 

following clause: 

(iv) EXISTING CONTRACTS.—The term of 

a contract described in clause (i) that, as of 

the date of enactment of this clause, is in 

repayment and has a term of not more than 

12 years, may be extended to a term of not 

more than 20 years to permit additional 

energy conservation improvements without 

requiring the reprocurement of energy 

performance, contractors. 

(See administrative provision, section 

229, of title II of Division K, at 121 Stat. 

2438.) 

II. The October 16, 2008, Interim Rule 

On October 16, 2008 (73 FR 6135), 

HUD published an interim rule that 

amended the regulations at 24 CFR 

990.185. The interim rule provided that, 

consistent with the amendment to the 

1937 Act by section 151 of the Energy 

Policy Act, the term of an EPC between 

a PHA and an entity other than HUD 

may be up to 20 years. Consistent with 

the amendment made to section 

9(e)(C)(2) by the Consolidated 

Appropriations Act, 2008, the interim 

rule also permitted the extension of 

executed EPCs to a term of not more 

than 20 years without requiring a new 

competitive procurement process. The 

provision for entering into EPCs with 

terms greater than 12 years and for 

extending the terms of executed EPCs 

commenced to apply on the effective 

date of the interim rule, which was 

November 17, 2008. The interim rule 

clarified that, consistent with the 

statute, to qualify for the incentives 

under § 990.185, the financing of energy 

conservation measures by a party other 

than HUD must be undertaken pursuant 

to a contract. The interim rule also 

clarified that the term ‘‘energy 

performance contract’’ encompasses all 

contracts that qualify under § 990.185, 

regardless of the energy conservation 

measure involved or the entity that is 

the other party to the contract with the 

PHA. 

III. This Final Rule 

The October 16, 2008 interim rule 

provided a 60-day public comment 

period. HUD received one public 

comment by the close of the public 

comment period on December 15, 2008. 

The commenter supported the interim 

rule but expressed concern that its 

effectiveness could be limited due to 

two considerations. According to the 

commenter, HUD underestimates total 

utility costs, resulting in insufficient 

funding for PHAs to use to pay back 

EPCs, even with extended payback 

periods. The commenter argued that 

HUD should change its method for 

allocating utility subsidies to PHAs in 

order to avoid underestimating actual 

utility costs. In addition, the commenter 

expressed concern that EPC companies 

may overestimate the prospective 

savings from energy conservation 

measures. The commenter advocated 

oversight of EPC companies to prevent 

PHAs from paying too much in 

Federal Register / Vol. 74, No. 15 / Monday, January 26, 2009 / Rules and Regulations 4639 

exchange for measures that result in 

insufficient savings. 

HUD appreciates the commenter’s 

concerns and will take them under 

consideration as it develops additional 

guidance on the use and analysis of 

EPCs. HUD notes, however, that 

practices required under its asset 

management initiative result in 

increased accuracy in estimating utility 

costs, and HUD already reviews PHAs’ 

proposed EPCs, including assumptions 

made about prospective utility cost 

savings. HUD encourages PHAs to 

negotiate savings guarantee provisions 

in their EPCs to reduce the risk to the 

PHA that savings from energy 

conservation measures will be 

insufficient to cover the PHA’s 

obligations under the EPC. HUD refers 

PHAs to its publication, ‘‘Energy 

Performance Contracting for Public and 

Indian Housing: A Guide for 

Participants’’ (the ‘‘Green Book’’), which 

provides extensive guidance and 

technical assistance on planning and 

negotiating successful and cost-effective 

EPCs. HUD anticipates that it will be 

issuing a revision to the Green Book to 

incorporate leading industry trends and 

best practices. If HUD determines that 

further regulatory action is warranted to 

address the issues raised by the 

commenter, it will undertake separate 

rulemaking. 

This rule therefore makes final the 

October 16, 2008, interim rule without 

change. 

IV. Findings and Certifications 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (2 U.S.C. 1531– 

1538) (UMRA) establishes requirements 

for federal agencies to assess the effects 

of their regulatory actions on state, 

local, and tribal governments and the 

private sector. This final rule does not 

impose any federal mandates on any 

state, local, or tribal government or the 

private sector within the meaning of 

UMRA. 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits an agency from 

publishing any rule that has federalism 

implications if the rule either imposes 

substantial direct compliance costs on 

state and local governments and is not 

required by statute, or the rule preempts 

state law, unless the agency meets the 

consultation and funding requirements 

of section 6 of the Order. This rule does 

not have federalism implications and 

would not impose substantial direct 

compliance costs on state and local 

governments nor preempt state law 

within the meaning of the Order. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

(5 U.S.C. 601 et seq.), generally requires 

an agency to conduct a regulatory 

flexibility analysis of any rule subject to 

notice and comment rulemaking 

requirements, unless the agency certifies 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. This rule, 

consistent with recent statutory 

amendments, provides PHAs with the 

flexibility to enter into energy 

performance contracts with terms of not 

more than 20 years. These revisions 

impose no significant economic impact 

on a substantial number of small 

entities. Therefore, the undersigned 

certifies that this rule will not have a 

significant impact on a substantial 

number of small entities. 

Environmental Impact 

This final rule does not direct, 

provide for assistance or loan and 

mortgage insurance for, or otherwise 

govern or regulate real property 

acquisition, disposition, leasing, 

rehabilitation, alteration, demolition, or 

new construction; or establish, revise, or 

provide for standards for construction or 

construction materials, manufactured 

housing, or occupancy. Accordingly, 

under 24 CFR 50.19(c)(1), this rule is 

categorically excluded from 

environmental review under the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4321). 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance program number is 14.850. 

List of Subjects in 24 CFR Part 990 

Accounting, Grant programs—housing 

and community development, Public 

housing, Reporting and recordkeeping 

requirements. 

■ Accordingly, for the reasons described 

in the preamble, HUD makes final the 

October 16, 2008, interim rule (73 FR 

6135) without change. 

Dated: January 14, 2009. 

Paula O. Blunt, 

General Deputy Assistant Secretary for Public 

and Indian Housing. 

[FR Doc. E9–1252 Filed 1–23–09; 8:45 am] 

BILLING CODE 4210–67–P