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Rural Development Utilities Programs

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Weather Radio (re-authorization) Sec. 601: Broadband (modified) Broadband Definition: ... National Center for Rural Telecommunications Assessment (new) ... – PowerPoint PPT presentation

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Title: Rural Development Utilities Programs


1
Rural Development Utilities Programs
  • KENNETH M. ACKERMAN
  • Assistant Administrator
  • Program Accounting and Regulatory Analysis
  • NARUC Staff Subcommittee on
  • Accounting and Finance
  • Lexington, Kentucky
  • October 14, 2008

2
Topics
  • Electric Program
  • Telecommunication Program
  • Farm Bill
  • Water Environmental Program
  • Accounting Issues
  • Other Issues

3
Electric Program
4
Program Overview
  • 670 borrowers
  • 617 distribution
  • 53 generation transmission
  • RUS Loans 12,964,636,000
  • FFB Loans 21,185,569,000
  • Total 34,150,205,000

5
Loan Programs FY 2008
Loan Levels
Hardship......... 99,300,000
Municipal 0 Treasury
........... 0 FFB Guaranteed
(Generation Transmission) 3,200,000,000 FFB
Guaranteed (Distribution) 3,300,000,0
00
6
Loan Programs FY 2008
Hardship 99,300,000
12 99,300,000 Municipal
Not Funded 0
- 0- Pending 4
25,943,000 FFB Guaranteed 6,500,000,000
177 6,500,000,000 Treasury Not Funded
0 - 0 - Pending 9
157,851,000
http//www.usda.gov/rus/electric/loans/loan_types0
41118.pdf
7
Electric Program Funding 2008 Budget( Millions)
Discretionary Budget Authority
Program Level
8
Summary of Historical Electric Programs Loan
Budget (Dollars In Million)


Loan
2004 2005
2006 2007 2008 Program
Actual Actual
Actual Actual Actual Direct 5
240 119 99
99 99 Municipal Rate
1,000 104 101 101
0 Direct Treasury Rate 750
1,000 990 990
0 FFB Guaranteed 1,900
2,100 2,700 2,700
6,500 Non-FFB Guarantee 99 0
100 0 0
Section 313A 0
1,000 1,500 0
500 Total Loan Program 3,989
4,323 5,400 3,889 7,099


9
GT Loans 1971-2007 (Actual) 2008-2018
(Projected)
10
Counties Impacted by Power Supply and
Distribution Loan Programs FY07
11
USDA, Rural Development has several financing
options available for financing Renewable Energy
projects. FFB Loan Program for
RenewablesSection 9006, Renewable Energy and
Energy Efficiency Grants and Loan Guarantees.
12
RENEWABLE ENERGY
  • Rural Development, Electric Programs has
  • typically set aside 200 million of
  • FFB loan funds to finance renewable energy
  • projects, with priority processing.


13
Generation and the Future of Baseload
14
COAL FIRED GENERATION
  • 50 of the electricity in this country
  • 80 for rural electric cooperatives
  • WHY? Fuel Use Act of 1978
  • Prohibited the use of natural gas and oil to
    generate electricity.
  • Forced the industry into coal and nuclear to meet
    demand.

15
COAL FIRED GENERATION
  • 51 of cooperative generation
  • 80 of MWhs generated
  • Trend is not likely to be reversed any time soon.
  • Strong track record in owning and operating coal
    fired plants.
  • Meaningful options are limited.

16
The Future is Dark(Black Actually)
  • US Projections
  • Annual Energy Outlook 2008 March 2008 (Revised)

17
World Electricity GenerationBy Fuel Type - 2004
and 2030
Sources 2004 Derived from EIA, International
Energy Annual 2004, www.eia.doe.gov/iea. 2030
EIA, System for the Analysis of Global Energy
Markets (2007)
18
Many Challenges Ahead For The Electric Program
  • Funding availability for baseload projects and
    related cost of capital
  • Effects related to the control of greenhouse gas
    emissions
  • State and local support for power plant projects
  • Legal Challenges
  • Trajectory of construction costs
  • Forecast of wholesale fuel prices
  • Demand effects of increased energy efficiency,
    conservation, and prices

19
NRECA GT Survey vs AEO 2008
Construction Cost By Generation Type
20
CLIMATE CHANGE IS REAL
  • Coal is the key problem and the key to solutions.
  • Technology will provide acceptable solutions.
  • Energy Efficiency, Renewables, and Nuclear,
    although very critical, cannot do the job alone.

21
WHAT IS RUS DOING?
  • CO2 Sequestration
  • RUS is committed to financing a demonstration
    project at an existing plant owned and operated
    by Basin.
  • The project will add carbon capture technology on
    the back of an existing plant.

22
WHAT IS RUS DOING?
  • CO2 Sequestration
  • Capture 90 of the flue gas devoted to this
    technology, clean it up some more and inject it
    into the pipeline already delivering CO2 for
    enhance oil recovery in Canada.
  • A portion of the output will also be diverted for
    injection into a non recoverable coal seam and
    another portion into a saline formation for
    permanent sequestration. These sites will be
    monitored continuously.

23
WHAT IS RUS DOING?
  • Recognize the need to reduce emissions
  • Recognize the need for pollution control systems
  • Prepared to finance, advanced power generation
    systems
  • IGCC (integrated gasification combined cycle)
  • CFBC (circulating fluidized bed combustion)

24
Telecommunications Program
25
Loan Budgets
  • (millions) 2008 2009(proposed)
  • Broadband 792.0 297.0
  • Infrastructure 685.2 690.0
  • Total 1,477.2 987.0

26
Telecom Loan Investment
Infrastructure Broadband
  • 86 loans have been made, for 1.7 billion, in
    more than 1,900 communities
  • More than 1.1 million households will receive
    broadband access under loans made
  • 376.7 million in loans made in FY 2007
  • 3.7 billion in principal outstanding 550
    borrowers
  • 92 of borrowers are providing Broadband service

27
Infrastructure Program
  • Trends
  • Lending Levels
  • FY 2007 only 55 of loan funding available was
    obligated
  • Higher demand was anticipated in FY 2008 AND has
    materialized
  • Typically funding requests are heavier in 3rd and
    4th quarters of the fiscal year

28
Infrastructure Program
  • Trends
  • Competition
  • From multiple fronts (Cable, ISPs, other LECs,
    Satellite)
  • Decrease in subscriber lines
  • Continued reliance on Universal Service Funds
  • Offering of Non-regulated Services

29
Infrastructure Program
  • Challenges
  • Impact of Competition
  • Regulatory requirements
  • Proposed Changes in USF
  • Upgrades and expansion of service offerings
  • Un-liquidated Loan Obligations (ULOs)

30
Infrastructure Program
  • Proposed Changes
  • Feasibility Study and Toll Forecasts
  • Toll forecast model is becoming outdated
  • Moving to 5-yr pro forma analysis
  • More accurate projections based on business model
    assumptions

31
Broadband Program
  • Trends
  • Trend toward larger, more complex loans
  • Substantial private equity financing to
    supplement loan
  • Complicates loan security arrangements
  • Third party agreements (i.e., stock pledge)

32
Broadband Program
  • Challenges
  • Projections do not include entire borrower
    operation
  • Projections do not reconcile with system design
  • Assumptions not supported by market survey
  • Assumptions do not reconcile with financial
    statements
  • Assumptions too general or only cover the
    financed project.

33
Broadband Program
  • Challenges (continued)
  • Validate financial forecast
  • Determine reasonableness of assumptions based on
    submitted data
  • Reconcile with system design, construction
    schedule, and budget
  • Assess feasibility and risk
  • Can be extremely complex

34
Broadband Program
  • Proposed Changes (Proposed Rule/Statutory)
  • Promote deployment to rural areas with little or
    no service
  • Limit funding in urban areas and areas where a
    significant share of the market is served by
    incumbent providers
  • Clarify equity and marketing survey requirements

35
Broadband Program
  • Proposed Changes (continued)
  • Increase the transparency of the application
    process
  • Promote a better understanding of application
    requirements
  • Ensure that projects funded are keeping pace with
    increasing demand for bandwidth

36
2008 Farm Bill
  • Title VI, Rural Development
  • RE Act Amendments
  • Non-Act Amendments

37
What it is
  • A five year law that sets farm policy for
    agriculture producers, agribusinesses, etc.
  • Contains 15 Titles (including Commodity,
    Conservation, Trade, Nutrition, Credit, Energy,
    etc.)
  • We are Title VI Rural Development

38
What it did
  • Title VI amended the Re Act
  • Sec. 306 Elimination of FFB Loans
  • Sec. 306F Initiative to better serve
    underserved trust areas (new)
  • Sec. 313A Authority for the Guarantee of Other
    Lenders Financing of Telecom or Electric
    projects (modified)

39
What it did
  • Title VI amended the RE Act
  • Sec. 315 Expansion of 911 access (modified)
  • Sec. 318 Bonding Requirements (new)
  • Sec. 601 Broadband (modified)
  • Sec. 602 National Center for Rural
    Telecommunications Assessment (new)

40
What it did
  • Other Provisions (non-RE Act amendments)
  • Comprehensive Rural Broadband Strategy (new)
  • Distance Learning and Telemedicine Program
    (re-authorization/modification)
  • Weather Radio (re-authorization)

41
Sec. 601 Broadband (modified)
  • Broadband Definition
  • Requires the Secretary to, as advances in
    technology warrant, review and recommend
    modifications to the transmission rate
  • Prohibition
  • The Secretary shall not establish a speed that
    has the effect of precluding the use of evolving
    technologies appropriate for rural areas

42
Sec. 601 Broadband (modified)
  • Rural Area means any area, which is not located
    within
  • A city, town, or incorporated area that has a
    population of greater than 20,000 inhabitants
    and
  • An Urbanized Area contiguous and adjacent to a
    city or town that has a population of greater
    than 50,000 inhabitants

43
Sec. 601 Broadband (modified)
  • Eligible Projects
  • 25 un-served in proposed application (one or
    none un-served)
  • There are less than 3 incumbent service providers
    providing broadband in the proposed service area

44
Sec. 602National Center for Rural
Telecommunications Assessment (new)
  • The Secretary shall designate an entity to serve
    as the National Center for Rural
    Telecommunications Assessment
  • Assess effectiveness of this program
  • Work with other rural development centers to
    promote effective broadband deployment strategies
    and policy for rural areas
  • Managed by Board of Directors issues annual
    report

45
Comprehensive Rural Broadband Strategy (new)
  • Chairman of the FCC in coordination with the
    Secretary of Agriculture must report on
  • Recommendations (interagency cooperation and
    coordination of agencies) to implement policies,
    streamline processes, target resources
  • Address short- and long-term needs assessments on
    all levels (state, local, Federal)
  • Set goals and timeframes

46
Distance Learning and Telemedicine Program
(modification)
  • Re-authorized through 2012
  • Places emphasis on ensuring that libraries are
    included as eligible purposes/entities

47
Next Steps
  • Farm Bill Implementation
  • Broadband Provision a Priority
  • Interim Rule and Proposed for Comment
  • Team in place
  • New rule by the end of the year

48
Water and Environmental Programs
49
Water and Environmental Programs( Millions)
  • FY 2007 FY 2008 FY09 Proposed
  • Actual Actual
  • Direct Loans 990.00 1,261.52
    476
  • Guaranteed Loans 75.00 18.4
    75
  • Grants 451.44 426 353
  • 2005 Hurricanes 29.90 0
    0
  • Solid Waste Mgmt Grants 3.50 3.5
    3.5
  • Individually-owned water well 0.99 .05
    0.50
  • Grants for Water and 0.50 .5
    0.99
  • Wastewater Revolving
  • Total 1,551.33 1,709.97
    908.99

50
HWWS Grant Program
  • The loan limit is 11,000 at 1 percent for 20
    years
  • A NOFA for FY 2009 will be published in March 2009

51
Electric Uniform System of Accounts
  • Published May 27, 2008
  • Provides alternative presentations for audited
    financial statements for balances in the Cushion
    of Credit account
  • Long term debt or Long term investment
  • Implements recent FERC orders
  • Acct 209, Accumulated Other Comprehensive Income
  • Clarifies Rural Development Utilities Programs
    specific guidance
  • Storm Damage
  • Record Retention
  • Consolidated Financial Statements

52
Renewable Energy Credits
  • Original proposal treated RECs as intangible
    assets.
  • Defer accounting guidance until further
    information is available
  • Creation of working group to recommend
    appropriate accounting treatment

53
Renewable Energy Credits
  • REC Working Group (RECWG) participants
  • Diana Alger, Chief, TAAS, Chair
  • Staff from several GTs
  • NRECA
  • CFC

54
RECWG
  • First conference call held on June 9, 2008
  • Goal is to recommend the accounting treatment and
    record keeping requirements related to RECs

55
Part 1773-Audit Policy
  • Revisions being planned
  • Update Independence Standards
  • Consider electronic filing of audits
  • Redefine users to include both for-profit and
    not-for-profit grant recipients
  • Update sample letters to reflect an adoption of
    SAS 112, Communicating Internal Control Related
    Matters Identified in an Audit

56
Novinium
  • Novinium Inc., is requesting its Perficio and
    Ultrinium products be treated as an addition to
    electric utility plant
  • Perficio extends useful life for 20 years
  • Ultrinium extends useful life for 40 years
  • Advancement to the silicone dielectric
    enhancement fluid used in CableCURE

57
Vacancies
  • Field Accountants
  • Northwest (Alaska, Washington, Idaho, Western
    Montana)
  • Indiana
  • South Carolina
  • Tennessee
  • Iowa
  • Washington D.C.
  • Staff Accountants
  • System Accountant

58
http//www.usda.gov/rus/ kenneth.ackerman_at_wdc.usda
.gov
59
Questions
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