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###### Department of Agriculture

###### Rural Utilities Service

          - 7 CFR Part 1730
          - RIN 0572-AC07

# AGENCY:

Rural Utilities Service, USDA.

# ACTION:

Final rule.

# SUMMARY:

The Rural Utilities Service, an agency delivering the U.S. Department of Agriculture's Rural Development Utilities Programs, hereinafter referred to as RUS, is amending its regulation to require electric program borrowers establish and maintain a written standard policy relating to the Interconnection of Distributed Resources (IDR). The intended effect is that owners of distributed resources know what they have to do to connect their facilities to the electric power systems of borrower electric cooperatives.

# DATES:

*Effective Date:*                         August 7, 2009. Incorporation by reference of a certain publication listed in this final rule is approved by the Director of the Federal Register as of August 7, 2009.                    

# FOR FURTHER INFORMATION CONTACT:

                        Donald Junta, USDA—Rural Development Utilities Programs, 1400 Independence Avenue, SW., Washington, DC 20250-1569, telephone (202) 720-3720 or e-mail to                         *Donald.Junta@wdc.usda.gov.*

# SUPPLEMENTARY INFORMATION:

      ( print page 32407)    

## 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.

## Catalog of Federal Domestic Assistance

                    The program described by this final rule is listed in the Catalog of Federal Domestic Assistance Programs under number 10.850, Rural Electrification Loans and Loan Guarantees. This catalog is available on a subscription basis from the Superintendent of Documents, the United States Government Printing Office, Washington, DC 20402-9325; telephone (202) 512-1800 or at                     *http://www.cfda.gov.*

## Executive Order 12372

This final rule is excluded from the scope of Executive Order 12372, “Intergovernmental Review of Federal Programs,” as implemented under USDA's regulations at 7 CFR part 3015.

## Executive Order 13132, Federalism

The policies contained in this final rule do not have any substantial direct effect on States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, nor does this direct final rule impose substantial direct compliance costs on State and local governments. Therefore, consultation with States is not required.

## Information Collection and Recordkeeping Requirements

The information and collection and recordkeeping requirements contained in this rule have been approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35) and have been assigned OMB Control Number 0572-0141.

## National Environmental Policy Act Certification

                    The Agency has determined that this final 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.                

## Regulatory Flexibility Act Certification

                    Pursuant to 5 U.S.C. 553(a)(2), this final rule is exempt from the rulemaking requirements of the Administrative Procedure Act (5 U.S.C. 551*et seq.*), including the requirement to provide prior notice and an opportunity for public comment. Because this final rule is not subject to a requirement to provide prior notice and an opportunity for public comment pursuant to 5 U.S.C. 553, or any other law, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601*et seq.*) are inapplicable.                

## Unfunded Mandates

This final 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 for the private sector. Thus, this rule is not subject to the requirements of sections 202 and 205 of the Unfunded Mandates Reform Act of 1995.

## Executive Order 12988

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. The Agency has determined that this final rule meets the applicable standards in § 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 appeal procedures, if any, must be exhausted before an action against the Department or its agencies may be initiated.

## Background

On August 13, 2008, at 73 FR 47101, the Agency published a rulemaking proposing to amend 7 CFR Part 1730 by adding a Subpart C titled “Interconnection of Distributed Resources”. This rule will require that electric program borrowers shall be responsible for establishing and maintaining a written standard policy relating to the interconnection of distributed resources (IDR). This rule will allow owners of distributed resources to ascertain the requirements of borrower electric cooperatives regarding connection to the electric cooperative facilities by referring to written borrower standards for IDR.

Prospective owners of distributed resources often do not know what they must do to connect their facilities to the electric power system of a borrower electric cooperative. The purpose of this action is to allow the owners of distributed resources to know exactly what they must do to connect their facilities with the electric power systems of borrower electric cooperatives.

The United States electric power system (electric power system) consists of three distinct components: Generation facilities, transmission facilities (including bulk transmission and subtransmission facilities) and distribution facilities. Specific definitions of generation, transmission and distribution facilities are located at 7 CFR 1710.2.

                    RUS borrowers have a legal obligation to RUS to maintain their respective systems. In satisfying this legal obligation, a borrower furthers the purposes of the Rural Electrification Act of 1936, as amended (7 U.S.C. 901*et seq.*) while also preserving the value of its system to serve as collateral for repayment of RUS financial assistance. The scope of this legal obligation is frequently measured against prudent utility practices (PUP). Accordingly, RUS expects and this rule provides for borrowers to be aware of and follow developing IDR standards using PUP. Voluntary standards using PUP are emerging within the private sector and the requirements of this final rule are consistent with those voluntary standards.                

This rule refers to a national series of standards published by the Institute of Electrical and Electronic Engineers (IEEE). It also allows individual borrowers to create their own additional technical requirements to meet local conditions that are consistent with PUP. The regulation applies to IDR having an installed capacity of not more than 10 megavolt amperes (MVA). This specific value was chosen to correspond with the national series of standards published by IEEE.

This regulation provides that borrowers may in their written interconnection policies require appropriate liability insurance for distributed resource facilities that are interconnected to borrowers' electric systems. It is expected that what is appropriate may vary depending on the type and size of the IDR asset. Current Federal regulations do not specify the amount of liability insurance required except when the distributed resource facility is owned by a RUS borrower, contractor, engineer, or architect.

### Discussion of Comments and Changes

                    RUS received 2 letters and 3 comments electronically through the Federal eRulemaking Portal on this proposed rule by the comment deadline of October 14, 2008. Comments were received from the National Rural Electric Cooperative Association (NRECA) Transmission and Distribution Engineering Committee, System                           ( print page 32408)                        Planning Subcommittee, Keyes & Fox, LLP, and three individuals.                

NRECA proposed that the statement “the Agency expects that borrower ownership of distributed resources will be uncommon” be deleted from the background section. RUS accepted this proposed change and deleted the statement.

NRECA also proposed that “Compliance with the State requirements is adequate to comply with the rule.” RUS rejected this proposed change because the intent of this rule is to facilitate the development of an appropriate minimum threshold of disclosure and uniformity in our borrowers' approach to interconnection policies. We recognize that in some States the requirements may be less than what would otherwise be determined appropriate threshold requirements. To accept this proposed change would negate one of the primary expected benefits of this rulemaking.

NRECA also proposed that “Borrowers may follow their State's requirements without seeking an individual waiver from the Administrator where the State requirements are inconsistent with the rule.” The final rule provides that where a State standard is higher than what is provided in this regulation, the higher standard would apply; the benefit of strict uniformity is not so great as to justify unnecessary conflict with State regulation in the area of IDR. Where a given State standard is lower, it is the Agency's intent to facilitate the establishment of a uniform minimum threshold but case by case waiver authority is retained.

NRECA also proposed that in the definitions § 1730.62, the regulation should only apply to installations “directly connected to distribution systems,” instead of “not directly connected to a bulk power transmission system.” RUS rejected this proposed change because the definition used in the regulation is that used in the series of standards published by the Institute of Electrical and Electronics Engineers, Inc. (IEEE) titled “1547, Series of Interconnection Standards”.

NRECA proposed that in § 1730.63(a)(2) the phrase “and the process to determine the costs” be added to the first sentence. RUS accepts this change because it allows for the fact that the exact cost of an interconnection may not be known initially; the process to determine the final cost will be explained to the applicant during the application stage.

NRECA proposed that in § 1730.63(a)(5) IDR policies be reconsidered and updated every five years instead of every three years. RUS accepted this proposed change to be consistent with the IEEE standard revision or reaffirmation schedule.

NRECA proposed that in § 1730.63(b)(2) that IEEE 1547.1 (Standard Conformance Test Procedures for Equipment Interconnecting Distributed Resources with Electric Power Systems) be added to the requirement. RUS rejected this proposed change because by specifying IEEE 1547.1 and not other IEEE 1547 standards, RUS would not be including these other IEEE 1547 standards in the requirement. It is not the Agency's intent to establish standards that conflict with IEEE 1547, or foster the development of borrower policies that are at odds with IEEE 1547.

NRECA proposed that the requirements in § 1730.63(b)(3) regarding disconnect facilities (lockable disconnect, visible open, and fusing) be deleted. RUS accepted the proposed change that the fusing requirement be deleted because IEEE 1547 does not mention fusing in its phrase “readily accessible, lockable, visible-break isolation device.” However RUS rejected the other parts of the proposed change regarding deleting the lockable disconnect and a visible open requirement. This standard is incorporated in IEEE 1547 and to not include these requirements could place service personnel at risk.

NRECA proposed that if the regulation did contain a requirement for a disconnect device, it should not apply to small inverter based installations meeting UL 1741 (Underwriters Laboratory Standard for Inverters, Converters, Controllers and Interconnection System Equipment for Use with Distributed Energy Resources). RUS rejected this proposed change. Were a disconnect not to be required service personnel would have to rely on a solid state device to remove the IDR facility from a deenergized line while working on the line and could be at risk should such devices fail. This is contrary to standard work rules requiring visible open disconnect devices and grounds before a line may be worked on as a deenergized line.

NRECA proposed to add the phrase “as determined by the borrower” to the liability insurance requirement in § 1730.63(c)(1). RUS rejected a change that gave unfettered discretion to the borrower, in favor of an amendment that subjects the borrower's discretion to an “appropriate” test. We recognize that the amount of liability insurance that is appropriate may vary by industry or region, or size and operating characteristics of the IDR.

NRECA proposed that we delete the § 1730.63(c)(4) requirement that “the Responsible Party must demonstrate the financial and managerial capability to develop, construct and operate the distributed resources.” RUS elected to modify this requirement. As originally proposed, the entire burden falls to the Responsible Party, but the capability can in some cases be contracted to a third party who is more appropriate to the task. The intent of the rule is to accomplish the end result that the facility be capably developed, constructed and operated. We fully expect that the appropriate party for this responsibility can vary depending on the size and ownership profile of the IDR, but do retain the fundamental requirement that the responsibility for these variables be addressed for each IDR facility that falls under this rule

Keyes & Fox, LLP proposed that the rule not require a Responsible Party to carry a minimum level of liability insurance. RUS rejected this proposed change as it was felt that appropriate levels of liability insurance are consistent with the intent of this rulemaking.

Keyes & Fox, LLP proposed that § 1730.63(b)(3) not require installation of an external disconnect switch. RUS rejected this proposed change because an external disconnect device is referred to in IEEE 1547 and to not have an external disconnect device could place service personnel at risk.

An individual proposed that the address of the IEEE Operations Center be substituted for the IEEE corporate address in § 1730.63(b)(2) for obtaining a copy of IEEE 1547. RUS accepted this proposed change as the IEEE Operations Center is the more appropriate address for where IEEE documents may be obtained.

An individual proposed that in § 1730.62, that the definition of 10 MVA be changed to 100 kW. RUS rejected this proposed change because 10 MVA is the quantity that is used in IEEE 1547 and it is our intent that this rule not conflict with this nationally recognized series of standards.

An individual proposed that in § 1730.62, that the definition of 10 MVA be changed to 10 kVA. RUS rejected this proposed change because 10 MVA is the quantity that is used in IEEE 1547 and it is our intent that this rule not conflict with this nationally recognized series of standards.

# List of Subjects in 7 CFR Part 1730

      - Electric power; Incorporation by reference; Loan program—energy; Reporting and recordkeeping requirements; Rural areas

      ( print page 32409)    
For reasons set forth in the preamble, the Agency amends 7 CFR, Chapter XVII, part 1730 by adding subpart C as follows:

# PART 1730—ELECTRIC SYSTEM OPERATIONS AND MAINTENANCE

1. 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.*

2. Add Subpart C to read as follows: 

      Subpart C—Interconnection of Distributed Resources1730.60 
General.
1730.61 
RUS policy.
1730.62 
Definitions.
1730.63 
IDR policy criteria.
1730.64 
Power purchase agreements.
1730.65 
Effective dates.
1730.66 
Administrative waiver.
1730.67-99 
[Reserved]
1730.100 
OMB Control Number.

# Subpart C—Interconnection of Distributed Resources

§ 1730.60 

Each electric program distribution borrower (as defined in § 1710.2) is responsible for establishing and maintaining a written standard policy relating to the Interconnection of Distributed Resources (IDR) having an installed capacity of not more than 10 megavolt amperes (MVA) at the point of common coupling.

§ 1730.61 

The Distributed Resource facility must not cause significant degradation of the safety, power quality, or reliability on the borrower's electric power system or other electric power systems interconnected to the borrower's electric power system. The Agency encourages borrowers to consider model policy templates developed by knowledgeable and expert institutions, such as, but not limited to the National Association of Regulatory Utility Commissioners, the Federal Energy Regulatory Commission and the National Rural Electric Cooperative Association. The Agency encourages all related electric borrowers to cooperate in the development of a common Distributed Resource policy.

§ 1730.62 

“Distributed Resources” as used in this subpart means sources of electric power that are not directly connected to a bulk power transmission system, having an installed capacity of not more than 10 MVA, connected to the borrower's electric power system through a point of common coupling. Distributed resources include both generators and energy storage technologies.

“Responsible Party” as used in this subpart means the owner, operator or any other person or entity that is accountable to the borrower under the borrower's interconnection policy for Distributed Resources.

§ 1730.63 

                                (a)                                 *General.*                                 (1) The borrower's IDR policy and procedures shall be readily available to the public and include, but not limited to, a standard application, application process, application fees, and agreement.                            

(2) All costs to be recovered from the applicant regarding the application process or the actual interconnection and the process to determine the costs are to be clearly explained to the applicant and authorized by the applicant prior to the borrower incurring these costs. The borrower may require separate non-refundable deposits sufficient to insure serious intent by the applicant prior to proceeding either with the application or actual interconnection process.

(3) IDR policies must be approved by the borrower's Board of Directors.

(4) The borrower may establish a new rate classification for customers with Distributed Resources.

(5) IDR policies must provide for reconsideration and updates every five years or more frequently as circumstances warrant.

                                (b)                                 *Technical requirements.*                                 (1) IDR policies must be consistent with prudent electric utility practice.                            

                                (2) IDR policies must incorporate the Institute of Electrical and Electronic Engineers (IEEE): IEEE 1547TM                                —Standard for Interconnecting Distributed Resources with Electric Power Systems, approved June 12, 2003, and IEEE 1547.1TM                                —Standard Conformance Test Procedures for Equipment Interconnecting Distributed Resources with Electric Power Systems, approved June 9, 2005. Copies of the IEEE Standards 1547TM                                 and 1547.1TM                                 may be obtained from the IEEE Operations Center, 445 Hoes Lane, Piscataway, NJ 08854-4141, telephone 1-800-678-4333 or online at                                 *http://www.standards.ieee.org*. Copies of the material are available for inspection during normal business hours at RUS, Room 1265, U.S. Department of Agriculture, Washington, DC 20250. Telephone (202) 720-3720, e-mail                                 *Donald.Junta@wdc.usda.gov,*                                 or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to:                                 *http://www.archives.gov/​federal_​register/​code_​of_​federal_​regulations/​ibr_​locations.html.*

(3) IDR policies must provide for appropriate electric power system disconnect facilities, as determined by the borrower, which shall include a lockable disconnect and a visible open, that are readily accessible to and operable by authorized personnel at all times.

(4) IDR policies must provide for borrower access to the Distributed Resources facility during normal business hours and all emergency situations.

                                (c)                                 *Responsible Party obligations.*                                 IDR policies must provide for appropriate Responsible Parties to assume the following risks and responsibilities:                            

(1) A Responsible Party must agree to maintain appropriate liability insurance as outlined in the borrower's interconnection policy.

(2) A Responsible Party must be responsible for the Distributed Resources compliance with all national, State, local government requirements and electric utility standards for the safety of the public and personnel responsible for utility electric power system operations, maintenance and repair.

(3) A Responsible Party must be responsible for the safe and effective operation and maintenance of the facility.

(4) Only Responsible Parties may apply for interconnection and the Responsible Party must demonstrate that the facility will be capably developed, constructed and operated, maintained, and repaired.

§ 1730.64 

Nothing in this subpart requires the borrower to enter into purchase power arrangements with the owner of the Distributed Resources.

§ 1730.65 

(a) All electric program borrowers with an approved electric program loan as of July 8, 2009 shall have an IDR policy board approved and in effect no later than July 8, 2011.

(b) All other electric program borrowers that have pending applications or submit an application to the Agency for financial assistance on or after July 8, 2009 shall provide a letter of certification executed by the General Manager that the borrower meets the requirements of this subpart before such loan may be approved.

§ 1730.66 

The Administrator may waive in all or part, for good cause, the requirements and procedures of this subpart.

      ( print page 32410)    
§§ 1730.67-1730.99 

§ 1730.100 

The Information collection requirements in this part are approved by the Office of Management and Budget and assigned OMB control number 0572-0141.

Dated: June 25, 2009.

James R. Newby,

Acting Administrator, Rural Utilities Service.

[FR Doc. E9-15888 Filed 7-7-09; 8:45 am]

BILLING CODE 3410-15-P