Proposed Rules. Interim final rule; request for comments

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BILLING CODE 3510-22-S 72 125 Friday, June 29, 2007 Rules and Regulations Part III Department of Labor Employment and Training Administration 20 CFR Part 641 Senior Community Service Employment Program; Performance Accountability; Interim Rule DEPARTMENT OF LABOR Employment and Training Administration 20 CFR Part 641 RIN 1205-AB47 Senior Community Service Employment Program; Performance Accountability AGENCY: Employment and Training Administration, Labor. ACTION: Interim final rule; request for comments. SUMMARY: The Employment and Training Administration

(ETA)of the Department of Labor (Department) is issuing this Interim Final Rule establishing new performance accountability measures for the Senior Community Service Employment Program (SCSEP). New measures are necessary due to the 2006 Amendments to Title V of the Older Americans Act. Specifically, this rule amends 20 CFR part 641 Subpart G—Performance Accountability and corresponding definitions found in Subpart A—Purpose and Definitions. This notice also solicits public comment on this Interim Final Rule which the Department will consider when it issues a Final Rule. DATES: This rule is effective June 29, 2007. The Department invites interested persons to submit comments on this interim final rule. To ensure consideration, comments must be in writing and must be received on or before August 28, 2007. Comments received after that date will be considered to the extent possible. ADDRESSES: You may submit comments, identified by Regulatory Information Number

(RIN)1205-AB47, by any of the following methods: • *Federal e-Rulemaking Portal: www.regulations.gov.* Follow the Web site instructions for submitting comments. • *Fax:*

(202)693-2766. • *Mail:* Written comments, disk, and CD-Rom submissions may be mailed to Maria Kniesler Flynn, Administrator, Office of Policy Development and Research, U.S. Department of Labor, 200 Constitution Avenue NW., Room N-5641, Washington, DC 20210. • *Hand Delivery/Courier:* Maria Kniesler Flynn, Administrator, Office of Policy Development and Research, U.S. Department of Labor, 200 Constitution Avenue NW., Room N-5641, Washington, DC 20210. The Department will post all comments received on *www.regulations.gov* without making any change to the comments, including any personal information provided. The *www.regulations.gov* Web site is the Federal e-rulemaking portal and all comments posted there are available and accessible to the public. The Department recommends that commenters not include their personal information such as Social Security Numbers, personal addresses, telephone numbers, and e-mail addresses in their comments as such submitted information will become easily available to the public via the *www.regulations.gov* Web site. Comments submitted through *www.regulations.gov* will not include the e-mail address of the commenter unless the commenter chooses to include that information as part of their comment. It is the responsibility of the commenter to safeguard his or her information. Postal mail delivery in Washington, DC, may be delayed due to security concerns. Therefore, the Department encourages the public to submit comments via the Internet as indicated above. *Docket:* The Department will make all the comments it receives available for public inspection during normal business hours at the above address. If you need assistance to review the comments, the Department will provide you with appropriate aids such as readers or print magnifiers. The Department will make copies of the rule available, upon request, in large print and electronic file on computer disk. The Department will consider providing the rule in other formats upon request. To schedule an appointment to review the comments and/or obtain the rule in an alternate format, contact the office of Maria Kniesler Flynn at

(202)693-3700 (VOICE) or 1-800-877-8339 TTY/ASCII. Please note these are not toll-free numbers. You may also contact Ms. Flynn's office at the address listed above. FOR FURTHER INFORMATION CONTACT: Adele Gagliardi, Senior Regulatory Specialist, Employment and Training Administration (ETA), U.S. Department of Labor, 200 Constitution Avenue, NW., Room N-5641, Washington, DC 20210; E-mail *gagliardi.adele@dol.gov;* Telephone

(202)693-3700 (this is not a toll-free number). Individuals with hearing or speech impairments may access the telephone number above via TTY by calling the toll-free Federal Information Relay Service at 1-800-877-8339. SUPPLEMENTARY INFORMATION: The preamble to this Interim Final Rule is organized as follows: I. Background—provides a brief description of the purpose and timing of the Interim Final Rule. II. Summary and Explanation of the Interim Final Rule—discusses the substance of the rule. III. Administrative Information—sets forth the applicable regulatory requirements. I. Background On October 17, 2006, President Bush signed the Older Americans Act Amendments of 2006, Pub. L. 109-365 (2006 OAA Amendments). This law amended the statute authorizing the SCSEP and necessitates changes to the SCSEP regulations. (The Department will continue to use the name “Senior Community Service Employment Program” for this program, although the law refers to it in various terms.) The purpose of this Interim Final Rule is to implement changes to the SCSEP performance measurement system required by the 2006 OAA Amendments. The Department intends to issue a separate Notice of Proposed Rulemaking, proceeding under related RIN 1205-AB48, to implement additional changes to the SCSEP regulations necessitated by the 2006 OAA Amendments. The SCSEP, authorized by Title V of the Older Americans Act, is the only federally-sponsored employment and training program targeted specifically to low-income older individuals who want to enter or re-enter the workforce. Participants must be 55 years of age or older with incomes no more than 125 percent of the Federal poverty level. The program offers participants training at community service employment assignments in public and non-profit so that they can gain on-the-job experience. The goals of the program are to move SCSEP participants into unsubsidized employment so that they can achieve economic self-sufficiency and to promote useful opportunities in community service activities. In the 2006 OAA Amendments, Congress expressed its sense of the benefits of SCSEP, stating, “placing older individuals in community service positions strengthens the ability of the individuals to become self-sufficient, provides much-needed support to organizations that benefit from increased civic engagement, and strengthens the communities that are served by such organizations.” Pub. L. 109-365 § 516(2). 1 1 Section 501 of the Older Americans Act Amendments of 2006, Pub. L. 109-365, amended the various provisions of title V of the Older Americans Act of 1965 (42 U.S.C. 3056 *et seq.* ). For ease of reference, we will refer to the changes to title V made by the 2006 OAA Amendments by referring to the relevant sections of title V as those sections were reflected in the Amendments. The statute requires the Department to issue definitions of the indicators of performance through regulation. Section 513(b)(3). The statute also requires the Department to establish and implement the performance measures referred to in the statute as “core measures and additional indicators of performance” by July 1, 2007. Section 513(d)(4). The Department has determined that the most effective way to define the indicators of performance is to do so in conjunction with the rules that implement such definitions. Defining the performance measures and implementing them concurrently and in the same document is also more helpful to the grantees. In addition, given the importance of the measures in terms of corrective actions and the potential impact they could have on grantee funding, it is preferable to continue to describe and define the measures through regulation even though the statute only requires the Department to implement the definitions through regulation. Accordingly the Department is both defining and describing the indicators through this rule. The Department is unable to promulgate these regulations through the normal notice and comment rulemaking process because of the July 1, 2007, statutory deadline. Development of this rule necessitated extensive consultation within the Department, among multiple Employment and Training Administration offices, the Solicitor's Office and the Office of the Assistant Secretary for Policy. Activities of this group included developing a strategy for promulgating the regulation, addressing policy and programmatic issues and drafting the regulatory text and explanatory preamble. In addition, the Department was required to establish and implement the new SCSEP performance measures after consultation with stakeholders. Pub. L. 109-365 § 513(b)(3). Therefore, the Department drafted, cleared internally, and published a notice in the **Federal Register** (published February 8, 2007, 72 FR 5999) in order to provide a fair and meaningful opportunity for stakeholders to respond. The Department received comments during the period announced in the notice and fully considered these comments, which informed the Interim Final Rule development. This process is described more thoroughly below. In addition, the Department needed to examine potential Paperwork Reduction Act implications of this Interim Final rule as well as examine the Interim Final Rule under additional laws and Executive Orders which cover rulemaking. Finally, the Department needed to obtain all clearances required in rulemaking. Therefore, time only allowed for the Department to issue an Interim Final Rule. There is not time to draft, clear, and publish a Notice of Proposed Rulemaking, receive and respond to comments, and draft, clear, and publish a Final Rule by the July 1, 2007, deadline. Because § 513(a)(2)(C) of the statute prohibits funding grants until the Department and the grantee have agreed upon expected levels of performance, it is adverse to the public interest, and to the interest of those served under the SCSEP program as well as the grantees who seek to serve them, if the rule is delayed and a gap in services to individuals occurs. Therefore, the rule is being published as an Interim Final Rule so that the performance measures and the supporting definitions are effective immediately upon publication and without further delay. This approach will enable the Department and the grantees to negotiate performance agreements in time for all Program Year 2007 grants to be funded at the beginning of the Program Year. Since the statute requires that the Department and each grantee reach agreement on the expected levels of performance for each of the core indicators before to the Department may fund the grants that will be subject to these new rules, starting with Program Year 2007, or July 1, 2007, the Department has made every effort to issue this Interim Final Rule in as timely a manner as possible and to assist grantees in meeting their obligations under the new performance requirements. To further assist grantees to adjust to the changes and to enable grantees to prepare for and to intelligently negotiate their performance goal for Program Year 2007, the Department previously issued a Training and Employment Guidance Letter

(TEGL)describing the anticipated changes in the performance measures. This Interim Final Rule supersedes the previously issued TEGL. If the Department determines that the information in this Interim Final Rule conflicts in a material way with the information previously issued through the TEGL, and has a material impact on the grantees' negotiated performance level goals, grantees will be allowed to renegotiate their performance level goals. The Department will make this determination and will issue further guidance if necessary. The Department sought public input on the SCSEP performance measures during the development of this Interim Final Rule in response to the statutory requirement that the Department establish and implement the new SCSEP performance measures after consultation with stakeholders. Specifically, section 513(a)(1) states that “[t]he Secretary shall establish and implement, after consultation with grantees, sub-grantees and host agencies under this title, States, older individuals, area agencies on aging and other organizations serving older individuals, core indicators of performance and additional indicators of performance for each grantee for projects and services carried out under this title.” The statute also instructs the Department to consult with stakeholders prior to defining the performance indicators. Pub. L. 109-365 § 513(b)(3). The Department satisfied these statutory requirements when it solicited public input on the definitions and implementation of the statutory performance measures in the **Federal Register** notice published February 8, 2007, 72 FR 5999. The February 8, 2007, **Federal Register** notice specifically requested input on six topics:

(1)The core indicators,

(2)the new one-year retention indicator,

(3)customer satisfaction,

(4)other additional indicators including possibly retaining the SCSEP placement measure,

(5)performance outcomes, and

(6)other comments related to SCSEP performance measures. 72 FR 5999 (Feb. 8, 2007). The Department made extensive efforts to make grantees aware of the notice and inform them of the timeframe for submitting comments; the Department e-mailed every grantee and briefed grantees during several all-grantee conference calls. In response to the notice, the Department received comments from 28 persons or entities. In addition, the Department presented a summary of the 2006 OAA Amendments at six regional SCSEP grantee training conferences in January, February, and March of 2007, and provided an opportunity for questions and comments. The Department carefully considered the comments received as we developed the content of this rule. In the preamble discussion of the regulatory changes, the Department discusses input we received from stakeholders. A full summary of the input received on each subject is available on the SCSEP Web site at *http://www.doleta.gov/seniors* . Although the Department solicited stakeholder input through the February 8, 2007, notice and carefully considered the concerns raised through the process, the Department solicits comments on all sections of this Interim Final Rule. The Department particularly invites comments addressing any concerns that this Interim Final Rule significantly compromises the ability of grantees, in areas where a substantial population of minority individuals reside, to serve their targeted population of minority older individuals, in accordance with the requirements of section 514(f) of the 2006 OAA Amendments. The SCSEP performance measures have evolved over time. Program-specific measures to monitor the performance of each SCSEP grantee were first codified in the 2000 Amendments to the OAA. The 2000 OAA Amendments required the following performance measures: 1. The number of persons served, with particular consideration given to individuals with greatest economic need, greatest social need, or poor employment history or prospects, and individuals who are over the age of 60; 2. Community services provided; 3. Placement into and retention in unsubsidized public or private employment; 4. Satisfaction of the enrollees, employers, and their host agencies with their experiences and the services provided; and 5. Any additional indicators of performance that the Secretary determines to be appropriate to evaluate services and performance. Pub. L. 106-501 § 513(b). When the Department implemented the 2000 OAA Amendments, it also began employing the “common measures” in the SCSEP performance system. The “common measures” are a government-wide initiative to apply uniform accountability measures to federally-funded employment and training programs, including those administered by the Department of Labor. Adoption of these common measures helps implement the President's Management Agenda for budget and performance integration as well as reduce barriers to integrated service delivery through local One-Stop Career Centers. To date, ETA has implemented the common performance measures for the majority of its workforce programs, including the SCSEP. The common performance measures are: 1. Entered employment; 2. Retention in employment; and 3. Average earnings. The value of implementing common performance measures is in the ability to describe in a similar manner the core purposes of the workforce system: How many people found jobs? Did they stay employed? What did they earn? Historically, multiple sets of performance measures have burdened grantees, as they are required to report performance outcomes based on varying definitions and methodologies. By minimizing the different reporting and performance requirements, common performance measures can facilitate the integration of service delivery, reduce barriers to cooperation among programs, and enhance the ability to assess the effectiveness and impact of the workforce investment system. Current Department guidance on the common measures is contained in TEGL No. 17-05, issued on February 17, 2006. This TEGL is available at *http://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=2195.* The Department previously identified “program efficiency” as a common measure for federal job training and employment programs, and listed program efficiency as a common measure in the last SCSEP Final Rule. 69 FR 19015, 19064 (April 9, 2004). However, since TEGL No. 17-05, grantees have not been required to report on program efficiency. Therefore, this measure is not addressed in this Interim Final Rule. This Interim Final Rule marks the beginning of the next phase of the SCSEP performance measures. The 2006 OAA Amendments direct the SCSEP to track the following performance measures: Indicators of Performance:

(1)Core Indicators—The core indicators of performance * * * shall consist of—

(A)Hours (in the aggregate) of community service employment;

(B)Entry into unsubsidized employment;

(C)Retention in unsubsidized employment for six months;

(D)Earnings; and

(E)The number of eligible individuals served, including the number of participating individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518.

(2)Additional Indicators—The additional indicators of performance * * * shall consist of—

(A)Retention in unsubsidized employment for 1 year;

(B)Satisfaction of the participants, employers, and their host agencies with their experiences and the services provided;

(C)Any other indicators of performance that the Secretary determines to be appropriate to evaluate services and performance. Pub. L. 109-365 § 513(b). Note that core indicators B, C, and D are consistent with the common measures. All of these indicators are discussed and defined below. II. Summary and Explanation of the Interim Final Rule This Interim Final Rule addresses only the SCSEP performance measures; it amends Subpart G, and related definitions located in Subpart A, of the SCSEP regulations. As discussed in the background section, the Department is proceeding separately with this portion of the regulation because of certain provisions of the 2006 OAA Amendments which mandate implementation of the new performance indicators during the Program Year 2007 grant solicitation and award process. The Department will be proceeding with the normal rulemaking process as it promulgates regulations addressing the remainder of the changes the 2006 OAA Amendments made to the SCSEP. As the Department implements these performance measures, it remains cognizant of Congress' statement that the indicators “shall be designed to promote continuous improvement in performance.” Pub. L. 109-365 § 513(a)(2)(B). The Department remains committed to a system-wide continuous improvement approach grounded upon proven quality principles and practices. The Department is implementing these performance measures with the goal of further aligning the SCSEP with performance measures used in the rest of the workforce investment system. Accordingly, the Department purposely defined the entry into unsubsidized employment, retention in unsubsidized employment for six months, and earnings performance measures to be consistent with the common performance measures which are intended for similar, federally-funded employment and training programs serving adults. Further, the Department defines the one-year retention indicator to align with the equivalent indicator used for ETA's Adult and Dislocated Workers programs. Subpart A—Purpose and Definitions What definitions apply to this subpart? (§ 641.140) Section 641.140 of the SCSEP regulations provides definitions for the SCSEP, including those definitions relevant to the SCSEP performance measures. This Interim Final Rule, however, includes only those definitions relevant to the performance measures that are new or have been changed. Definitions relevant to performance measures that have not changed, as well as SCSEP definitions that are not directly related to performance measures, remain in the existing rule. This Interim Final Rule contains new definitions. Several of them clarify which participants satisfy the core indicator that tracks “the number of participating individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518.” Pub. L. 109-365 § 513(b)(1)(E). The Department received several suggestions for these definitions; many aspects of that input are mentioned in the descriptions of each definition, below. Several commenters encouraged the Department to keep current definitions and/or adopt definitions that are familiar to the SCSEP, including the definitions from the SCSEP Data Collection Handbook. Our general approach to defining new terms in this rule is consistent with these comments; our goal was to minimize the number of new or potentially duplicative definitions. Accordingly, we attempted to define terms in a manner consistent with established definitions used in programs SCSEP grantees are familiar with, and in many cases those definitions also formed the basis for the definitions that exist in the Data Collection Handbook. For example, the definition of veteran comes from the Jobs for Veterans Act, which has been used by the SCSEP for years to distinguish which veterans qualify for a priority for SCSEP services. Descriptions of the new definitions follow: *Additional indicators:* Following the structure established in the 2006 OAA Amendments, we define additional indicators to distinguish them from core indicators; additional indicators are those indicators not subject to goals and corrective action. We currently implement only two additional indicators—one-year retention and customer satisfaction. These are the additional indicators required by the 2006 OAA Amendments. At this time, the Department declines to add any additional indicators, but the regulations reserve the Secretary's authority, under section 513(b)(2)(C), to develop new additional measures when the Secretary determines that such additional indicators are appropriate for evaluation of services and performance. *At risk for homelessness:* The Department defines at risk for homelessness in relation to the definition of homeless, such that a person is at risk for homelessness if the person is likely to become homeless and is unable, using his or her own resources and support network, to obtain housing. *Community service employment:* The 2006 OAA Amendments added a definition of community service employment. We took the definition here directly from the statute. *Core indicators:* The 2006 OAA Amendments establish core indicators as a new category of indicators that are subject to goal-setting and corrective action. The indicators in the definition are those listed in the statute. *Frail:* A few commenters urged various definitions from sources such as the Older Americans Act and the Journal of Gerontology, Another commenter suggested consultation with the Administration on Aging. We adopt the definition of frail that is in the Older Americans Act in order to promote consistency with other OAA programs. *Homeless:* We adopt the definition of homeless that is in the McKinney-Vento Homeless Assistance Act; that Act's definition of homeless has consistently been used by the SCSEP for data collection purposes. One commenter recommended that we adopt a definition of homeless contained in a bill pending in Congress; however, the Department determined that the more prudent course was to adopt a definition already in statute. *Limited English Proficiency:* A few commenters urged various definitions from sources such as those used by the Department of Education and the Workforce Investment Act of 1998 (WIA). We adopt the definition of limited English proficiency

(LEP)that is used by the Federal Interagency Working Group on Limited English Proficiency. The LEP Working Group was created at the request of Assistant Attorney General for Civil Rights and includes members representing more than 35 federal agencies; the group's focus is to ensure that limited English proficient persons have meaningful access to federal and federally-assisted programs. Its Web site, maintained by the U.S. Department of Justice, is *http://www.lep.gov.* ETA and the Department's Civil Rights Center adopted this definition for use in official guidance to the workforce system in 2004. That guidance may be viewed at *http://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=1488.* Use of this definition by the SCSEP will promote consistency within the workforce system. *Low employment prospects:* The Department interprets the statute's term “low employment prospects” to be essentially equivalent to the similar phrase which also appears in the statute, “poor employment prospects.” “Poor employment prospects” also appeared in the prior OAA Amendments and was defined in the prior SCSEP rule. The Department developed the definition of low employment prospects from the prior definition of poor employment prospects. *Low literacy skills:* A few commenters urged various definitions such as those used by the Department of Education and WIA. In an effort to maintain program consistency, the Department defines low literacy skills based on a definition of a very similar term, “literacy skills deficient,” which is already in use in the SCSEP through the Data Collection Handbook. *Most-in-need:* Most-in-need is a label for the core indicator that tracks “the number of participating individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518.” Pub. L. 109-365 § 513(b)(1)(E). *Persistent Unemployment:* The Department defines persistent unemployment by reference to the unemployment rate for a locale, as a rate that is more than 20 percent higher than the national average for two of the last three years. *Rural:* We received suggestions about this definition that cited sources such as the Office of Management and Budget,the Administration on Aging, and the Economic Research Service at the Department of Agriculture. We have decided to align this definition of rural with that of the Rural Health Service at the U.S. Department of Health and Human Services; this is also consistent with the approach taken by the Economic Research Service at the Department of Agriculture. This definition is the broadest one available. First, the definition of rural includes areas not designated as metropolitan statistical areas by the Census Bureau. Information on which locations have been designated as metropolitan by the Census Bureau is available on the Census Bureau's Web site at *census.gov/population/www/estimates/metrodef.html.* To identify a particular Census tract, visit the Web page at *ffiec.gov/geocode/default.htm* and enter a street address. Second, rural also includes segments of metropolitan counties that have been assigned a Rural Urban Commuting Area

(RUCA)code between four and ten. To determine whether a portion of a metropolitan county has been so classified, readers may consult the RUCA codes, which can currently be located at the Web site of the Economic Research Service of the U.S. Department of Agriculture, *ers.usda.gov/data/ruralurbancommutingareacodes/.* Finally, Census tracts that are larger than 400 square miles, have a population density of less than 30 people per square mile, and have been assigned RUCA codes 2 or 3, are also considered rural. Further information on the Rural Health Service's rural classification system, including a list of areas classified by the Service as rural, can be found at their Web site, *ruralhealth.hrsa.gov/funding/eligibilitytestv2.asp.* The University of Washington has created a zip-code-specific approximation of rural status which can be downloaded at *depts.washington.edu/uwruca/data.html.* *Severe disability:* We adopt the definition of severe disability that is in the Older Americans Act. *Severely limited employment prospects:* The Department developed the definition of severely limited employment prospects to relate to the definition of low employment prospects; a person faces severely limited employment prospects when that person has more than one significant barrier to employment. *Veteran:* We define veteran by reference to the Jobs for Veterans Act, 38 U.S.C. 4215(a). The SCSEP has consistently used that statute to distinguish precisely which veterans qualify for SCSEP priority and thus it was a logical source of our definition. We note that under certain circumstances spouses of veterans qualify as veterans under the Jobs for Veterans Act. The following terms were defined in the prior SCSEP rule but have been modified: *Disability:* The only change to the definition of disability concerns the citation. The definition comes from the Older Americans Act, and the paragraph number to which the definition is assigned changed as a result of the 2006 OAA Amendments. *National grantee:* We modify the definition of National grantee by removing the word “Federal” as a modifier to the word “public” to be consistent with the 2006 OAA Amendments, see Pub. L. 109-365 § 506(g)(5), and by making various technical corrections. Subpart G—Performance Accountability What performance measures/indicators apply to SCSEP grantees? (§ 641.700) The 2006 OAA Amendments separate SCSEP performance measures into two categories, core and additional. The Department and each grantee must agree upon goals for core indicator performance levels before the start of each program year. A grantee that fails to meet the agreed-upon core performance levels, which may be adjusted as discussed below, is subject to corrective action. Additional indicators are not subject to goal-setting and are, therefore, not subject to corrective action. However, the statute does mandate that the Department annually publish each grantee's performance on the additional indicators. Section 513(a)(3)(b)(1) of the 2006 OAA Amendments lists the *core indicators* : 1. Hours (in the aggregate) of community service employment; 2. Entry into unsubsidized employment; 3. Retention in unsubsidized employment for six months; 4. Earnings; 5. The number of eligible individuals served, including the number of participating individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518. The Department received numerous comments about whether the fifth core indicator should be split into two indicators. Many commenters supported establishing two separate measures, with one measure for total persons served and one for “the number of participating individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518.” Respondents provided a variety of rationales for this position. For example, several respondents noted that this would be a better measure of services provided to those individuals with barriers to employment; one noted that this would ensure service to “high barrier populations”; one noted that combining measures would not give an accurate depiction of the individuals being served; and one noted that two measures can be beneficial for effective program management. Several commenters expressed support for one combined measure, rather than two separate measures. These respondents also provided a range of rationales for their position. For example, one noted that grantees cannot control who enters the program and that many of the individuals that have attributes cited in the priority list cannot find unsubsidized employment in 27 months; one noted that one measure would promote more effective services and ensure services to those “at great risk” but falling outside the priority of service list; and one noted that, based on income eligibility requirements, all individuals eligible for SCSEP are effectively most-in-need and so a separate measure for most-in-need is not necessary. After considering this input, the Department has decided to divide the fifth core indicator into two separate core indicators:

(1)The number of eligible individuals served, described in section 641.710(a)(5), and

(2)the number of participating individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518 ( *i.e.* , most-in-need), described in section 641.710(a)(6)). This is consistent with current practice in which we have a separate measure for a narrower group of participants in need as well as with the recommendation of a majority of respondents who commented on this measure, and it more clearly tracks relevant program data than a combined indicator. The statute then lists the *additional indicators:* 1. Retention in unsubsidized employment for one year; 2. Satisfaction of the participants, employers, and their host agencies with their experiences and the services provided; and 3. Any other indicators of performance that the Secretary determines to be appropriate to evaluate services and performance. Pub. L. 109-365 § 513(a)(3)(b)(2). An agreement to be evaluated on the core indicators of performance and to report information on the additional indicators of performance is a requirement for application for, and a condition of, all SCSEP grants. Pub. L. 109-365 § 513(a)(3). The Department considered an additional indicator, SCSEP Placement. The SCSEP Placement indicator has tracked how many exiting participants were employed for 30 days within the first 90 days after program exit. Several stakeholders, however, argued against the need for doing so. Some expressed the view that the SCSEP has too many measures already and that the SCSEP should be evaluated on only the common measures, as is the case with other Department programs. Other commenters focused on the notion that the common measure “entered employment” indicator is sufficient to track placement and that the SCSEP placement rate is duplicative. The Department is persuaded that the potential benefit of tracking the SCSEP Placement measure does not outweigh the added burden on grantees. Accordingly, the SCSEP Placement indicator will no longer be required. Several commenters argued in favor of retaining the SCSEP Placement indicator. Any grantee is welcome to continue its use, as grantees may use additional performance measures that assist them in managing their SCSEP project. We received some comments suggesting that the Department adopt various other additional indicators, such as a measure to record recruitment; and measures related to the unique aspects of SCSEP ( *i.e.* , community service and service to a specific population). Other respondents urged us not to adopt any more indicators. Although the statute allows the Department to establish “[a]ny other indicators of performance that the Secretary determines to be appropriate to evaluate services and performance” we choose not to establish any further indicators at this time. Again, this course was chosen because any potential benefits of additional reporting do not outweigh the costs of that reporting. How are the performance indicators defined? (§ 641.710) Core Indicators 1. *Hours (in the aggregate) of community service employment.* Hours (in the aggregate) of community service employment compares the total number of hours of community service provided by each SCSEP grantee to the number of community service hours funded by the grant. Current practice is for SCSEP grantees to report the number of hours of community service; that is, the number of hours that participants worked at host agencies. In order to provide a meaningful way to assess and compare performance, however, it is necessary to transform the number of hours into a community service participation rate. The Department began computing such a rate during Program Year 2006. To calculate the rate, the Department takes the number of community service hours as reported by each grantee and divides that number by the total community service hours funded for the grantee, adjusted for minimum wage differences among the States and areas. The Department received a variety of comments on this indicator. A number of these comments expressed support for this performance indicator because it relates to the community service goal of the SCSEP, and because community service employment assignments are a unique and vital aspect of the SCSEP that is valuable to participants as well as to communities. Several commenters encouraged the Department in its new practice of transforming the raw data provided by grantees into a rate that can be the subject of a performance goal. A few respondents suggested definitions for this indicator; these comments included recommendations that the performance measure for hours of community service employment be determined by

(1)comparing the number of community service hours provided to the potential number of community service hours based on the average current participants; and

(2)dividing the actual number of community service hours completed by the potential number of community service hours that could be completed (Enrollee Wages and Fringe Benefits divided by the hourly community service cost). Finally, a commenter also suggested that participant training for computer skills and soft skills be counted as community service hours because of the importance of developing such skills in today's workforce. Soft skills are short-term pre-vocational services, including development of learning skills, communication skills, interviewing skills, punctuality, personal maintenance skills and professional conduct, to prepare individuals for unsubsidized employment. At this time, the Department has decided not to change to the way this indicator is currently calculated. While a few commenters suggested slight revisions to the current definition, the Department declines to adopt those suggestions at present. Though we acknowledge that computer and soft skills are important for many jobs in current employment market, the 2006 OAA Amendments define community service employment to mean part-time, temporary employment (the full definition is included in the definitions section of these regulations, § 641.140). Furthermore, we concur with those commenters that find value in data quantifying the hours worked by SCSEP participants in service to their communities. Accordingly, grantees will continue to report the raw number of hours of community service as they have in the past. The Department clarifies, however, that hours of paid participation in non-host agency training such as classroom training and on-the-job experience, are excluded from the hours of community service reported by grantees. Hours spent on such paid training are also excluded from the total number of community service hours funded (the denominator when the Department calculates the rate); excluding non-host agency paid training from both figures avoids penalizing grantees that provide such training to their participants. 2. *Entry into unsubsidized employment.* The 2000 OAA Amendments defined placement into unsubsidized employment so that it measured how many exited participants had obtained paid employment for 30 days within the 90-day period following their program exit. Pub. L. 106-501 § 513(c)(2)(A). The 2006 OAA Amendments eliminate that statutory definition, and instead require the Department to define each of the indicators by regulation after consultation with stakeholders. To more fully align the SCSEP with the indicators required of other federally-funded employment and training programs, the Department has decided to define this core indicator in the same manner as the common measures entered employment indicator. We note that while we did not receive many comments on this indicator, the input we did receive generally favored adoption of the common measures and alignment with WIA. TEGL 17-05, which explains ETA's common measures policy, describes entered employment as, “[o]f those who are not employed at the date of participation: the number of participants who are employed in the first quarter after the exit quarter divided by the number of adult participants who exit during the quarter.” Grantees have been reporting on this indicator already, and there will not be any change in their reporting at this time. 3. *Retention in unsubsidized employment for six months.* As with entry into unsubsidized employment, the 2006 OAA Amendments eliminated the 2000 OAA Amendments' definition of six-month retention, and charged the Department with defining the indicators by regulation. The Department has decided to define retention in unsubsidized employment for six months in the same manner as the common measures employment retention measure; this approach is generally consistent with the few comments we received on this indicator. Using this definition will decrease the burden on grantees, as the Department previously required grantees to report on both the former statutory six-month indicator (measured 180 days after program exit) as well as the common measures employment retention measure. Grantees will no longer be required to conduct a follow-up 180 days after placement, as they have been doing to comply with the previous statutory retention indicator. TEGL 17-05 describes the common measures employment retention indicator as, “[o]f those who are employed in the first quarter after the exit quarter: The number of adult participants who are employed in *both* the second and third quarters after the exit quarter *divided* by the number of adult participants who exit during the quarter.” Again, grantees have already been reporting on this indicator, and there will be no change to their reporting at this time. 4. *Earnings.* When SCSEP regulations were last published in April 2004, the earnings common measure compared the difference in earnings pre- versus post-program participation. The Department subsequently revised its earnings measure in TEGL 17-05 in response to concerns that focusing on the change in earnings provided a disincentive to serving people with previous work experience, especially those with higher pre-program wages, and that in practice the measure was more likely to indicate participants' previous earnings history than a measure of program effectiveness. With the revision, the focus of the earnings measure shifted to post-program earnings. The Department implemented a new methodology for reporting the earnings measure, which looks at wages over a six month period following program exit (average earnings). SCSEP grantees have been reporting on the average earnings common measure for participants who entered the program on or after July 1, 2005, since the first quarter of Program Year 2006 and there will be no change to their reporting at this time. The Department received a small number of comments on the earnings measure. Some commenters recommended eliminating this measure; however, the 2006 OAA Amendments require an earnings measure so the Department does not have the discretion to eliminate it. We also received a comment encouraging the Department to calculate earnings based on wages earned at any time during a quarter (rather than a specific date), and a suggestion that earnings increase should be measured from entry in the program to the earnings at six months. In order to align with similar, federally-funded employment and training programs, the Department has determined that earnings will be defined in the same manner as the average earnings common measure. TEGL 17-05 describes average earnings as, “[o]f those adult participants who are employed in the first, second *and* third quarters after the exit quarter: The total earnings in the second quarter *plus* total earnings in the third quarter after the exit quarter *divided* by the number of adult participants who exit during the quarter.” It is important to note that this measure looks only at those individuals who are included in the retention measure, so the earnings are a reflection of what participants who are still working are earning. Previous earnings measures counted program exiters who were not still employed, which had the effect of lowering the outcomes and distorted the outcomes of the measure. By including those who were not employed in the earnings measure, it was difficult to determine how much those who were employed were actually earning. A few respondents encouraged the Department to facilitate grantee access to unemployment insurance wage records, which would make it much easier to capture entered employment, retention, and earnings data. The Department is always interested in improving data collection methods, and we will continue to explore the possibility of access to unemployment insurance wage records as an option for future implementation. 5. *Number of eligible individuals served.* The 2006 OAA Amendments list “the number of eligible individuals served, including the number of participating individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518” as the fifth and final core indicator. As discussed above, the Department has decided it will continue its current practice of dividing this indicator into two measures to clearly track relevant program data and for ease of reporting. The first portion of this indicator, the number of eligible individuals served (also referred to as the service level) has been reported by SCSEP grantees for years, and there is no change in the reporting requirements as a result of the 2006 OAA Amendments. The number of eligible individuals served performance measure will continue to be calculated by comparing the total number of participants served to a grantee's authorized number of positions, adjusted for the differences in minimum wage among the States and other areas. 6. *Most-in-need.* The second portion of the statutory fifth and final core indicator, “the number of participating individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518” establishes the most-in-need indicator. The Department received numerous comments concerning the most-in-need indicator. In addition to providing feedback on the question of whether to divide the fifth indicator into two measures, several respondents discussed the list of characteristics of those to whom a priority of service will be given. The statutory priority list contributes to the most-in-need list. However, to the extent that these comments focused on priority requirements, we have not incorporated the comments into this Interim Final Rule because the scope of this rule is limited to the performance measurement system. Non-performance measure changes to the SCSEP required by the 2006 OAA Amendments, such as the new priority characteristics, will be addressed in a forthcoming Notice of Proposed Rulemaking. Subsection (a)(3)(B)(ii) of section 518 lists the factors relevant to requesting a waiver to the new 48-month limit on program participation. It states that a grantee may request an increased period of participation for individuals who have a severe disability; are frail or are age 75 or older; meet the eligibility requirements related to age for, but do not receive, benefits under Title II of the Social Security Act (42 U.S.C. 401 *et seq.* ); live in an area with persistent unemployment and are individuals with severely limited employment prospects; or have limited English proficiency or low literacy skills. Subsection (b)(2) of section 518 lists characteristics (other than age) of individuals who have priority for SCSEP services. Priority is to be given to individuals who: Have a disability; have limited English proficiency or low literacy skills; reside in a rural area; are veterans; have low employment prospects; have failed to find employment after utilizing services provided under title I of WIA; or are homeless or at risk for homelessness. The statute is written in such a way that a participant with any one characteristic from either the waiver list or the priority list will be included in the most-in-need performance measure. For ease of administration, the Department has consolidated these two lists into one list of most-in-need characteristics. Some characteristics, for example, low literacy skills, are listed in both subsection (a)(3)(B)(ii) and subsection (b)(2) of section 518; such characteristics are only listed once in the most-in-need list. One statutory description of a characteristic actually contains two characteristics (“are frail or are age 75 or older,” Pub. L. 109-365 § 518 (a)(3)(B)(ii)(II)), and so those characteristics are listed separately here. Each of the thirteen characteristics on the most-in-need list will be given the same weight. Because some characteristics, such as poor employment prospects, are shared by most SCSEP participants, all or nearly all participants may qualify as most-in-need. To distinguish among the level of grantees' efforts to enroll participants with additional serious barriers to employment, and to make the most-in-need measure a more effective assessment of grantees' compliance with statutory priorities, grantees will report on each characteristic and the most-in-need measure will be an average of the total number of characteristics per participant served. For example, if a 70 year-old veteran with a severe disability who lives in a rural area enrolls in the SCSEP, that participant will be marked as possessing four of the most-in-need characteristics: Veteran, disability, severe disability, and rural resident. To restate, then, the Department will define most-in-need by counting the total number of the most-in-need characteristics for all participants and dividing by the number of participants served. Most-in-need is a core indicator and is, therefore, subject to goal-setting. However, the 2006 OAA Amendments significantly expanded the most-in-need list of characteristics. While the most-in-need list used to contain four characteristics (individuals over age 60 who have the greatest economic need, greatest social need, or poor employment history or prospects), the list now contains thirteen characteristics. Because there is not yet a body of performance data on the new characteristics, it is not possible to set rational goals for the first program year for this indicator. Accordingly, the Department will use Program Year 2007 as a baseline year so that grantees and the Department may collect sufficient data to set a meaningful goal for this measure for Program Year 2008. We intend that all grantees will be required to negotiate goals for and be held accountable to this measure in Program Year 2008. At the conclusion of Program Year 2007, the Department will be able to report on the average number of most-in-need characteristics per participant for each grantee, as well as the total number of participants exhibiting each characteristic. Additional Indicators 1. *Retention in unsubsidized employment for one year.* The 2006 OAA Amendments include retention in unsubsidized employment for one year as an additional indicator. This is a new indicator for the SCSEP. Many respondents commented on this measure. In terms of choosing the time at which to measure one-year retention: no one recommended measuring one-year retention during the 5th quarter after the exit quarter, a few commenters recommended the 365th day, and many commenters encouraged the Department to measure this indicator during the 4th quarter after the exit quarter. One commenter recommended measuring one-year retention during the fourth quarter but not later than the 365th day. Another commenter suggested this indicator be measured during the twelfth month after the date the unsubsidized employment began. Consistent with the majority of comments received on this question, the Department is defining this indicator to align with the WIA one-year retention performance measure. ETA defined the WIA one-year retention measure in its WIA Annual Report, General Reporting Instructions, Revised 2006, as, “[o]f those who are employed in the first quarter after the exit quarter: the number of participants who are employed in the fourth quarter after the exit quarter *divided* by the number of participants who exit during the quarter.” This measure looks only at those individuals who are included in the entered unsubsidized employment indicator. By examining whether participants are employed in the fourth quarter after the quarter of exit, grantees will be focused on whether participants who entered unsubsidized employment are still employed approximately one calendar year after exiting the SCSEP. For example, if a participant exits during the first quarter of the calendar year (between January 1 and March 31), the fourth quarter after the exit quarter will be the first quarter of the next calendar year (January 1 to March 31). Retention is measured at one year, only one quarter after measuring retention at six months, because the one-year retention measure has been determined by the Department to most accurately capture retention twelve months after program exit. The Department received many comments expressing the view that obtaining follow-up data one year after program exit will be a challenge. One commenter noted that while participants are generally grateful for the services provided through the SCSEP, participants sometimes feel “a sort of infringement” about providing follow-up information. One commenter noted that employers sometimes hesitate to release employment and wage information despite being provided with a release signed by the participant. One commenter noted that in her experience it is difficult to maintain participant contact more than six months after program exit; similarly, another commenter pointed out that securing follow-up information becomes more difficult the longer the participant has been exited from the SCSEP. Another commenter maintained that it may be difficult for participants who satisfy the new priority characteristics to remain employed for one year. One commenter argued that grantees should not be penalized if follow-up data is unobtainable; another contended that grantees should not be punished if a participant must exit the workforce due to failing health before one-year retention gets measured. Finally, one commenter suggested that the Department delay implementation of the one-year retention measure until the SCSEP gains access to Unemployment Insurance wage records. The Department recognizes that obtaining one-year retention data may prove to be a demanding task. However, the 2006 OAA Amendments require a one-year indicator, and the Department must follow the mandates of the statute. The Department remains available to provide technical assistance as grantees implement this new indicator. Indeed, it is our intention to share with grantees whatever information we can that will facilitate this data collection process. And, as stated with regard to the earnings measure, the Department has been exploring options for access to unemployment insurance wage records as an option for future implementation. Finally, note that we have no current intention of altering the exclusion policies relating to participants that must exit the program or the workforce due to extraordinary circumstances such as ill health. As listed in TEGL 17-05, the circumstances for excluding participants in the common measures calculations include institutionalization, health/medical issues for self or family, deceased, and called to active duty from the reserves. 2. *Satisfaction of the participants, employers, and their host agencies with their experiences and the services provided.* The 2006 OAA Amendments continue the customer satisfaction indicator. The Department envisions no change in this reporting requirement at this time. Grantees will continue to track three distinct measures of customer satisfaction: one measure for participant satisfaction, one measure for employer satisfaction, and one measure for host agency satisfaction. Customer satisfaction for all three groups will continue to be determined using an established methodology. The Department received a handful of comments on this performance measure. Several commenters recommended that the Department maintain the current system because the information received is valuable and the system appears to be working satisfactorily. A small number of commenters suggested that the Department entirely eliminate customer satisfaction surveys or at least not use them as a performance measure. Several commenters suggested that customer satisfaction surveys are either too costly to administer, do not add value to the program, or should be administered less frequently than every year. There was also a range of comments on related issues: A small number of commenters suggested that the Department not conduct the satisfaction surveys in Program Year 2006 because the recent national grant competition would lead to data that is not useful; some respondents offered suggestions on how to improve the survey instrument such as convening focus groups to refine survey questions, shortening the surveys, and adding more questions to the surveys; and one commenter suggested that the Department, rather than the grantees, conduct the surveys of employers. As stated with regard to the other statutorily-mandated performance measures, it is not within the scope of the Department's discretion to eliminate the customer satisfaction indicator, and the surveys will be administered during Program Year 2006. There are, however, plans for a pilot project in 2007 to test the feasibility of the Department conducting the employer surveys. The Department will take other commenters' suggestions under advisement. To summarize, the Department will now be collecting data on eight performance indicators, six of which are core indicators, subject to goal-setting: Core Indicators:

(1)Hours (in the aggregate) of community service employment;

(2)Entry into unsubsidized employment (common measure);

(3)Retention in unsubsidized employment for six months (common measure);

(4)Earnings (common measure);

(5)Number of eligible individuals served;

(6)The number of most-in-need individuals served/number of participating individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518 (second part of fifth statutory core indicator, treated here as separate indicator). Additional Indicators:

(1)Retention in unsubsidized employment for one year;

(2)Satisfaction of the participants, employers, and their host agencies with their experiences and the services provided. By using the SCSEP Performance and Results Quarterly Progress Report, or SPARQ, system, grantees only need to input the raw data, and the data management system will complete the performance measure calculations. Performance measure results may be viewed at virtually any time by producing a grantee or sub-grantee Quarterly Progress Report. Grantees are also provided with data quality reports which indicate the existence of any missing or impermissible data values. How will the Department and grantees initially determine and then adjust expected levels of performance for the core performance measures? (§ 641.720) The Department and SCSEP grantees have been reaching agreement on performance levels for several years and the Department does not envision any change at this time to the process for reaching agreement. The performance levels will continue to be agreed upon before the beginning of each Program Year. The Department will continue to initially propose a baseline performance level, taking into consideration such things as grantees' past performance, the need for continuous improvement, and the statutory adjustment factors described in § 641.720(b). A grantee may respond with data on either the statutory adjustment factors or other relevant dynamics to alter the proposed goals. At the conclusion of this process, the parties will form agreement on performance levels for the coming Program Year. A grantee may submit comments to the Department concerning the grantee's satisfaction with the negotiated levels; those comments will be made available for public review. Section 641.720(a)(5) implements another new provision in the 2006 OAA Amendments which concerns making public the agreed-upon performance levels. Once all agreements have been reached, the Department will make available for public review the final expected levels of performance for each grantee, including any comments submitted by any grantee about the grantee's satisfaction with the agreed-upon levels. The Department received a few comments about the process of reaching agreement on the expected levels of performance, and on the goals themselves. A small number of respondents expressed general support for the current process, and a small number of commenters suggested that in the goal-setting process more weight should be given to grantee input. There were also comments suggesting that the same performance goals be established for all national grantees or that the Department make public the specific criteria and rationale used to justify different goals for each grantee. The Department elects to retain its current process of reaching agreement on performance goals as this process already allows for significant grantee input, and is an objective, data-driven process. We will not set the same goals for all national grantees because that would not account for the varying performance levels among the grantees, nor would allow for reasonable levels of continuous improvement. In terms of the information available to grantees about the goals set for other grantees, we note that all grantees have access to all other grantees' performance outcomes, as well as the performance levels initially proposed by the Department and the final, negotiated goals. Further, the Department explains to each grantee the objective, data-driven process used in reaching agreement on the performance levels, and the same process is consistently employed with all grantees. Finally, we again note the new provision in the 2006 OAA Amendments that allows grantees to submit, and the Department to make public, comments concerning a grantee's satisfaction with the agreed-upon levels. The 2006 OAA Amendments create a graduated “floor” for the entry into unsubsidized employment indicator. That is, under the 2000 OAA Amendments, the entry into unsubsidized employment measure could not be less than 20 percent. The 2006 OAA Amendments require the following levels of entry into unsubsidized employment: 21 percent for Program Year 2007; 22 percent for Program Year 2008; 23 percent for Program Year 2009; 24 percent for Program Year 2010; and 25 percent for Program Year 2011. In the pursuit of continuous improvement, and based on the prior performance of the grantees, the Department has consistently established a performance level higher than the graduated floor set by statute for many grantees, and expects to continue to do so. The 2006 OAA Amendments continue the practice of allowing grantees to petition for an adjustment to the agreed-upon performance levels, in recognition of the reality that circumstances affecting program performance can change markedly over the course of a year. The list of statutory adjustment factors has changed. Section 513(a)(2)(D) of the 2006 OAA Amendments limits the new adjustment factors to: (i)(a) High rates of unemployment in the areas served by a grantee, relative to other areas of the State involved or Nation; or (i)(b) High rates of poverty in the areas served by a grantee, relative to other areas of the State involved or Nation; or (i)(c) High rates of participation in TANF (Temporary Assistance for Needy Families, a program of block grants to States established under part A of title IV of the Social Security Act (42 U.S.C. 601 *et seq.* )), in the areas served by a grantee, relative to other areas of the State involved or Nation;

(ii)Significant economic downturns in the areas served by the grantee or in the national economy;

(iii)Significant numbers or proportions of participants with one or more barriers to employment, including individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518 (most-in-need), served by a grantee relative to such numbers or proportions for grantees serving other areas of the State or Nation;

(iv)Changes in Federal, State, or local minimum wage requirements; and

(v)Limited economies of scale for the provision of community service employment and other authorized activities in the areas served by the grantee. In petitioning for an adjustment, grantees must support their case with data based on one or more of the factors from this list. Obtaining an adjustment to negotiated performance levels is a data-driven process. How will the Department assist grantees in the transition to the new core performance indicators? (§ 641.730) Section 513(d)(1) of the 2006 OAA Amendments calls for the Department, as soon as practicable after July 1, 2007, to determine whether grantees have, for Program Year 2006, met the performance levels set for the core indicators for Program Year 2007. The Department will also determine whether grantees have achieved the statutory percentages required for placement. If the Department determines that a grantee failed to achieve either the agreed-upon performance levels or the required placement percentages, the Department will provide technical assistance to assist that grantee to meet the agreed-upon performance levels and/or the applicable placement percentage during Program Year 2007. This technical assistance is for the purpose of assisting the grantees to be able to work successfully with the new performance measures and does not count as technical assistance provided under § 513(d)(2) or (3). Further, and as discussed in relation to the most-in-need measure, Program Year 2007 will be treated as a baseline year for the most-in-need indicator so that grantees and the Department may gather data on the expanded list of characteristics. Expected levels of performance will be set for Program Year 2008 for the most-in-need measure. How will the Department determine whether a grantee fails, meets, or exceeds the expected levels of performance for the core indicators and what will be the consequences of failing to meet expected levels of performance? (§ 641.740) The Department will annually evaluate the performance of each grantee with respect to the levels achieved for each of the core indicators of performance in comparison to the levels of performance set by agreement (including any adjustments). As required by the statute, the Department's evaluation will be published, and information on each grantee's performance on the core indicators will be made available for public review. Information on the annual performance of each grantee with respect to the additional performance indicators will also be published and made available for public review. According to the statute, the Department will report the results of the Department's annual evaluation to Congress. Sections 513(d)(2)(A) and 513(d)(3)(A) of the 2006 OAA Amendments require the Department to determine whether a grantee has met or failed to meet the agreed-upon levels of performance for the core indicators “not later than 120 days after the end of each program year.” In evaluating Program Year performance, and although we did receive comments urging various other approaches, the Department will continue to aggregate the core indicators to determine if, on the whole, a grantee met its performance objectives (including any adjustment made.) The aggregate is calculated by combining the percentage of goals achieved on each of the individual core indicators to obtain an average score. The Department received many comments concerning the evaluation of performance outcomes. Several commenters recommended staying with the methodology that is currently used, *i.e.* , requiring that grantees achieve at least 80 percent of the negotiated levels of performance for the aggregate of all the core indicators. Other commenters suggested that any grantee that meets or exceeds the negotiated ( *i.e.* , “expected”) levels of performance in the aggregate for a majority of the core indicators should be considered to have met the expected levels of performance. A small number of commenters suggested lowering the threshold for achievement of expected levels of performance in the aggregate for all core indicators to 65 percent. The Department has decided to continue to determine that a grantee has failed to meet its performance measures when it is does not meet 80 percent of the agreed-upon level of performance for the aggregate of all the core indicators. Performance in the range of 80 to 100 percent constitutes meeting the level for the core performance measures. Performance in excess of 100 percent constitutes exceeding the level for the core performance measures. The Department also received comments expressing concern about achieving the expected levels of performance given a service population distinguished by hard-to-serve characteristics. A small number of respondents recommended separate performance goals for separate population groups, one for those most-in-need and one for those not most-in-need. A few commenters suggested separate performance goals for priority populations and participants who did not have the priority characteristics. The Department chooses to continue the practice of setting unified expected levels of performance for the SCSEP population as a whole, rather than setting separate goals for separate populations. Performance goals currently covering all participants already account for those individuals with priority and/or most-in-need characteristics because performance goals are based in large part on each grantee's past performance, which includes the outcomes of the most-in-need and priority participants. These populations will continue to be accounted for in the same manner. If the Department determines that a State or national grantee fails to meet the expected levels of performance for the core indicators, the Department, after each year of such failure, will provide technical assistance to the failing grantee and will require the failing grantee to submit a corrective action plan not later than 160 days after the end of the Program Year. The corrective action plan must detail the steps the grantee will take to meet the expected levels of performance in the next Program Year. A national grantee that fails to meet the expected levels of performance for the core indicators for four consecutive years (beginning with Program Year 2007) will not be allowed to compete in the subsequent SCSEP grant competition following the fourth consecutive year of failure but may compete in the next grant competition after that subsequent competition. If the Department determines that a State grantee fails to meet the expected levels of performance for the core indicators for three consecutive years (beginning with Program Year 2007) the Department will require the State to compete the SCSEP funds awarded under section 506(e) of the OAA for the first full Program Year following the Department's determination. The grantee that is then awarded the SCSEP grant will administer the SCSEP in that State and will be subject to the same rules and responsibilities as the State grantee. We emphasize that the failure of a State grantee does not mean that the SCSEP would cease or lapse in a State; it merely means that a different entity would be chosen to administer the existing program. Indeed, the 2006 OAA Amendments require that grant applicants be evaluated, among other things, for their ability to minimize disruption in services for participants and in community services provided. Pub. L. 109-365 §§ 503(a)(6), 514(c)(9). A few commenters suggested that the same criteria for sanctions be applied to State and national grantees. Congress decided to apply corrective actions to national grantees who fail to achieve the expected levels of performance for four consecutive years, while State grantees are subject to corrective action if they fail to achieve their performance goals for three consecutive years and the Department must implement the statute as written. Finally, under the 2000 OAA Amendments, each national grantee in a State was required to meet the goals agreed upon for the State as well as that grantee's national performance goals. The 2006 OAA Amendments alter those requirements so that national grantees are now held accountable only for their national goals. Will there be performance-related incentives? (§ 641.750) Section 517(c)(1) of the 2006 OAA Amendments authorizes the Department to re-obligate recaptured funds for incentive grants and section 502(e)(2)(B)(iv) authorizes the Department to award incentives for exemplary performance. Section 641.750 of these regulations addresses performance-based incentives for grantees. Such incentives may take the form of financial or non-financial awards. The Department will issue guidance setting out the procedures and standards that will be used to award the incentives. The Department will exercise this authority at its discretion. Other Comments Received The Department received a variety of comments that have not been mentioned above. A summary of the input received on each subject was posted on the SCSEP Web site at *http://www.doleta.gov/seniors.* Some comments received suggested actions that contradict the 2006 OAA Amendments that we are implementing; the Department does not have the authority to act in contradiction to the statute. Several other comments exceeded the scope of this Interim Final Rule by discussing policies in the 2006 OAA Amendments that are not directly related to performance measures. A forthcoming Notice of Proposed Rulemaking

(NPRM)will address all non-performance measure changes to the SCSEP resulting from the 2006 OAA Amendments; the public will be invited to comment on the NPRM, and the Department will consider the out-of-scope comments submitted here when it considers the comments that are submitted in response to the NPRM. Other performance-related comments will be taken under advisement. III. Administrative Information Regulatory Flexibility Analysis, Executive Order 13272, Small Business Regulatory Enforcement Fairness Act The Regulatory Flexibility Act (RFA), 5 U.S.C. Chapter 6, requires the Department to evaluate the economic impact of this rule with regard to small entities. The RFA defines small entities to include small businesses, small organizations including not-for-profit organizations, and small governmental jurisdictions. The Department must determine whether the rule imposes a significant economic impact on a substantial number of such small entities. First, the Department has determined that this Interim Final Rule does not affect a substantial number of small entities. There are 74 SCSEP grantees; 50 of these are States and are not small entities as defined by the RFA. Six grantees are governmental jurisdictions other than States (four grantees are territories such as Guam, one grantee is Washington, DC, and another grantee is Puerto Rico). Governmental jurisdictions must have a population of less than 50,000 to qualify as a small entity for RFA purposes and the population of these six SCSEP grantees each exceeds 50,000. The remaining 18 grantees are non-profit organizations, which includes some large national non-profit organizations. Eighteen is simply not a substantial number; in fact, it is a minute number compared to the total number of non-profits in the country, which has been estimated to be over one million. The Department has also determined that the economic impact of this Interim Final Rule is not significant because the additional burden imposed by the new performance measurement system will not impose any considerable costs on grantees. In addition, all costs are covered by the SCSEP program money provided to grantees. Two performance measures that had been statutorily required in the 2000 OAA Amendments are now being dropped: the indicator known as “SCSEP placement,” which determined that an unsubsidized placement had been accomplished if a participant worked 30 days within the first 90 days after program exit, and the retention indicator which examined whether the participant was still employed 180 days after program exit. Based on our program experience, we estimate that it takes approximately fifteen minutes for program staff to capture each of those indicators. Accordingly, grantees will see a cost savings equivalent to 30 minutes of program staff time per placement. Conversely, two changes required by the 2006 OAA Amendments will necessitate additional expenditures by grantees. First, there are changes in the list of which characteristics qualify a participant as most-in-need that will require nominal staff time to implement, mostly at the beginning of the first Program Year under this Interim Final Rule as grantee staff adjust to the new list. We note that the most-in-need indicator itself is not new and so grantee staff are already used to the process of capturing information on a list of characteristics. Accordingly, and based on our program expertise, we estimate that grantee staff will spend an average of one minute per participant adjusting to the new list of characteristics. Second, the addition of the one-year retention measure represents the most time-consuming change in the set of performance measures. Implementing this indicator requires grantee staff to conduct an additional follow-up with an employer to determine whether the participant is still employed. Given the considerable length of time that will elapse between program exit and this follow-up, grantee staff may have to initiate several contacts with an employer before the information sought can be gathered. The Department acknowledges the several comments received on this point in response to the notice published in the **Federal Register** . Accordingly, although we estimate that earlier follow-up contacts may each be successfully accomplished in fifteen minutes, based on our program expertise, we allow that the one-year retention follow-up will take an average of thirty minutes per placed participant. For each placement, then, we have estimated that grantees will see cost savings equivalent to thirty minutes of staff time and will be required to invest a new thirty minutes of staff time. These amounts cancel each other out. The effect of the changes to the most-in-need indicator end up being the net effect of the new performance measures: An additional amount equal to one minute of staff time per participant. Applying our program expertise we estimate that program staff persons perform work roughly equivalent to that performed by a grade 12, step 1 Federal employee. The base pay hourly rate for such an employee is $26.53. Adding one-third additional funds for fringe benefits, the total hourly rate for this employee becomes $35.28. One minute of such a person's time would cost $0.59. The smallest SCSEP national grant award goes to two organizations that each have the capacity to serve 205 participants. Multiplying 205 times fifty-nine cents equals $120.95. The smallest SCSEP national grants are over $1.1 million. The expenditure of roughly $121 is not significant in terms of a budget of over $1.1 million. We further note that the capacity to serve participants is always related to the award amount, so national grantees with different (higher) grant awards would not spend any greater a percentage of their funds on the implementation of these performance measures even though they would serve more participants. According to the above analysis, we therefore determine and certify that this Interim Final Rule does not impose a significant economic impact on a substantial number of small entities. The Department welcomes comments on this RFA certification. We note that this analysis is also applicable under Executive Order 13272; for those purposes as well we certify that this Interim Final Rule does not impose a significant economic impact on a substantial number of small entities. The Department has also determined that this rule is not a “major rule” for purposes of the Small Business Regulatory Enforcement Fairness Act (SBREFA), 5 U.S.C. Chapter 8. SBREFA requires agencies to take certain actions when a “major rule” is promulgated. SBREFA defines a “major rule” as one that will have an annual effect on the economy of $100,000,000 or more; that will result in a major increase in costs or prices for, among other things, State or local government agencies; or that will significantly and adversely effect the business climate. For the reasons already discussed, the Department estimates that the only additional costs to grantees implementing these SCSEP regulations will be $0.59 per participant. Accordingly, none of the definitions of “major rule” apply in this instance. Executive Order 12866 Executive Order 12866 requires that for each “significant regulatory action” proposed by the Department, the Department conduct an assessment of the proposed regulatory action and provide the Office of Management and Budget

(OMB)with the proposed regulation and the requisite assessment prior to publishing the regulation. A significant regulatory action is defined to include an action that will have an annual effect on the economy of $100 million or more, as well as an action that raises a novel legal or policy issue. The performance measures defined and implemented by this rule will not have an annual effect on the economy of $100 million or more, for the reasons outlined above, but do raise novel policy issues related to implementing the performance measures required by the 2006 OAA Amendments to the SCSEP. Accordingly, the OMB has reviewed this Interim Final Rule. Paperwork Reduction Act The purposes of the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 *et seq.* , include minimizing the paperwork burden on effected entities. The PRA requires certain actions before an agency can adopt or revise the collection of information, including publishing a summary of the collection of information and a brief description of the need for and proposed use of the information. The performance accountability system described in this Interim Final Rule requires grantees to continue to maintain electronic participant records that include the data needed for each performance indicator. Quarterly and annual reports on performance measures are generated using these electronic records. Grantees may use the SPARQ computer system developed by the Department for the SCSEP, or they may maintain their own computer database as long as they are able to electronically provide the necessary data for the quarterly and annual reports. These information gathering activities are required to implement the performance measurement system enacted in the 2006 OAA Amendments, and will promote program effectiveness by providing valuable data on program performance. The forms used until now by grantees to maintain and report performance measures data were approved by the OMB and assigned OMB control number 1205-0040. Revised forms that account for the changes in the performance measures described in this Interim Final Rule have been submitted as required by the PRA as modifications to existing forms, using the same control number. The Department estimates that the public reporting burden for this collection of information is an average of 8.4 minutes per response. Note that this estimate does not represent the total burden on grantees for all SCSEP paperwork, rather it is an estimate of the burden resulting just from the paperwork directly related to the performance measures. The Department invites comments on its Paperwork Reduction Analysis. Unfunded Mandates Reform Act For purposes of the Unfunded Mandates Reform Act of 1995, this rule does not include any Federal mandate that may result in increased expenditure by State, local, and tribal governments in the aggregate of more than $100 million, or increased expenditures by the private sector of more than $100 million. Executive Order 13132 The Department has reviewed this rule in accordance with Executive Order 13132 regarding federalism and has determined that it does not have “federalism implications.” The rule does not “have substantial direct effects on the 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.” This interim rule defines and implements performance measures for the SCSEP, and while States are SCSEP grantees, this rule merely makes changes to data collection processes that are ongoing. Requiring State grantees to implement these changes does not constitute a “substantial direct effect” on the States, nor will it alter the relationship or responsibilities between the Federal and State governments. Executive Order 13045 Executive Order 13045 concerns the protection of children from environmental health risks and safety risks. This rule defines and details the performance measures to be utilized by the SCSEP, a program for older Americans, and has no impact on safety or health risks to children. Executive Order 13175 Executive Order 13175 addresses the unique relationship between the Federal Government and Indian tribal governments. The order requires Federal agencies to take certain actions when regulations have “tribal implications.” Required actions include consulting with Tribal Governments prior to promulgating a regulation with tribal implications and preparing a tribal impact statement. The order defines regulations as having “tribal implications” when they have substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. The Department has reviewed this Interim Final Rule and concludes that it does not have tribal implications. While tribes are sub-grantees of national SCSEP grantees, this rule will not have a substantial direct effect on those tribes, because, as outlined in the Regulatory Flexibility section of the preamble, there are only small cost increases associated with implementing this regulation. This regulation does not affect the relationship between the Federal Government and the tribes, nor does it affect the distribution of power and responsibilities between the Federal Government and Tribal Governments. The Department notes that it did receive a submission from the National Indian Council on Aging (NICOA). However, the NICOA's comments did not raise concerns about the relationship between the Federal Government and Indian tribes or the distribution of power and responsibilities between the Federal Government and Indian tribes. Instead, the NICOA thoroughly responded to the issues outlined in the notice. Accordingly we conclude that this rule does not have tribal implications for the purposes of Executive Order 13175. Environmental Impact Assessment The Department has reviewed this rule in accordance with the requirements of the National Environmental Policy Act

(NEPA)of 1969 (42 U.S.C. 4321 *et seq.* ), the regulations of the Council on Environmental Quality (40 CFR part 1500), and the Department's NEPA procedures (29 CFR part 11). The rule will not have a significant impact on the quality of the human environment, and, thus, the Department has not prepared an environmental assessment or an environmental impact statement. Assessment of Federal Regulations and Policies on Families Section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 2681), requires the Department to assess the impact of this rule on family well-being. A rule that is determined to have a negative affect on families must be supported with an adequate rationale. The Department has assessed this rule and determines that it will not have a negative effect on families. Indeed, we believe the SCSEP strengthens families by providing job training and support services to low-income older Americans so that they can obtain fruitful employment and enjoy increased economic self-sufficiency. Privacy Act The Privacy Act of 1974, 5 U.S.C. 552a, provides safeguards to individuals concerning their personal information which the Government collects. The Act requires certain actions by an agency that collects information on individuals when that information contains personally identifying information such as Social Security Numbers or names. Because SCSEP participant records are maintained by Social Security Number, the Act applies here. A key concern is for the protection of participant Social Security Numbers. Grantees must collect the Social Security Number in order to properly pay participants for their community service work in host agencies. When participant files are sent to the Department for aggregation, the transmittal is protected by secure encryption. When participant files are retrieved within the Internet-based SCSEP data management system, or SPARQ, only the last four digits of the Social Security Number are displayed. Any information that is shared or made public is aggregated by grantee and does not reveal personal information on specific individuals. The Department works diligently to ensure the highest level of security whenever personally identifiable information is stored or transmitted. All contractors that have access to individually identifying information are required to provide assurances that they will respect and protect the confidentiality of the data. ETA's Office of Performance and Technology has been an active participant in the development and approval of data security measures—especially as they apply to SPARQ. In addition to the above, a Privacy Act Statement is provided to grantees for distribution to all program participants. The grantees were advised of the requirement in ETA's Older Worker Bulletin OWB-04-06. Participants receive this information when they meet with a case worker or intake counselor. When the programs are monitored, implementation of this item is included in the review. Executive Order 12630 This rule is not subject to Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights, because it does not involve implementation of a policy with takings implications. Executive Order 12988 This regulation has been drafted and reviewed in accordance with Executive Order 12988, Civil Justice Reform, and will not unduly burden the Federal court system. The regulation has been written so as to minimize litigation and provide a clear legal standard for affected conduct, and has been reviewed carefully to eliminate drafting errors and ambiguities. Executive Order 13211 This rule is not subject to Executive Order 13211, because it will not have a significant adverse effect on the supply, distribution, or use of energy. Plain Language The Department drafted this Interim Final Rule in plain language. Effective Date and Absence of Notice and Comment The Department has, for good cause, determined, in accordance with 5 U.S.C. 553(b)(3)(B), that in order to meet the 2006 OAA Amendments' requirements for implementation of the SCSEP performance accountability system it is impracticable and contrary to the public interest to promulgate these regulations through the normal notice and comment rulemaking process. In addition, for similar reasons, good cause exists for this rule to take effect immediately upon publication pursuant to 5 U.S.C. 553(d)(3). The 2006 OAA Amendments call for several specific changes to the existing performance accountability system, and require that DOL establish and implement the new SCSEP performance measures after consultation with stakeholders by July 1, 2007. Specifically, section 513(a)(1) states that “The Secretary shall establish and implement, after consultation with grantees, subgrantees and host agencies under this title, States, older individuals, area agencies on aging and other organizations serving older individuals, core measures of performance and additional indicators of performance for each grantee for projects and services carried out under this title.” Section 513(d)(4) calls for the Department to establish and implement the core measures and additional indicators of performance identified in the 2006 Amendments “not later than July 1, 2007.” Further, section 513(a)(2)(C) requires that “The Secretary and each grantee shall reach agreement on the expected levels of performance for each program year for each of the core indicators of performance * * *. Funds may not be awarded under the grant until such agreement is reached.” Finally, section 513(b)(3) states that “(t)he Secretary, after consultation with national and State grantees, representatives of business and labor organizations, and providers of services, shall, by regulation, issue definitions of the indicators of performance” described in OAA-2006. The tasks required to implement the performance accountability section are interconnected and the consequences of failing to achieve them by July 1 are contrary to the public interest. Without regulatory definitions, the Department will likely be unable to reach agreement with grantees on expected levels of performance. Without such agreements, grants may not be awarded. Failure to award grants on time may result in a gap in service during which needy seniors go without the assistance authorized by the Act. The Department has worked diligently to develop a strategy and achieve the tasks necessary to implement the performance accountability system by the July 1 deadline. For example, we have implemented an interagency group to oversee the strategy for implementation; consulted with stakeholders through a **Federal Register** notice seeking public input on the matters covered by this rule; and we published a Training and Employment Guidance Letter to inform grantees of the anticipated changes to the performance measures. The establishment of the regulatory definitions in this Interim Final Rule is critical to this strategy. In order to carry out this multi-pronged approach, it is not possible to develop and publish a Notice of Proposed Rulemaking followed by a Final Rule in the short period of time available. Therefore, in order to assure that the system is implemented by July 1 and to avoid harmful gaps in service, it is necessary and in the public interest to implement the regulations through an Interim Final Rule. We are committed to public input in the development of SCSEP regulations, including this Interim Final Rule. We provided an opportunity for input into the development of this regulation; we request and are committed to considering comments on this rule; and we will be implementing the remaining regulations to the SCSEP program through Notice and Comment Rulemaking. List of Subjects in 20 CFR Part 641 Aged, Employment, Government contracts, Grant programs—labor, Reporting and recordkeeping requirements. For the reasons discussed in the preamble, the Department of Labor amends 20 CFR part 641 as follows: PART 641—PROVISIONS GOVERNING THE SENIOR COMMUNITY SERVICE EMPLOYMENT PROGRAM 1. The authority citation for part 641 continues to read as follows: Authority: 42 U.S.C. 3056 *et seq.* 2. Amend § 641.140 to: a. Add in alphabetical order the definitions of “additional indicators,” “at risk for homelessness,” “community service employment,” “core indicators,” “frail,” “homeless,” “limited English proficiency,” “low employment prospects,” “low literacy skills,” “most-in-need,” “persistent unemployment,” “rural,” “severe disability,” “severely limited employment prospects,” and “veteran” as set forth below; b. Revise the definitions of “disability” and “national grantee;” to read as set forth below. § 641.140 What definitions apply to this part? *Additional indicators* mean retention in unsubsidized employment for one year; and satisfaction of participants, employers and their host agencies with their experiences and the services provided and any other indicators of performance that the Secretary determines to be appropriate to evaluate services and performance. (§ 513(b)(2) as amended by Pub. L. 109-365). *At risk for homelessness* means an individual is likely to become homeless and the individual lacks the resources and support networks needed to obtain housing. *Community service employment* means part-time, temporary employment paid with grant funds in projects in host agencies through which eligible individuals are engaged in community service and receive work experience and job skills that can lead to unsubsidized employment. (§ 518(a)(2) as amended by Pub. L. 109-365). *Core indicators* means hours (in the aggregate) of community service employment; entry into unsubsidized employment; retention in unsubsidized employment for six months; earnings; the number of eligible individuals served; and most-in-need (the number of individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518 of the OAA). (§ 513(b)(1) as amended by Pub. L. 109-365). *Disability* means a disability attributable to mental or physical impairment, or a combination of mental and physical impairments, that results in substantial functional limitations in one or more of the following areas of major life activity:

(1)Self-care;

(2)Receptive and expressive language;

(3)Learning;

(4)Mobility;

(5)Self-direction;

(6)Capacity for independent living;

(7)Economic self-sufficiency;

(8)Cognitive functioning; and

(9)Emotional adjustment. (42 U.S.C. 3002(13)). *Frail* means an individual 55 years of age or older who is determined to be functionally impaired because the individual— (1)(i) Is unable to perform at least two activities of daily living without substantial human assistance, including verbal reminding, physical cueing, or supervision; or

(ii)At the option of the State, is unable to perform at least three such activities without such assistance; or

(2)Due to a cognitive or other mental impairment, requires substantial supervision because the individual behaves in a manner that poses a serious health or safety hazard to the individual or to another individual. (42 U.S.C. 3002(22)). *Homeless* includes

(1)An individual who lacks a fixed, regular, and adequate nighttime residence; and

(2)An individual who has a primary nighttime residence that is:

(i)A supervised publicly or privately operated shelter designed to provide temporary living accommodations (including welfare hotels, congregate shelters, and transitional housing for the mentally ill);

(ii)An institution that provides a temporary residence for individuals intended to be institutionalized; or

(iii)A public or private place not designed for, or ordinarily used as, a regular sleeping accommodations for human beings. (42 U.S.C. 11302(a)). *Limited English proficiency* means individuals who do not speak English as their primary language and who have a limited ability to read, speak, write, or understand English. *Low employment prospects* means the likelihood that an individual will not obtain employment without the assistance of the SCSEP or another workforce development program. Persons with low employment prospects have a significant barrier to employment. Significant barriers to employment may include but are not limited to: Lacking a substantial employment history, basic skills, and/or English-language proficiency; lacking a high school diploma or the equivalent; having a disability; being homeless; or residing in socially and economically isolated rural or urban areas where employment opportunities are limited. *Low literacy skills* means the individual computes or solves problems, reads, writes, or speaks at or below the 8th grade level or is unable to compute or solve problems, read, write, or speak at a level necessary to function on the job, in the individual's family, or in society. *Most-in-need* means participants with one or more of the following characteristics: Have a severe disability; are frail; are age 75 or older; are age-eligible but not receiving benefits under title II of the Social Security Act; reside in an area with persistent unemployment and have severely limited employment prospects; have limited English proficiency; have low literacy skills; have a disability; reside in a rural area; are veterans; have low employment prospects; have failed to find employment after utilizing services provided under title I of the Workforce Investment Act of 1998 (29 U.S.C. 2801 *et seq.* ); or are homeless or at risk for homelessness. (Older Americans Act

(OAA)section 513(b)(1)(E) as amended by Pub. L. 109-365). *National grantee* means a public or non-profit private agency or organization, or Tribal organization, that receives a grant under title V of the OAA (42 U.S.C. 3056 *et seq.* ) to administer a SCSEP project. ( *See* OAA section 506(g)(5) as amended by Pub. L. 109-365). *Persistent unemployment* means that the annual average unemployment rate for a county or city is more than 20 percent higher than the national average for two out of the last three years. *Rural* means an area not designated as a metropolitan statistical area by the Census Bureau; segments within metropolitan counties identified by codes 4 through 10 in the Rural Urban Commuting Area

(RUCA)system; and RUCA codes 2 and 3 for census tracts that are larger than 400 square miles and have population density of less than 30 people per square mile. *Severe disability* means a severe, chronic disability attributable to mental or physical impairment, or a combination of mental and physical impairments, that—

(1)Is likely to continue indefinitely; and

(2)Results in substantial functional limitation in 3 or more of the following areas of major life activity:

(i)Self-care;

(ii)Receptive and expressive language;

(iii)Learning;

(iv)Mobility;

(v)Self-direction;

(vi)Capacity for independent living;

(vii)Economic self-sufficiency. (42 U.S.C. 3002(48)). *Severely limited employment prospects* means a substantially higher likelihood that an individual will not obtain employment without the assistance of the SCSEP or another workforce development program. Persons with severely limited employment prospects have more than one significant barrier to employment; significant barriers to employment may include but are not limited to: Lacking a substantial employment history, basic skills, and/or English-language proficiency; lacking a high school diploma or the equivalent; having a disability; being homeless; or residing in socially and economically isolated rural or urban areas where employment opportunities are limited. *Veteran* means an individual who is a “covered person” for purposes of the Jobs for Veterans Act, 38 U.S.C. 4215(a)(1). 3. Revise Subpart G to read as follows: Subpart G—Performance Accountability Sec. 641.700 What performance measures/indicators apply to SCSEP grantees? 641.710 How are the performance indicators defined? 641.720 How will the Department and grantees initially determine and then adjust expected levels of performance for the core performance measures? 641.730 How will the Department assist grantees in the transition to the new core performance indicators? 641.740 How will the Department determine whether a grantee fails, meets, or exceeds the expected levels of performance for the core indicators and what will be the consequences of failing to meet expected levels of performance? 641.750 Will there be performance-related incentives? § 641.700 What performance measures/indicators apply to SCSEP grantees?

(a)*Indicators of performance.* There are currently eight performance measures, of which six are core indicators and two are additional indicators. Core indicators (defined in § 641.710) are subject to goal-setting and corrective action (described in § 641.720); that is, performance level goals for each core indicator must be agreed upon between the Department and each grantee before the start of each program year, and if a grantee fails to meet the performance level goals for the core indicators, that grantee is subject to corrective action. Additional indicators (defined in § 641.710) are not subject to goal-setting and are, therefore, also not subject to corrective action.

(b)*Core Indicators.* Section 513(b)(1) as amended by Pub. L. 109-365 establishes the following core indicators of performance:

(1)Hours (in the aggregate) of community service employment;

(2)Entry into unsubsidized employment;

(3)Retention in unsubsidized employment for six months;

(4)Earnings;

(5)The number of eligible individuals served; and

(6)The number of most-in-need individuals served (the number of participating individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518).

(c)*Additional Indicators.* Section 513(b)(2) as amended by Pub. L. 109-365 establishes the following additional indicators of performance:

(1)Retention in unsubsidized employment for one year; and

(2)Satisfaction of the participants, employers, and their host agencies with their experiences and the services provided.

(3)Any other indicators of performance that the Secretary determines to be appropriate to evaluate services and performance.

(d)*Affected entities.* The core indicators of performance and additional indicators of performance are applicable to each grantee without regard to whether such grantee operates the program directly or through sub-contracts, sub-grants, or agreements with other entities. Grantees must assure that their sub-grantees and lower-tier sub-grantees are collecting and reporting program data.

(e)*Required evaluation and reporting.* An agreement to be evaluated on the core indicators of performance and to report information on the additional indicators of performance is a requirement for application for, and is a condition of, all SCSEP grants. § 641.710 How are the performance indicators defined?

(a)The core indicators are defined as follows:

(1)“Hours of community service employment” is defined as the total number of hours of community service provided by SCSEP participants divided by the number of hours of community service funded by the grantee's grant, after adjusting for differences in minimum wage among the States and areas. Paid training hours are excluded from this measure.

(2)“Entry into unsubsidized employment” is defined by the formula: Of those who are not employed at the date of participation: The number of participants who are employed in the first quarter after the exit quarter divided by the number of adult participants who exit during the quarter.

(3)“Retention in unsubsidized employment for six months” is defined by the formula: Of those who are employed in the first quarter after the exit quarter: The number of adult participants who are employed in both the second and third quarters after the exit quarter *divided* by the number of adult participants who exit during the quarter.

(4)“Earnings” is defined by the formula: Of those participants who are employed in the first, second and third quarters after the exit quarter: Total earnings in the second quarter plus total earnings in the third quarter after the exit quarter divided by the number of participants who exit during the quarter.

(5)“The number of eligible individuals served” is defined as the total number of participants served divided by a grantee's authorized number of positions, after adjusting for differences in minimum wage among the States and areas.

(6)“Most-in-need” or “the number of participating individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518” is defined by counting the total number of the following characteristics for all participants and dividing by the number of participants served. Participants are characterized as most-in-need if they:

(i)Have a severe disability;

(ii)Are frail;

(iii)Are age 75 or older;

(iv)Meet the eligibility requirements related to age for, but do not receive, benefits under Title II of the Social Security Act (42 U.S.C. 401 *et seq.* );

(v)Live in an area with persistent unemployment and are individuals with severely limited employment prospects;

(vi)Have limited English proficiency;

(vii)Have low literacy skills;

(viii)Have a disability;

(ix)Reside in a rural area;

(x)Are veterans;

(xi)Have low employment prospects;

(xii)Have failed to find employment after utilizing services provided under title I of the Workforce Investment Act of 1998 (29 U.S.C. 2801 *et seq.* ); or

(xiii)Are homeless or at risk for homelessness.

(b)The additional indicators are defined as follows:

(1)“Retention in unsubsidized employment for 1 year” is defined by the formula: of those who are employed in the first quarter after the exit quarter: The number of participants who are employed in the fourth quarter after the exit quarter divided by the number of participants who exit during the quarter.

(2)“Satisfaction of the participants, employers, and their host agencies with their experiences and the services provided” is defined as the results of customer satisfaction surveys administered to each of these three customer groups. The Department will prescribe the content of the surveys. § 641.720 How will the Department and grantees initially determine and then adjust expected levels of performance for the core performance measures?

(a)*Initial agreement.* Before the beginning of each Program Year, the Department and each grantee will undertake to agree upon expected levels of performance for each core indicator, except as provided in paragraph

(b)of § 641.730.

(1)As a first step in this process, the Department proposes a baseline performance level for each core indicator, taking into account any statutory performance requirements, the need to promote continuous improvement in the program overall and in each grantee, the grantee's past performance, and the statutory adjustment factors articulated in paragraph

(b)of this section.

(2)A grantee may request a revision to the Department's initial performance level goal determination. The request must be based on data that supports the revision request. The data supplied by the grantee at this stage may concern the statutory adjustment factors articulated in paragraph

(b)of this section, but is not limited to those factors; it is permissible for a grantee to supply data on “other appropriate factors as determined by the Secretary.” Section 513(a)(2)(C) as amended by Pub. L. 109-365.

(3)The Department may revise the performance level goal in response to the data provided. The Department then sets the expected levels of performance for the core indicators. Grantee may agree to the expected level of performance and thereby receive the grant. At this point, agreement is reached by the parties and funds may be awarded. If a grantee does not agree with the offered expected level of performance, agreement is not reached and no funds may be awarded. A grantee may submit comments to the Department regarding the grantee's satisfaction with the expected levels of performance.

(4)Funds may not be awarded under the grant until such agreement is reached.

(5)At the conclusion of negotiations concerning the performance levels with all grantees, the Department will make available for public review the final negotiated expected levels of performance for each grantee, including any comments submitted by the grantee regarding the grantee's satisfaction with the negotiated levels.

(6)The minimum percentage for the expected level of performance for the entry into unsubsidized employment core indicator is:

(i)21 percent for Program Year 2007;

(ii)22 percent for Program Year 2008;

(iii)23 percent for Program Year 2009;

(iv)24 percent for Program Year 2010; and

(v)25 percent for Program Year 2011.

(b)*Adjustment during the Program Year.* After the Department and grantees reach agreement on the core indicator levels, those levels may only be revised in response to a request from a grantee based on data supporting one or more of the following statutory adjustment factors:

(1)High rates of unemployment or of poverty or of participation in the program of block grants to States for temporary assistance for needy families established under part A of title IV of the Social Security Act (42 U.S.C. 601 *et seq.* ), in the areas served by a grantee, relative to other areas of the State involved or Nation.

(2)Significant downturns in the areas served by the grantee or in the national economy.

(3)Significant numbers or proportions of participants with one or more barriers to employment, including individuals described in subsection (a)(3)(B)(ii) or (b)(2) of section 518 as amended by Pub. L. 109-365 (most-in-need), served by a grantee relative to such numbers or proportions for grantees serving other areas of the State or Nation.

(4)Changes in Federal, State, or local minimum wage requirements.

(5)Limited economies of scale for the provision of community service employment and other authorized activities in the areas served by the grantee. § 641.730 How will the Department assist grantees in the transition to the new core performance indicators?

(a)*General transition provision.* As soon as practicable after July 1, 2007, the Department will determine if an SCSEP grantee has, for Program Year 2006, met the expected levels of performance for the Program Year 2007. If the Department determines that the grantee failed to meet Program Year 2007 goals in Program Year 2006, the Department will provide technical assistance to help the grantee meet those expected levels of performance in Program Year 2007.

(b)*Exception for most-in-need for Program Year 2007.* Because the 2006 OAA Amendments expanded the list of most-in-need characteristics neither the Department nor the grantees have sufficient data to set a goal for measuring performance. Accordingly, Program Year 2007 will be treated as a baseline year for the most-in-need indicator so that the grantees and the Department may collect sufficient data to set a meaningful goal for this measure for Program Year 2008. § 641.740 How will the Department determine whether a grantee fails, meets, or exceeds the expected levels of performance for the core indicators and what will be the consequences of failing to meet expected levels of performance?

(a)*Aggregate Calculation of Performance.* Not later than 120 days after the end of each Program Year, the Department will determine if a national grantee has met the expected levels of performance (including any adjustments to such levels) by aggregating the grantee's core indicators. The aggregate is calculated by combining the percentage of goal achieved on each of the individual core indicators to obtain an average score. A grantee will fail to meet its performance measures when it is does not meet 80 percent of the agreed-upon level of performance for the aggregate of all the core indicators. Performance in the range of 80 to 100 percent constitutes meeting the level for the core performance measures. Performance in excess of 100 percent constitutes exceeding the level for the core performance measures.

(b)*Consequences* —(1) *National grantees.*

(i)If the Department determines that a national grantee fails to meet the expected levels of performance in a Program Year, the Department, after each year of such failure, will provide technical assistance and will require such grantee to submit a corrective action plan not later than 160 days after the end of the Program Year.

(ii)The corrective action plan must detail the steps the grantee will take to meet the expected levels of performance in the next Program Year.

(iii)Any national grantee that has failed to meet the expected levels of performance for 4 consecutive years (beginning with Program Year 2007) will not be allowed to compete in the subsequent grant competition, but may compete in the next grant competition after that subsequent competition.

(2)*State Grantees.*

(i)If the Department determines that a State fails to meet the expected levels of performance, the Department, after each year of such failure, will provide technical assistance and will require the State to submit a corrective action plan not later than 160 days after the end of the Program Year.

(ii)The corrective action plan must detail the steps the State will take to meet the expected levels of performance in the next Program Year.

(iii)If the Department determines that the State fails to meet the expected levels of performance for 3 consecutive Program Years (beginning with Program Year 2007), the Department will require the State to conduct a competition to award the funds allotted to the State under section 506(e) of the OAA for the first full Program Year following the Department's determination. The new grantee will be responsible for administering the SCSEP in the State and will be subject to the same requirements and responsibilities as had been the State grantee.

(c)*Evaluation.* The Department will annually evaluate, publish and make available for public review, information on the actual performance of each grantee with respect to the levels achieved for each of the core indicators of performance, compared to the expected levels of performance, and the actual performance of each grantee with respect to the levels achieved for each of the additional indicators of performance. The results of the Department's annual evaluation will be reported to Congress. § 641.750 Will there be performance-related incentives? The Department is authorized by sections 502(e)(2)(B)(iv) and 517(c)(1) as amended by Pub. L. 109-365 to use recaptured SCSEP funds to provide incentive awards. The Department will exercise this authority at its discretion. Signed at Washington, DC, this 25th day of June, 2007. Emily Stover DeRocco, Assistant Secretary for Employment and Training. [FR Doc. E7-12541 Filed 6-28-07; 8:45 am] BILLING CODE 4510-FN-P 72 125 Friday, June 29, 2007 Notices Part IV Department of Housing and Urban Development HOPE VI Main Street Grants; Notice DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT [Docket No. FR-5139-N-01] HOPE VI Main Street Grants AGENCY: Office of the Assistant Secretary for Public and Indian Housing, HUD. ACTION: Notice of funding availability. Overview Information A. *Federal Agency Name.* Department of Housing and Urban Development, Office of Public and Indian Housing. B. *Funding Opportunity Title.* HOPE VI Main Street Grants. C. *Announcement Type.* Initial announcement. D. *Funding Opportunity Number.* FR-5139-N-01; OMB approval number is 2577-0208. E. *Catalog of Federal Domestic Assistance

(CFDA)Number.* The CFDA number for this NOFA is 14.878, “Affordable Housing Development in Main Street Rejuvenation Projects.” F. *Dates.* 1. *Application Submission Date.* The application deadline date is August 29, 2007. Applications must be received and validated by Grants.gov no later than 11:59:59 p.m. on the application deadline date. Validation by Grants.gov may occur up to 72 hours after electronic receipt of the application. See the General Section for application submission and timely receipt requirements. 2. *Estimated Grant Award Date.* The estimated award date will be September 24, 2007. G. *Electronic Application Submission.* Applications for this NOFA must be submitted electronically through *http://www.grants.gov/applicants/apply_for_grants.jsp.* Registration or required annual re-registration to submit an application electronically may take more than a week because of the following:

(1)The applicant's requirement to register with the Central Contractor Registration (CCR),

(2)the cross-checking of applicant identification numbers between CCR and the Internal Revenue Service (IRS),

(3)applicant registration with the Grants.gov Web site, and

(4)the applicant's requirement to register the official who will be submitting the application. HUD's Early Registration Notice can be obtained through HUD's Web site at *http://www.hud.gov/grants/.* See “Other Submission Requirements” in Section IV.F of this NOFA and the General Section for detailed information about application submission. Full Text of Announcement I. Funding Opportunity Description A. *Available Funds.* This NOFA announces the availability of approximately $1.4 million in Fiscal Year

(FY)2006 funds and $1.1 million in FY 2007 funds, an approximate total funds availability of $2.5 million. B. *Purpose of the Program.* The purpose of the HOPE VI Main Street program is to provide grants to small communities to assist in the rejuvenation of an historic or traditional central business district or “Main Street” area by replacing unused commercial space in buildings with affordable housing units. 1. The objectives of the program are to: a. Redevelop Main Street areas; b. Preserve historic or traditional architecture or design features in Main Street areas; c. Enhance economic development efforts in Main Street areas; and d. Provide affordable housing in Main Street areas. C. *Statutory Authority.* 1. The program authority for the HOPE VI Main Street program is Section 24 of the United States Housing Act of 1937 (42 U.S.C. 1437v), as amended by Section 535 of the Quality Housing and Work Responsibility Act of 1998 (Pub. L. 105-276, 112 Stat. 2461, approved October 21, 1998), as amended; the HOPE VI Program Reauthorization and Small Community Mainstreet Rejuvenation and Housing Act of 2003 (Pub. L. 108-186, 117 Stat. 2685, approved December 16, 2003); and the Revised Continuing Appropriations Resolution, 2007 (Pub. L. 110-5, approved February 15, 2007). 2. The funding authority for the HOPE VI Main Street program is provided by the District of Columbia, and Independent Agencies Appropriations Act, 2006 (Pub. L. 109-115, approved November 30, 2005), under Revitalization of Severely Distressed Public Housing (HOPE VI) and the Revised Continuing Appropriations Resolution, 2007 (Pub. L. 110-5, approved February 15, 2007). 3. The HOPE VI Program Reauthorization and Small Community Mainstreet Rejuvenation and Housing Act of 2003 states that, of the amount appropriated for the overall HOPE VI program for any fiscal year, the Secretary shall provide up to 5 percent for use only for the Main Street initiative. The statute amended Section 24(n) of the Act, which now provides for grants to smaller communities, to provide assistance to carry out eligible affordable housing activities. D. *Definition of Terms.* 1. Affordable housing for this NOFA means rental or homeownership dwelling units that, for INITIAL occupants: a. Are made available to low-income families, with a subset of units made available to very low-income families; and b. Provide the same rules regarding occupant contribution toward rent or purchase, and basic terms of rental or purchase, as are provided to occupants of public housing units in a HOPE VI development. Rights and responsibilities vary among HOPE VI developments. HOPE VI public housing units use various mechanisms to set the resident portion of rent, resident job training or employment requirements, resident rights of return, and other occupancy issues. The Grantee, with HUD's approval, determines how to implement these initial resident safeguards. Strict application of public housing rules and regulations is not required; e.g., the use of HUD forms and record-keeping requirements for occupancy and income. Units developed, rehabilitated or reconfigured through this NOFA are NOT and statutorily MUST NOT BE public housing units. 2. Applicant Team (“Team”) means the group of entities that will develop the Main Street affordable housing project (“project”). The Team includes the unit of local government that submits the application and, where applicable, the procured developer, the procured property manager, architects (including architects who are knowledgeable about universal design and Section 504 accessible design requirements), construction contractors, attorneys, investment partners that comprise an owner entity, and other parties that may be involved in the development and management of the project. 3. Community and Supportive Services (“CSS”) means services provided to residents of the project that may include, but are not limited to: a. Homeownership counseling that is scheduled to begin promptly after grant award so that, to the maximum extent possible, qualified residents will be ready to purchase new homeownership units when they are completed; b. Educational life skills, job readiness and retention, employment training, and other activities as described on HUD's HOPE VI Web site at *http://www.hud.gov/offices/pih/programs/ph/hope6/css/;* and c. Coordination with fair housing groups to educate the Main Street affordable housing project's targeted population on its fair housing rights. 4. Firmly committed means that the amount of match or of Leverage resources and their dedication to HOPE VI Main Street activities, must be explicit, in writing, and signed by a person authorized to make the commitment. 5. General Section means the Notice of HUD's Fiscal Year

(FY)2007 Notice of Funding Availability (NOFA); Policy Requirements and General Section to the FY 2007 SuperNOFA for HUD's Discretionary Programs; Notice, Docket No. FR-5100-N-01, published in the **Federal Register** on January 18, 2007. The General Section can be obtained through HUD's Web site at *http://www.hud.gov/offices/adm/grants/fundsavail.cfm.* 6. Homeownership unit means a housing unit that a local government makes available through a grant from this NOFA for purchase by low-income families for use as their principal residence. 7. Initial occupancy period means the period of time that a rental unit is occupied by the initial low-income resident or the period of time that a homeownership unit is owned by the initial third-party, low-income purchaser. There is no set requirement for the length of this occupancy period. 8. Jurisdiction means the physical area under the supervision of a local government. 9. Leverage means non-HOPE VI-funded donations of cash and in-kind services that are firmly committed to the rejuvenation of the Main Street Area and are from non-HOPE VI sources. a. Leverage may include funds/in-kind services that are already expended, received but not expended, and firmly committed but not yet received. See the definition of “firmly committed” in Section 4., above. b. Types of resources that may be counted include:

(1)Private mortgage-secured loans, insured loans, and other debt;

(2)Housing trust funds;

(3)Net sales proceeds from a homeownership project that exceed the amount of HOPE VI funds used to develop the homeownership unit;

(4)Tax Increment Financing (TIF);

(5)Proceeds from Low-Income Housing Tax Credits (LIHTC), Historic Preservation Tax Credits, and Tax Exempt Bonds;

(6)Land Sale Proceeds. The value of land sale proceeds may be included as leverage only if this value is a sales proceed. Absent a sales transaction, the value of land will not be counted;

(7)Other Federal Funds. Other Federal sources may include non-public housing funds provided by HUD;

(8)In-Kind Services, including donations of:

(9)Staff time of either the local government applicant or the recognized developer entity;

(10)Property such as land (donations of land may be counted as leverage only if the donating entity owns the land to be donated), materials, supplies, a building, a lease on a building, and other infrastructure;

(11)Services such as Homeownership Counseling, other CSS and family self-sufficiency

(FSS)resources, and time and services contributed by volunteers.

(12)Leverage does NOT include, and HUD will not count, Wages projected to be paid to residents through jobs that are provided through Section 3, or by FSS/CSS partners. 10. Local government means any city, county/parish, town, township, parish, village, or other general purpose political subdivision of a State; Guam, the Northern Mariana Islands, the Virgin Islands, American Samoa, the District of Columbia, and the Trust Territory of the Pacific Islands, or a general purpose political subdivision thereof; or a combination of such political subdivisions that is recognized by the Secretary. 11. Low-income limits prescribed by HUD are stated on the internet at *http://www.huduser.org/datasets/il/il2007/select_Geography.odb.* Low-Income family means a family (resident) with an income equal to or less than 80 percent of median income for the local area, adjusted for family size, in accordance with Section 3(b)(2) of the United States Housing Act of 1937, as amended. HUD may establish a level higher or lower than 80 percent because of prevailing construction costs or unusually high or low family incomes in the area. Local area is defined as the nonmetropolitan county/parish or primary metropolitan statistical area/metropolitan statistical area (PMSA/MSA) or county/parish, as prescribed by HUD, in which the low-income family resides. 12. Main Street Area means an area determined and designated by the applicant that fulfills the requirements stated in “Program Requirements,” Section III.C of this NOFA, and: a. Is within the jurisdiction of the applicant; b. Has specific boundaries that are determined by the applicant; c. Is or was:

(1)Traditionally the central business district and center for socio-economic interaction;

(2)Characterized by a cohesive core of historic and/or older commercial and mixed-use buildings, often interspersed with civic, religious, and residential buildings, which represent the community's architectural heritage; d. Is the location of a downtown or “Main Street” rejuvenation effort that:

(1)Has as its purpose the revitalization or redevelopment of the historic or traditional commercial area;

(2)Involves investment, or other participation, by the applicant local government and private entities in the community in which the project is carried out; and

(3)Involves the development of affordable housing that is located in the commercial area. 13. Main Street affordable housing project (“project”) means the collection of affordable housing units that are developed in the Main Street Area using funds obtained through this NOFA, and meet the requirements as stated in “Program Requirements,” Section III.C of this NOFA. 14. Match is cash or in-kind donations that will be expended on allowable activities under the grant. The match must: a. Total at least 5 percent of the requested HOPE VI Main Street grant amount; and b. Be from government or private-sector sources other than HOPE VI funding, including Community Development Block Grant

(CDBG)funds, which by statute are considered local money. 15. Owner entity is the legal entity that holds title to the real property that contains any affordable housing units developed through this NOFA. 16. Person with disabilities means a person who: a. Has a condition defined as a disability in Section 223 of the Social Security Act; b. Has a developmental disability as defined in Section 102 of the Developmental Disabilities Assistance Bill of Rights Act; or c. Is determined to have a physical, mental, or emotional impairment that:

(1)Is expected to be of long-continued and indefinite duration;

(2)Substantially impedes his or her ability to live independently; and

(3)Is of such a nature that such ability could be improved by more suitable housing conditions. d. The term “person with disabilities” may include persons who have acquired immunodeficiency syndrome

(AIDS)or any conditions arising from the etiologic agent for AIDS. In addition, no individual shall be considered a person with disabilities, for purposes of eligibility for low-income housing, based solely on any drug or alcohol dependence. e. The definition provided above for persons with disabilities is the proper definition for determining program qualifications. However, the definition of a person with disabilities contained in Section 504 of the Rehabilitation Act of 1973 and its implementing regulations must be used for purposes of reasonable accommodations. 17. Program means the HOPE VI Main Street Program. 18. Recognized developer means the local government applicant or a legal entity that has an agreement with the local government applicant to seek financing for, rehabilitation and/or construction of housing units, and the provision of Community and Supportive Services (if required), for a HOPE VI Main Street grantee. a. For a non-complex development, the applicant may choose not to use a developer and instead directly procure a design/build construction contractor and accountant. 19. Site Control means the local government applicant, or its developer, has the legal authority to commit the owner of the property to the rehabilitation to be performed with HOPE VI Main Street grant funds. Some examples of site control are: a. The local government owns the property outright; b. The private owner of the property and the applicant have signed a developer agreement and the private owner is the developer; c. The government- or private-owner has signed a developer agreement with a separate developer and the agreement gives the developer site control; d. The applicant or developer has an option to purchase the property that covers a time period sufficient to obtain grant funds for purchase (at least 180 days after award), and is contingent only upon:

(1)Receipt of a grant from this NOFA; and

(2)satisfactory compliance with this NOFA's environmental review requirements; e. An owner-entity partnership was formed between the applicant, original owner, and, possibly, the developer and other interested parties. 20. Unit of local government: See “local government” under this section. 21. Very low-income family means a family (resident) with an income equal to or less than 50 percent of median income for the local area, adjusted for family size, in accordance with Section 3(b)(2) of the United States Housing Act of 1937, as amended. HUD may establish a level higher or lower than 50 percent because of prevailing construction costs or unusually high or low family incomes in the area. HUD-prescribed income limits are stated at *http://www.huduser.org/datasets/il/il2007/select_Geography.odb.* Local area is defined as the PMSA/MSA or nonmetropolitan county/parish, as prescribed by HUD, in which the low-income family resides. 22. General Section reference. The subsection entitled “Funding Opportunity Description” in Section I of the General Section is hereby incorporated by reference. II. Award Information A. *Available Funds.* A total of approximately $1.4 million appropriated for FY 2006 and $1.1 million appropriated for FY 2007, totaling approximately $2.5 million, is available for funding under this NOFA and must be obligated by September 30, 2007. B. *Number of Awards.* This NOFA will result in approximately 3 awards. C. *Range of Amounts of Each Award.* Each applicant may request up to $1,000,000. D. *Start Date, Period of Performance.* The term of the grants that result from this NOFA will start on the date that the grant award document is signed by HUD and will continue for 30 months thereafter. E. *Type of Instrument.* Grant Agreement. F. *Supplementation.* Grants resulting from this NOFA do not supplement other HOPE VI grants. III. Eligibility Information A. *Eligible Applicants.* Eligible applicants include, and are limited to, local governments, as defined in Section I.D of this NOFA and Section 102 of the Housing and Community Development Act of 1974 (42 U.S.C. 5302). The local government must: 1. Have a population of 50,000 or less; and 2. Not be served by a local government, county/parish, or regional or State public housing agency

(PHA)that administers more than 100 public housing units *within the local government's jurisdiction.* Such units exclude Section 8 Housing Voucher subsidized units and public housing units in Mixed-Finance developments where the public housing agency is not the General Partner in the for-profit ownership entity. B. Cost Sharing or match. 1. Match. HUD is required by the Quality Housing and Work Responsibility Act (42 U.S.C. 1437v(c)(1)(A)) to include the requirement for matching funds for all HOPE VI-related grants. Applicants must provide matching funds or in-kind services in the amount of 5 percent of the requested grant amount from sources other than HUD HOPE VI funds. Match sources may include other Federal sources, CDBG funds (which are statutorily considered local funds), any State or local government sources, any private contributions, the value of any donated material or building, the value of any lease on a building, the value of the time and services contributed by volunteers, and the value of any other in-kind services provided. MATCH FUNDS MUST BE USED ONLY FOR CARRYING OUT ELIGIBLE AFFORDABLE HOUSING ACTIVITIES THAT RELATE TO THE MAIN STREET AFFORDABLE HOUSING PROJECT PRESENTED IN THIS APPLICATION. The match may include funds that have already been spent or funds that are for future use. a. Match donations must be firmly committed to the Main Street affordable housing project presented in the application. See the definition of “firmly committed” in “Definitions,” Section I.D of this NOFA. b. The applicant may propose to use the applicant's own funds to meet the match requirement, provided that the match funds do not originate from HOPE VI funds. c. See Section IV.B of this NOFA for the requirements for documentation of match resources. C. *Other.* 1. Eligible Uses of Grant Funds. Main Street grant funds may be expended on the following activities: a. New construction, reconfiguration, or rehabilitation of affordable rental and homeownership housing located within the Main Street Area. New construction and rehabilitation activities that are intrinsic to the development of the affordable housing units may extend to other portions of the Main Street affordable housing project; *e.g.* , to the building envelope, to interior bearing walls of commercial space located below the affordable housing units, and to systems installation through commercial space located below or adjacent to the affordable housing units. b. Architectural and Engineering activities, surveys, permits, and other planning and implementation costs related to the construction and rehabilitation of the Main Street affordable housing project presented in the application. c. Tax credit syndication costs. d. Funding of moving expenses for low-income residents displaced as a result of construction or rehabilitation of the project, in accordance with the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970

(URA)and Handbook CPD 02-08, “Guidance on the Application of the Uniform Relocation Assurance and Real Property Acquisition Policies Act of 1970 (URA), as amended in HOPE VI Projects.” e. Management improvements necessary for the proper development and management of the Main Street affordable housing project presented in the application, similar to and including, but not limited to:

(1)Staff training (including travel) related to affordable housing development and management.

(2)Staff time and materials or contractor services to revise or develop:

(a)Procedure manuals;

(b)Accounting systems, excluding accounting services;

(c)Lease documents;

(d)Resident screening procedures; and

(e)Data processing systems. f. Leveraging non-HOPE VI funds and in-kind services. See the definition of “Leverage” in Section I.D of this NOFA. g. Community and Supportive Services. See Funding Restrictions in Section IV.E of this NOFA.

(1)Only 15 percent of the grant amount may be used for Community and Supportive Services. See “Funding Restrictions,” Section IV.E of this NOFA, for non-allowable costs and activities. 2. Thresholds. a. Match. Applicants must provide matching funds in the amount of 5 percent of the requested grant amount from sources other than HUD HOPE VI funds. See “Cost Sharing or match,” Section III.B of this NOFA.

(1)In order to demonstrate that the applicant meets this threshold, for each match resource, the application must include a letter stating the match amount and that the match is firmly committed to be used for activities related to the particular Main Street affordable housing project presented in the application. Each match resource must also be listed on page 12 of the “HOPE VI Main Street Application Data Sheet,” form HUD-52861, (under the Excel Worksheet Tab, “matching and Housing Resources”) which will be a part of the application. Columns on that page provide space to include the following required information for each source: Resource organization name, name and telephone number of a contact at the resource organization, the amount of the resource organization's contribution, and whether the contribution is in cash or in-kind services. All columns, except the last, “Leverage Period More than 2 Years,” must be filled in.

(2)If the applicant does not demonstrate that there will be matching funds of at least 5 percent of the requested grant amount, the application will not be eligible for funding through this NOFA. b. Main Street Area. The applicant must have within its jurisdiction a Main Street Area. See Section I.D of this NOFA for the definition of a Main Street Area.

(1)In order to demonstrate that the applicant meets this threshold, the application must contain the attachment “Map of the Main Street Area.” The attached map must clearly show the applicant-determined Main Street Area boundaries. Boundaries may be streets, rail lines, rivers, or other man-made or natural bounds. No other documentation is necessary.

(2)If the applicant's jurisdiction does not have a Main Street Area, the application will not be eligible for funding through this NOFA. c. Main Street Affordable Housing Project (“Project”). The targeted affordable housing project must conform to this NOFA's requirements for a Main Street affordable housing project, as defined in “Program Requirements,” Section III.C of this NOFA.

(1)By applying for a grant through this NOFA, the applicant certifies that the Main Street affordable housing project meets the Program Requirements. No other documentation is necessary to meet this threshold.

(2)If the targeted affordable housing project does not conform to this NOFA's requirements, the application will not be eligible for funding through this NOFA. d. One Main Street Area. Under this NOFA, the applicant must apply for assistance only in support of one Main Street Area. That is, if the local government's jurisdiction includes two neighborhoods, each with a traditional commercial/social center, the application must contain only one of those traditional commercial/social centers. However, the applicant's Main Street affordable housing project may consist of several scattered sites within that one Main Street Area. If the applicant applies for assistance for more than one Main Street Area through this NOFA, the application will not be eligible for funding through this NOFA. e. Code of Conduct.

(1)The applicant must have developed and must maintain a written code of conduct (see 24 CFR 84.42 and 85.36(b)(3)). The applicant must provide, or have provided, documentation that demonstrates that it has a written code of conduct.

(2)The applicant must submit a copy of its code of conduct as part of the application if its code of conduct is not already on file with HUD. See 24 CFR 84.42 and 85.36(b)(3).

(3)Unless the applicant is listed on HUD's Web site at *http://www.hud.gov/offices/adm/grants/codeofconduct/cconduct.cfm* and the information has not been revised, the applicant is required to submit:

(a)A copy of its code of conduct;

(b)A description of the methods it will use to ensure that all officers, employees, and agents of its organization are aware of its code of conduct; and

(c)The following information, as it is stated on the SF-424:

(i)Dun and Bradstreet Data Universal Numbering System

(DUNS)number;

(ii)Employer Identification Number (EIN);

(iii)Applicant's Legal Name (Note: Applicants must enter their legal name in box 8.a. of the SF-424 as it appears in the Central Contractor Register (CCR). See the General Section regarding CCR registration);

(iv)Address (Street, PO Box, City, State, and ZIP Code); and

(d)Authorized Official's information (Name, Title, Telephone Number, and E-mail Address).

(4)The code of conduct must prohibit real and apparent conflicts of interest that may arise among officers, employees, or agents; prohibit the solicitation and acceptance of gifts or gratuities by the organization's officers, employees, or agents for their personal benefit in excess of minimal value; and outline administrative and disciplinary actions available to remedy violations of such standards.

(5)See Section III.C of the General Section for more detailed information and instructions if the applicant needs to submit its code of conduct to HUD via facsimile.

(6)If the applicant does not provide a copy of the code of conduct, and its implementation methodology in its application, or is not listed by HUD as having already submitted such documentation, the application will not be eligible for funding through this NOFA. f. The following sub-sections of Section III of the General Section are hereby incorporated by reference. The applicant must comply with each of the incorporated threshold requirements in order to be eligible for funding, including:

(1)Ineligible Applicants;

(2)DUNS Number Requirement;

(3)Compliance with Fair Housing and Civil Rights Laws;

(4)Conducting Business In Accordance with Core Values and Ethical Standards;

(5)Delinquent Federal Debts;

(6)Pre-Award Accounting System Surveys;

(7)Name Check Review;

(8)False Statements;

(9)Prohibition Against Lobbying Activities; and

(10)Debarment and Suspension. 3. Certification of Certain Thresholds. a. Certification by Application. The SF-424, “Application for Federal Assistance,” is the cover sheet to the application. By manually or electronically signing the SF-424, the applicant certifies that the following thresholds have been met:

(1)The Main Street Area rejuvenation effort:

(a)Is carried out within the jurisdiction of the applicant;

(b)Involves the development of affordable housing that is located in the commercial area that is the subject of the rejuvenation effort; and

(c)Has as its purpose the revitalization or redevelopment of a historic or traditional commercial area.

(2)A portion of the Main Street affordable housing project units will be reserved for very low-income initial occupants.

(3)Historic preservation requirements in Section 106 of the National Historic Preservation Act of 1966

(NHPA)will be fulfilled, where applicable.

(4)Environmental requirements stated in the NOFA will be fulfilled.

(5)Building standards stated in the NOFA will be fulfilled.

(6)Relocation requirements under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970

(URA)will be fulfilled.

(7)Fair Housing, Civil Rights, and Section 3 requirements will be followed and fulfilled. 4. Program Requirements. a. Main Street Area Recognition by HUD. The applicant must have, within the applicant's jurisdiction, a HUD-recognized Main Street Area rejuvenation effort that involves affordable housing. In order to be recognized by HUD, a Main Street Area rejuvenation effort must:

(1)Be located within a definable Main Street Area (See Section I.D of this NOFA);

(2)Have as its purpose the rejuvenation or redevelopment of a historic or traditional commercial area;

(3)Involve investment or other participation by BOTH the local government and locally located private entities;

(4)Comply with historic preservation requirements as directed by the cognizant State Historic Preservation Officer

(SHPO)or, if such historic preservation requirements are not applicable, to preserve significant traditional, architectural, and design features in the project structures or Main Street Area; and

(5)Include the development of the Main Street affordable housing project that is proposed and described in the application for a grant under this NOFA. b. Main Street Affordable Housing Project (Project). The “Main Street affordable housing project” is the collection of affordable housing units that are rejuvenated or developed in the Main Street Area using funds obtained through this NOFA and related match funds. The project must:

(1)Involve the construction or rehabilitation of affordable housing units. The number of units that will be developed through this NOFA must at least equal the number of units stated in form HUD-52861, “HOPE VI Main Street Application Data Sheet,” on the “Unit Mix and Accessibility Summary, Post-Revitalization” page;

(2)Be located within the boundaries of the applicant's Main Street Area; and

(3)NOT replace demolished or otherwise disposed of public housing units. c. Program Schedule. The application requires a Program Schedule for the applicant's Project. The Program Schedule must reflect the Reasonable Time-Frame and Development Proposal time requirements stated in Section VI.B of this NOFA. d. Requirements During the Initial Occupancy Period.

(1)Initial residents of affordable rental units and initial resident purchasers of affordable homeownership units must be subject to the same rules regarding occupant contribution toward rental or purchase, and basic terms of rental or purchase, as residents of HOPE VI development public housing units. Site-based waiting lists, resident job or training requirements, and other occupancy requirements that are allowed under Section 24 of the U.S. Housing Act of 1937 (1937 Act) may be applied to the units.

(2)The project owner entity is not required to develop and maintain mandatory PHA documentation; *e.g.* , the PHA Plans as described in 24 CFR part 903, etc. However, before the project is initially rented, the ownership entity must determine, develop, and obtain HUD approval of a written statement of its rent determination and occupancy policies.

(3)Public housing, HUD HOME, or Low-Income Housing Tax Credit rental requirements are not mandatory under the Main Street program, but may be used as examples for such policies. Such examples are located at 24 CFR 903.7(d) and 24 CFR 903.7(f). If other government programs are used in connection with the applicant's Main Street grant activities, such requirements apply to the extent required by the other programs. e. Main Street Homeownership. The initial sale of an affordable homeownership unit to a third-party, low-income purchaser must take place in accordance with Section 24 of the 1937 Act. Providing homeownership counseling to residents is mandatory if the application includes development of homeownership units. f. Use Restrictions. PROJECT UNITS MUST BE MAINTAINED AS AFFORDABLE HOUSING ONLY FOR THE PERIOD OF INITIAL RENTAL OCCUPANCY OR THE INITIAL RESIDENT'S OWNERSHIP. The applicant may elect to apply use restrictions for a longer period, or in excess, of this requirement. g. Leveraging Other Resources.

(1)The Main Street Area rejuvenation effort must have community support from government and the private sector. Leverage, or the contribution of funds or in-kind services from sources other than a grant that results from this NOFA, demonstrates this support. See “Leverage” in “Definitions,” Section I.D of this NOFA. To measure the amount of support that the Main Street Area rejuvenation effort has, this NOFA includes a Leverage rating factor. See Rating Factor 3(c) in Section V.A.3 of this NOFA.

(2)Unlike grant and match funds from this NOFA, Leverage is not limited to the funding of affordable housing development. Leverage can include contributions that have been made to, or are firmly committed to, the Main Street Area rejuvenation effort as a whole. It can include past or future funding for other affordable housing, retail supportive services, jobs, and other economic development that is part of the Main Street Area rejuvenation effort. Other examples of uses for Leverage funds include, but are not limited to:

(a)The acquisition of existing housing units that will become affordable housing, but do not require rehabilitation, including associated costs, such as appraisals, surveys, tax settlements, broker fees, and other closing costs;

(b)Off-site site improvements that are contiguous to the site;

(c)Demolition;

(d)Restoration of the Main Street affordable housing project facade when facade rehabilitation is not an integral part of the project's rehabilitation;

(e)Rehabilitation of retail space in the Main Street affordable housing project, even if this rehabilitation is not an integral part of the rehabilitation of the rental areas of the project;

(f)Rehabilitation of retail space elsewhere in the Main Street Area;

(g)Funding of Reserves; *e.g.* , the Initial Operating Reserve necessary for financial viability during the initial affordable housing occupancy period, Replacement Reserves, etc.;

(h)Homeownership financial assistance, *e.g.* , write-down of homeownership unit development costs and downpayment assistance;

(i)Other uses that relate directly to the Main Street affordable housing project;

(j)Site improvements, *e.g.* , repaving streets or upgrading streets or sidewalks with brick or cobblestone, adding “boulevard” islands, etc.;

(k)Legal and administrative fees and costs; and

(l)Other uses that do not relate directly to the Main Street affordable housing project, but do relate to the Main Street Area rejuvenation effort. h. Transfer of Title for Tax Credits. The original owner entity of Main Street affordable housing project properties may transfer title to, or commit to a long-term lease with, an owner entity partnership that includes the original owner, the applicant, an equity partner and, when appropriate, other partners, for the purpose of obtaining Low-Income or Historic Tax Credit equity as a leverage resource. Such a transfer, excluding legal fees, is an allowable grant activity. See Section IV.E of this NOFA for limits on the sale of real property. i. Section 106 Historic Preservation Requirements. Grantees may not commit HUD funds until HUD has completed the historic preservation review and consultation process under Section 106 of the National Historic Preservation Act of 1966 (16 U.S.C. 470f) and its implementing regulation, 36 CFR part 800, as applicable, in accordance with environmental review requirements under 24 CFR part 50. See *http://www.achp.gov/* for details on the Section 106 review process. j. Environmental Requirements.

(1)HUD's notification of award to a selected applicant constitutes a preliminary approval by HUD, subject to HUD's completion of an environmental review of proposed sites in accordance with 24 CFR part 50. Selection for participation (preliminary approval) does not constitute approval of the proposed site(s).

(2)Your application constitutes a certification that you, the applicant, will supply HUD with all available, relevant information necessary for HUD to perform any environmental review required by 24 CFR part 50 for each property; will carry out mitigating measures required by HUD or, if mitigation is not feasible, select alternate eligible property; and will not acquire, rehabilitate, convert, demolish, lease, repair, or construct property, nor commit or expend HOPE VI, other HUD or other non-HUD funds, for these program activities with respect to any eligible property, until you receive written HUD approval of the property.

(3)Each proposal will be subject to a HUD environmental review, in accordance with 24 CFR part 50, and the proposal may be modified or the proposed sites rejected as a result of that review.

(4)Phase I and Phase II Environmental Site Assessments. If you are selected for funding, you must have a Phase I environmental site assessment completed in accordance with the ASTM Standards E 1527-05, as amended (see *http://www.astm.org* ). The results of the Phase I assessment must be included in the documents that must be provided to HUD for the environmental review. If the Phase I assessment recognizes environmental concerns or if the results are inconclusive, a Phase II environmental site assessment will be required.

(5)Mitigating and remedial measures. You must carry out any mitigating/remedial measures required by HUD. If a remediation plan, where required, is not approved by HUD and a fully funded contract with a qualified contractor licensed to perform the required type of remediation is not executed, HUD reserves the right to determine that the grant is in default.

(6)Your application constitutes a certification that there are not any environmental or public policy factors, such as sewer moratoriums, that would preclude development in the requested Main Street Area.

(7)Note that environmental requirements for this NOFA are found in 24 CFR part 50, which requires HUD environmental approval. Please note that 24 CFR part 58, which allows State and local governments to assume Federal environmental responsibilities, is not applicable.

(8)HUD's environmental Web site is located at *http://www.hud.gov/offices/cpd/environment/index.cfm.* k. Building Standards.

(1)Building Codes. All activities that include construction, rehabilitation, lead-based paint removal, and related activities must meet or exceed local building codes. The applicant is encouraged to read the policy statement and Final Report of the HUD Review of Model Building Codes that identify the variances between the design and construction requirements of the Fair Housing Act and several model building codes. That report can be found on the HUD Web site at *http://www.hud.gov/offices/fheo/disabilities/modelcodes/.*

(2)Deconstruction. HUD encourages the applicant to design programs that incorporate sustainable construction and demolition practices, such as the dismantling or “deconstruction” of housing units, recycling of demolition debris, and reusing of salvage materials in new construction. “A Guide to Deconstruction” can be found at *http://www.huduser.org/publications/destech/decon.html.*

(3)Partnership for Advancing Technology in Housing (PATH). HUD encourages the applicant to use PATH technologies in the construction and delivery of affordable housing. PATH is a voluntary initiative that seeks to accelerate the creation and widespread use of advanced technologies to improve radically the quality, durability, environmental performance, energy efficiency, and affordability of our nation's housing.

(a)The goal of PATH is to achieve dramatic improvement in the quality of U.S. housing by the year 2010. PATH encourages leaders from the home building, product manufacturing, insurance, and financial industries and representatives from Federal agencies dealing with housing issues to work together to spur housing design and construction innovations. PATH will provide technical support in design and cost analysis of advanced technologies to be incorporated in project construction.

(b)Applicants are encouraged to employ PATH technologies to exceed prevailing national building practices by:

(i)Reducing costs;

(ii)Improving durability;

(iii)Increasing energy efficiency;

(iv)Improving disaster resistance; and

(v)Reducing environmental impact.

(c)More information, including a list of technologies, the latest PATH Newsletter, results from field demonstrations, and descriptions of PATH projects can be found at *http://www.pathnet.org.*

(4)Energy Efficiency.

(a)New construction and rehabilitation must comply with the 2003 International Energy Conservation Code (IECC 2003), which incorporates American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) 90.1 2001 by reference for high-rise multifamily housing.

(i)IECC 2003 Administrative Guidance. IECC 2003 applies to all construction and rehabilitation of residential and commercial property. The standard contains exceptions that allow for its reasonable application to Main Street NOFA activities.

(A)IECC 2003 Section “101.2.2.3 Historic buildings. The provisions of this code * * * shall not be mandatory for existing buildings or structures specifically identified and classified as historically significant by the State or local jurisdiction, listed in The National Register of Historic Places, or which have been determined to be eligible for such listing.”

(B)IECC 2003 Section “101.2.3 Mixed occupancy. [For mixed-use buildings,] * * * each portion of the building shall conform to the requirements for the occupancy housed therein. Buildings [with more than two housing units] with a height of four or more stories above grade shall be considered commercial buildings * * * regardless of the number of floors that are classified as residential.” That is, if there is a store in the building, that part of the building is considered commercial. The rest of the building would incorporate low-rise residential requirements.

(C)IECC 2003 Section “101.2.2.2 Additions, alterations or repairs. Additions [and rehabilitation of a building or portion of a building] * * * shall conform to the provisions of this code * * * without requiring the unaltered portions(s) of the existing system to comply with all of the requirements of this code. Additions [or rehabilitation] shall not cause any one of the aforementioned and existing systems to become unsafe, hazardous or overloaded.”

(b)Where local or State energy-related building codes exceed the above standards, new construction and rehabilitation must comply with those local or State standards.

(c)The applicant must use new technologies that will conserve energy and decrease operating costs, where cost effective. Examples of such technologies include:

(i)Geothermal heating and cooling;

(ii)Placement of buildings and size of eaves that take advantage of the directions of the sun throughout the year;

(iii)Photovoltaics (technologies that convert light into electrical power);

(iv)Extra insulation;

(v)Smart windows;

(vi)Energy Star appliances; and

(vii)Combined heat and power (cogeneration).

(5)Universal Design. HUD encourages the applicant to incorporate the principles of universal design in the construction or rehabilitation of housing, retail establishments, and community facilities, and when communicating with community residents at public meetings or events. Universal Design is the design of products and environments to be usable by all people, to the greatest extent possible, without the need for adaptation or specialized design. The intent of Universal Design is to simplify life for everyone by making products, communications, and the built environment more usable by as many people as possible at little or no extra cost. Universal Design benefits people of all ages and abilities. Examples include designing wider doorways, installing levers instead of doorknobs, and putting bathtub/shower grab bars in all units. Computers and telephones can also be set up in ways that enable as many residents as possible to use them. The Department has a publication that contains a number of ideas about how the principles of Universal Design can benefit persons with disabilities. To order a copy of “Strategies for Providing Accessibility and Visitability for HOPE VI and Mixed Finance Homeownership,” go to the publications and resource page of the HOPE VI Web site at *http://www.huduser.org/publications/pubasst/strategies.html.*

(6)Energy Star. HUD has adopted a wide-ranging energy action plan for improving energy efficiency in all program areas. As a first step in implementing the energy plan, HUD, the Environmental Protection Agency (EPA), and the Department of Energy have signed a partnership to promote energy efficiency in HUD's affordable housing efforts and programs. The purpose of the Energy Star partnership is to promote energy efficiency of the affordable housing stock, but also to help protect the environment. Applicants constructing, rehabilitating, or maintaining housing or community facilities are encouraged to promote energy efficiency in design and operations. They are urged especially to build to Energy Star qualifications and to purchase and use Energy Star-labeled products. Applicants providing housing assistance or counseling services are encouraged to promote Energy Star building to homebuyers and renters. Program activities can include developing Energy Star promotional and informational materials, outreach to low- and moderate-income renters and buyers on the benefits and savings when using Energy Star products and appliances, and promoting the designation of community buildings and homes as Energy Star compliant. For further information about Energy Star, see *http://www.energystar.gov* or call

(888)STAR-YES ((888) 782-7937) or, for the hearing-impaired,

(888)588-9920 (TTY). l. Lead-Based Paint. The applicant must comply with lead-based paint evaluation and reduction requirements as provided for under the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821, *et seq.* ), the EPA's Pre-Renovation Education Rule (40 CFR 745, subpart E), HUD's Lead Safe Housing Rule (24 CFR 35, subparts B-R), and the Lead Disclosure Rule (24 CFR 35, subpart A), which addresses documents provided to pre-1978 housing owners regarding lead paint or hazard testing or lead hazard reduction activities, as they may be amended or revised from time to time. The applicant will be responsible for lead-based paint evaluation and reduction activities for housing constructed prior to 1978. The National Lead Information Hotline is

(800)424-5323. m. Labor Standards. Davis-Bacon wage rates do NOT apply to grants from this NOFA, with the following exceptions:

(1)If other Federal programs are used in connection with the applicant's HOPE VI Main Street activities, Davis-Bacon requirements apply to the extent required by the other Federal programs.

(2)If any grant funds from an award through this NOFA are expended by a PHA, acting as a developer, partnering with a developer, or as a partner in an ownership entity partnership, Davis-Bacon wage rates will apply to laborers and mechanics (other than volunteers under 24 CFR part 70) employed in development of all housing units, and HUD-determined wage rates will apply to laborers and mechanics (other than volunteers) employed in the operation of all housing units, regardless of whether such units are public housing or non-public housing. n. Relocation Requirements. The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1979 (42 U.S.C. 4601-4655), implementing regulations at 49 CFR part 24, and “Handbook CPD 02-08, Guidance on the Application of the Uniform Relocation Assurance and Real Property Acquisition Policies Act of 1970 (URA), as amended in HOPE VI Projects” apply to anyone who is displaced as a result of acquisition, rehabilitation, or demolition due to a HUD-assisted activity. o. Fair Housing and Equal Opportunity Requirements. Fair Housing and Equal Opportunity requirements stated in Section III.C of the General Section apply as referenced in this NOFA. In addition, the following requirement applies:

(1)Accessibility Requirements.

(a)All “multifamily” HOPE VI developments, defined as projects with more than five units, are subject to the accessibility requirements contained in several Federal laws, as implemented in 24 CFR part 8. PIH Notice 2003-31, available at *http://www.hud.gov/offices/pih/publications/notices/* and subsequent updates, provide an overview of all pertinent laws and implementing regulations pertaining to HOPE VI.

(b)Generally, for substantial rehabilitation of projects with more than 15 housing units, or new construction of a multifamily project, at least 5 percent of the units, or one unit, whichever is greater, must be accessible to persons with mobility impairments. An additional 2 percent, but not less than one unit, must be made accessible for persons with hearing or vision impairment. See, in particular, 24 CFR parts 8.20 through 8.32.

(c)In addition, under the Fair Housing Act, all new construction of covered multifamily buildings must contain certain features of accessible and adaptable design. The relevant accessibility requirements are provided on HUD's FHEO Web site at *http://www.hud.gov /groups/fairhousing.cfm.* Units covered are all those in elevator buildings with four or more units and all ground floor units in buildings without elevators. See also “program accessibility” at *http://www.hud.gov/offices/fheo/disabilities/sect504faq.cfm#anchor263905.* This section is in addition to, and does not replace, other non-HUD accessibility requirements to which the applicant local government may be subject. p. Procurement. City governments are required to follow the procurement regulations at 24 CFR 85.36. State and local procurement requirements apply to the extent required by those governments. 5. General Section References. The following subsections of Section III of the General Section are hereby incorporated by reference: a. Additional Nondiscrimination and Other Requirements;

(1)Civil Rights Laws, including the Americans with Disabilities Act of 1990 (42 U.S.C. 1201 *et seq.* );

(2)The Age Discrimination Act of 1974 (42 U.S.C. 6101 *et seq.* ); and

(3)Title IX of the Education Amendments Act of 1972 (20 U.S.C. 1681 *et seq.* ) b. Affirmatively Furthering Fair Housing; c. Economic Opportunities for Low- and Very Low-Income Persons (Section 3); d. Ensuring the Participation of Small Businesses, Small Disadvantaged Businesses, and Women-Owned Businesses; e. Relocation; f. Executive Order 13166, Improving Access to Services for Persons With Limited English Proficiency (LEP); g. Executive Order 13279, Equal Protection of the Laws for Faith-Based and Community Organizations; h. Accessible Technology; i. Procurement of Recovered Materials; j. Participation in HUD-Sponsored Program Evaluation; k. Executive Order 13202, Preservation of Open Competition and Government Neutrality Towards Government Contractors' Labor Relations on Federal and Federally Funded Construction Projects; l. Salary Limitation for Consultants; m. OMB Circulars and Government-wide Regulations Applicable to Financial Assistance Programs; n. Environmental Requirements; o. Conflict of Interest; p. Drug-Free Workplace; and q. Safeguarding Resident/Client Files. IV. Application and Submission Information A. *Addresses to Request Application Package.* This section describes how you may obtain application forms, additional information about the General Section of this NOFA, and technical assistance. 1. Copies of this published NOFA and related application forms may be downloaded from the Grants.gov Web site at *http://www.grants.gov/applicants/apply_for_grants.jsp* . If you have difficulty accessing the information, you may receive customer support from Grants.gov by calling the help line at

(800)518-GRANTS ((800) 518-4726) or by sending an e-mail to *support@grants.gov.* The operators will assist you in accessing the information. If you do not have Internet access and need to obtain a copy of this NOFA, you can contact HUD's NOFA Information Center toll-free at

(800)HUD-8929. Persons with hearing or speech impairments may call the Federal Information Relay Service at

(800)877-8339. 2. The published **Federal Register** document is the official document that HUD uses to evaluate applications. Therefore, if there is a discrepancy between any materials published by HUD in its **Federal Register** publications and other information provided in paper copy, electronic copy, or at *http://www.grants.gov,* the **Federal Register** publication prevails. Please be sure to review the application submission against the requirements in this NOFA. *B. Content and Form of Application Submission.* 1. Number of Applications Permitted. Each applicant may submit only one application. 2. Joint Applications. Joint applications are not permitted. However, the applicant may enter into subgrant agreements with procured developers, other partners, nonprofit organizations, State governments, or other local governments to perform the activities proposed under the application. 3. General Format and Length of Application. a. Applicant Name. The applicant's official name is the name that is submitted to Grants.gov on the form SF-424. (Note: Applicants must enter their legal name in box 8.a. of the SF-424 as it appears in the Central Contractor Register (CCR). See the General Section regarding CCR registration). b. Electronic Format.

(1)General.

(a)Sections of the application are as listed below.

(b)In accordance with the General Section, applications are to be submitted electronically via *http://www.grants.gov/applicants/apply_for_grants.jsp.* See the General Section for additional instructions.

(2)File Names.

(a)The name of each submission file should include the information below so that a HUD reviewer will be able to identify it as part of the application:

(i)Short version of applicant's name, *e.g.* , town, city, county/parish, etc., and State; and

(ii)The word “Narrative” or “Attachment,” as applicable, and the Section letter(s) (A through U) that are included in the file, as listed below.

(b)Examples of file names are “AtlantaGANarrative SectionD_ABC.doc” and “NewYorkNYAttachment SectionM_KL.pdf.” Do not include spaces in the file names. Replace spaces with underscore marks.

(3)Summary and Rating Factor Narrative Files.

(a)In the Application Package, the form SF-424, “Application for Federal Assistance,” should be completed first. Other Exhibits are part of the Application Instructions that you will download from Grants.gov, which are described in Sections IV.B.5 through 6 and in the “Rating Factors,” Section V.A of this NOFA. The following instructions apply to those Narrative Exhibits.

(b)Each narrative submission file must be formatted so it can be read by MS Word (version 9 or earlier).

(c)Each Narrative Exhibit, for each section of the application, should be contained in a separate file, as listed in Section IV.A.3.d of this NOFA, directly below.

(d)Narrative Exhibit Title Pages. HUD will use title pages to identify each section of the application. Each Narrative Exhibit file should contain one title page (the first page of the file. Do not create title pages separately from the documents they go with). Provided the information on the title page is limited to the list in section

(i)below, the title pages will not be counted when HUD determines the length of each Narrative Exhibit, or the overall length of the Narrative Exhibits.

(i)Each title page should contain only:

(A)The name of the Narrative Exhibit, as described in “File Names,” Section IV.B.3.b.(2), above, *e.g.* , “Narrative Exhibit B: Executive Summary”;

(B)The name of the applicant; and

(C)The name of the file that contains the Narrative Exhibit.

(4)Entering Narrative Files into the Application.

(a)Each narrative submission file must be formatted so it can be read by MS Word (version 9 or earlier).

(b)To be included in the application, each file must be entered into the Grants.gov “Project Narrative Attachment Form” located in the Mandatory Documents area of the “Grant Application Package.”

(i)After the form is open, enter your first file as the “Mandatory Project Narrative File.” Add subsequent files, if any, as “Optional Project Narrative Files” by clicking on “Attach” in the Attachments window.

(5)Attachment Files.

(a)In the Grants.gov Grant Application Package, certain form Attachments have been converted into documents for completion by the applicant on the screen. The applicant must simply fill these forms in and submit them. Other Attachments are part of Grants.gov Application Instructions and are defined in this Section IV of this NOFA. The following instructions apply to those Attachments.

(b)Each Attachment file must be formatted so it can be read by MS Word (.doc), MS Excel (.xls) or Adobe Acrobat (.pdf). See the General Section for format version specifications.

(c)Downloaded files, *e.g.* , forms HUD-52861 and HUD-52825A, should be submitted in their original format.

(d)Existing and third-party documents, *e.g.* , Main Street Plan, maps, and drawings, should be submitted in Adobe Acrobat (.pdf) format, or faxed using the HUD Facsimile Transmittal (HUD-96011) form.

(e)You must complete these Attachments in stand-alone computer applications, such as MS Excel. To include these downloaded Attachments in the application, you must enter each Attachment's file into the Grants.gov “Other Attachments Form,” which is located in the Mandatory Documents area of the Grant Application Package.

(i)After the form is open, enter your first file as the “Mandatory Other Attachment.” Add subsequent files, if any, as “Optional Other Attachments” by clicking on “Attach” in the Attachments window. c. Maximum Length of Application.

(1)There is no overall maximum application length. However, there are maximum page limits for specific parts of the application. Pages beyond the below listed limits will not be reviewed. Page limits are as follows:

(a)All of the Narrative Sections' responses together, including the Rating Factor responses, are limited to a maximum of 20 pages;

(b)The Program Schedule is limited to a maximum of one page;

(c)The Main Street Area Map, including identification of all project sites, is limited to a maximum of one page. The map may be hand-drawn, but must be approximately to scale and must be of sufficient quality to be legible at 11″ x 17″ printed size. Computer-Aided Design software is not necessary;

(d)The representative affordable housing unit layout is limited to a maximum of one page; and

(e)Applicant Team Resumes are limited to a maximum of five pages. More than one resume may be placed on each page.

(2)Page Definition and Layout.

(a)A page is the electronic equivalent of an 8 1/2 ″ x 11″ paper page, with one-inch top, bottom, left, and right margins.

(b)For .doc files, a “page” contains a maximum of 23 double-spaced lines. The length of each line is limited to 6 1/2 inches. The font must be 12-point Times New Roman. Each page must be numbered. The page numbers may be within the bottom one inch of the page, *e.g.* , in the footer area.

(c)Third-party and existing documents converted into PDF format may retain their original page layout. They must not be shrunk to fit more than one original page on each application page. To add page numbers to PDF files using Adobe Acrobat 6, click on Document; Add Headers & Footers; Footer; Align Right; and Insert Page Number. Page numbers may also be added manually.

(d)Pages of HUD forms and certification formats furnished by HUD must remain as numbered by HUD. These forms do not count toward any page limits. d. List of Application Sections and Related Documents.

(1)Summary Information:

(a)Section A: Application for Federal Assistance, form SF-424;

(b)Section B: Executive Summary;

(2)Rating Factor Responses:

(a)Section C: Rating Factor 1, Capacity, Narrative Response;

(b)Section D: Rating Factor 3, Readiness and Appropriateness of the Main Street affordable housing project, Narrative Response;

(c)Section E: Rating Factor 4, Program Administration and Fiscal Management, Narrative Response;

(d)Section F: Rating Factor 5, Incentive Criteria on Regulatory Barrier Removal (HUD Community Initiative (information required by form HUD-27300), Narrative Response;

(3)Attachments:

(a)Section G: Readiness Certifications and Documents;

(b)Section H: Program Schedule;

(c)Section I: HOPE VI Main Street Application Data Sheet, form HUD-52861;

(d)Section J: HOPE VI Budget, form HUD-52825A;

(e)Section K: 5-Year Cash Flow Proforma;

(f)Section L: Map of Main Street Area;

(g)Section M: Site Plan and Typical Unit Layout;

(h)Section N: HUD Community Initiative, form HUD-27300 (Narrative includes explanation and background);

(i)Section O: Certification of Consistency with the RC/EZ/EC-IIs Strategic Plan, form HUD-2990, if applicable;

(j)Section P: Program Outcome Logic Model, form HUD-96010 (including indicators, outcomes and related items obtained in accordance with Section VI.C of the General Section);

(k)Section Q: Code of Conduct (including distribution methodology);

(l)Section R: Applicant/Recipient Disclosure Report, form HUD-2880, (“HUD Applicant Recipient Disclosure Report” on Grants.gov) if applicable;

(m)Section S: Disclosure of Lobbying Activities, Standard Form LLL, if applicable;

(n)Section T: HUD-96011 Third Party Documentation Facsimile Transmittal (“Facsimile Transmittal Form” on Grants.gov) (to be used to transmit third-party documents as part of your electronic application, if applicable); and

(o)Section U: HUD-2994, You Are Our Client Grant Applicant Survey (optional) 4. Threshold Documentation. Threshold documentation requirements are limited to those stated in “Thresholds,” Section III.C.2, “Certification of Certain Thresholds,” Section III.C.3, of this NOFA, and *“Conducting Business in Accordance with Core Values and Ethical Standards,” in Section III.C of the General Section.* 5. Summary and Attachment Documentation. a. Executive Summary.

(1)Provide an Executive Summary. Describe your affordable housing plan. State whether:

(1)You have procured (or will procure) a developer,

(2)you will act as your own developer, or

(3)you will not use a developer because your housing project is not complex enough to warrant one. Briefly describe:

(a)The type of housing, *e.g.* , walk-up above retail space, detached house, etc.;

(b)The number of units and buildings;

(c)The description of the Main Street Area that surrounds the Main Street affordable housing project. Include income mix, basic features (such as restoration of streets), and a general description of mixed-use and non-housing Main Street rejuvenation components;

(d)The number of homeownership units in your proposal, if any;

(e)The amount of HOPE VI funds you are requesting. (See Section IV.E of this NOFA for funding limits); and

(f)A list of major non-HOPE VI funding resources for the Main Street affordable housing project and the Main Street Area rejuvenation effort as a whole. b. Readiness (Site Control, Zoning, and Developer/Construction Agreement). See “Rating Factor Documentation,” Section 6, below. c. Program Schedule. The application requires a Program Schedule for the applicant's Project. The Program Schedule must reflect the Reasonable Time-Frame and Development Proposal time requirements stated in Section VI.B of this NOFA. d. HOPE VI Main Street Application Data Sheet, form HUD-52861, in MS Excel format (.xls).

(1)This form consists of several Excel worksheets. Each worksheet requires information that is necessary for the applicant to meet thresholds, obtain rating points, or determine the maximum grant amount. Instructions for completing the data worksheets are located in the left-hand worksheet, with the tab name, “Instructions.” The worksheets should be completed from the left-most tab toward the right. In this way, the information that the applicant provides will automatically be inserted to the right into other worksheets, as needed.

(2)Unit Mix. This worksheet will be HUD's primary source of information on the Main Street affordable housing project's unit number and type. This information also feeds into the calculations for maximum grant amount.

(3)Construction Sources and Uses. This worksheet contains the planned costs and funding resources that will exist during the construction period. That is, if a construction loan will be obtained, it would be included here along with other financing that will be expended during the construction and rent-up period, including grant funds used in construction. A permanent mortgage would not be included here.

(4)Permanent Sources and Uses. This worksheet contains the planned costs and long-term financing that will be used to develop the Main Street affordable housing project. Tax credit equity, permanent mortgages, grant funds that will be used in construction, rent-up, developer fee, etc., would be included here.

(5)TDC (Total Development Cost).

(a)The maximum amount of the grant must be based on HUD's published TDC per unit developed. See HUD's Notice PIH-2006-22 (HA), “Public Housing Development Cost Limits.”

(b)HUD has developed TDCs for larger cities, metropolitan statistical areas and primary metropolitan statistical areas (MSA/PMSA), and some counties. HUD has not developed TDCs for all small, nonmetropolitan cities and towns. Therefore, the applicant may have to contact its closest HUD Field Office to find out of which county/parish or MSA/PMSA it is considered a part.

(6)Match. In order to meet HOPE VI's statutory 5 percent match threshold, the applicant must enter match resource information in this worksheet. If a resource is not listed in this worksheet, the amount will not be included in HUD's calculation of match, and the application may be barred from rating, ranking, and award. (Note that the applicant must also provide a commitment letter for each match resource. See “match,” Section III.B of this NOFA.)

(a)For each of the applicant's match resources, the applicant must include in this form:

(i)The name of the entity providing the resource;

(ii)The name of a contact for the entity providing the resource who is familiar with the contribution toward this application;

(iii)The telephone number of a contact for the resource who is familiar with the contribution toward this application;

(iv)The match amount;

(v)Whether the match amount is cash or in-kind services; and

(vi)A letter from the entity that is furnishing the match, including items

(i)through

(v)above and signed by an authorized individual, stating that the match is firmly committed.

(vii)All columns, except the last, “Leverage Period More than 2 Years,” must be completed.

(b)Match may only include resources to fund the Main Street affordable housing project. The applicant must enter all match resource information in this worksheet. If a resource is not listed in this worksheet, the amount will not be included in HUD's calculation of the match amount. (Note that the applicant must also provide a commitment letter for each match resource.)

(7)Leverage. Leverage is a HOPE VI program requirement of cash or in-kind services that have been firmly committed to the Main Street affordable housing project or the Main Street Area refurbishment.

(a)For each of the applicant's Leverage resources, the applicant must include in this form:

(i)The name of the entity providing the resource;

(ii)The name of a contact for the entity providing the resource who is familiar with the contribution toward this application;

(iii)The telephone number of a contact for the resource who is familiar with the contribution toward this application;

(iv)The leverage amount;

(v)Whether the leverage amount is cash or in-kind services;

(vi)A letter from the entity that is furnishing the Leverage, including items

(i)through

(v)above, signed by an authorized individual, stating that the Leverage is firmly committed; and

(vii)All columns, except the last, “Leverage Period More than 2 Years,” must be filled in. e. HOPE VI Budget. Enter the amount you are requesting through this NOFA. Typically, HOPE VI assists PHAs. With the Main Street program, HOPE VI is assisting local governments. Because of this, the HOPE VI Budget form refers to PHAs instead of local governments. In “Part I: Summary,” in the “PHA” space, enter the applicant's name as stated on the form SF-424. Also complete the column entitled, “Revised Overall HOPE VI Budget for All Project Phases.” It is not necessary to fill in the other columns. In “Part II: Supporting Pages,” in the “PHA” space, enter the applicant's name as stated on the form SF-424 and complete only columns two and three. f. Cash Flow Proforma. The applicant must include a 5-year estimate of project income, expenses, and cash flow (“proforma”) that shows that the project will be financially viable over the long term. The proforma should show the affordable rents for the period of the INITIAL occupancy and the affordable or market rents (set at the discretion of the grantee) for subsequent occupants. Note that initial funding of reserves with grant funds is NOT an allowable use of funds from this NOFA, *e.g.* , a rental reserve to support initial affordable income. Reserves may be funded through leverage resources. g. Map of Main Street Area. The drawing must denote the boundaries of a Main Street Area and denote each housing site that is included in the applicant's project. The map should be grayscale for printing on a black-and-white printer. Boundaries and site(s) should be delineated with black lines. The boundaries may include streets, highways, railroad tracks, etc., and natural boundaries such as streams, hills, and ravines, etc. The map may be hand-drawn and should be approximately to scale. The purpose of this drawing is to define the area where firmly committed leverage resources that are included in the application have been, or will be, expended. h. Site Plan and Typical Unit Layout. The applicant must include a drawing of the Main Street affordable housing project site plan and a typical unit layout. The drawings may be hand-drawn, should be approximately to scale, and should be in grayscale, for printing on a black-and-white printer. The purpose of these drawings is to determine if the building and unit configuration look feasible and fulfill generally acceptable housing standards. i. America's Affordable Communities Initiative, form HUD-27300. See “Reviews and Selection Process,” Section V.B of the General Section. j. Certification of Consistency with the RC/EZ/EC-IIs Strategic Plan, form HUD-2990. See “Rating Factor Documentation,” below. k. Logic Model. The applicant must complete the form HUD-96010, “Logic Model,” in accordance with the “Logic Model Instructions” in the General Section. 6. Rating Factor Documentation. a. Rating Factor 1—Capacity.

(1)Team Experience. This Rating Factor will be based upon the applicant's narrative description of the various types and extent of experience that each of its Team members has accumulated. Information from other sections of the application that reflect on the Team's capacity also will be weighed for this Rating Factor. The stated experience will be reviewed to determine if the Team has successfully completed similar projects. It will also be reviewed to determine how similar those projects were to the activities that will be performed under a grant from this NOFA. At a bare minimum, the following should be included:

(a)A list and short description of affordable housing projects that the members of the applicant's team have completed; and

(b)A list and short description of contracts or grants completed by the members of the applicant's Team for similar housing development or services.

(2)Key Personnel Knowledge. Key personnel are those Team members that must remain part of the team in order for the Team to complete the activities required by a grant under this NOFA. As examples, key personnel may include the developer, if complex financing methods are necessary to complete the grant activities; or the owner of the property that is going to be rehabilitated, if it will remain in his possession; or an affordable housing intermediary that is going to manage the activities of other Team members. On the other hand, a specific accountant would not be key to grant completion. Knowledge may come from experience or from education. The quality and amount of knowledge that key personnel have will be weighed by this Rating Factor. As an example, short resumes would contain this type of information. b. Rating Factor 2—Need for Affordable Housing. NO DOCUMENTATION IS NECESSARY FOR THIS RATING FACTOR.

(1)HUD reviewers will derive the need for affordable housing based on a comparison of HUD's Fair Market Rent

(FMR)for the applicant's primary metropolitan statistical area/metropolitan statistical area (PMSA/MSA) or nonmetropolitan county/parish and the maximum amount of rent that a very low-income family living in that PMSA/MSA or nonmetropolitan county/parish can afford to pay. In performing the comparison, HUD will compare the FMR for a three-bedroom unit to the rent that would be paid by a four-person, very low-income family.

(2)PMSA/MSAs and nonmetropolitan counties/parishes documentation on the FMRs are listed at *http://www.huduser.org/datasets/fmr.html* .

(3)The FMRs are listed at *http://www.huduser.org/intercept.asp?loc=/datasets/fmr/fmr2007P/FY2007P_ScheduleB.pdf* .

(4)The maximum, affordable very low-income rent is based on HUD's Income Limits, which can be obtained at *http://www.huduser.org/datasets/il/il2007_docsys.html* for very low-income families. The initial occupant must not pay more in rent than a public housing resident at a HOPE VI development, which is 30 percent of one-twelfth of the listed income limit for a very low-income family. c. Rating Factor 3—Readiness and Appropriateness of the Main Street Affordable Housing Project.

(1)Site Control, Zoning, and Developer/Construction Agreement.

(a)Evidence of Site Control should be included in the application's Readiness Attachment Exhibit:

(i)For site(s) that WILL NOT be conveyed to perform under a grant from this NOFA:

(A)A copy of the site's deed that shows ownership by the applicant or a Team member; or

(B)A certification signed by the applicant's Mayor, City Registrar, or other authorized city employee, stating that the applicant has the legal authority to perform the proposed and the required activities of a grant from this NOFA on the site(s).

(ii)For sites that WILL be conveyed in order to perform under a grant from this NOFA, the first page and execution page of the agreement, contract, sales contract, sales option, or other document that gives the applicant the legal authority to perform the proposed and required activities of a grant from this NOFA on the site(s).

(2)For Zoning, the application's Readiness Attachment Exhibit should include a certification from the appropriate local official, *e.g.* , local government engineer, zoning/land-use official (not necessarily the Mayor), documenting that either:

(a)All required land-use approvals for developed and undeveloped land have been secured; or

(b)The request for such approval(s) is on the agenda for the next meeting of the appropriate authority in charge of land use, *e.g.* , zoning board, city council. This document must include the date of the meeting.

(3)For Developer/Construction Agreement, the application's Readiness Attachment Exhibit should include one of the following:

(i)A description in the Rating Factor Narrative of activities that the applicant Team has performed in order to obtain a developer, construction manager, or construction contractor. These may include discussions, procurement processing, etc., that the applicant has completed. The description should also contain a description of the activities that have not been, and must be, completed to sign an agreement with such a Team member or contractor to perform the proposed and required grant activities. Note that under 24 CFR 50.3, the grantee must not enter into a binding agreement for choice-limiting actions until HUD completes an environmental review.

(ii)If the applicant has entered into a binding contract before submitting an application for activities that may be partially funded by a grant from this NOFA, the applicant must state so in the application. Note that, prior to HUD's completion of its environmental review, funds from this NOFA must not be committed or used to fund construction activities that started under a binding contract that was executed before application submission.

(4)Leverage. The applicant must provide leverage funds/in-kind services that are firmly committed to the Main Street rejuvenation effort. This leverage may include leverage specifically committed to development of the Main Street affordable housing project. This leverage demonstrates statutorily required government and private-sector community support. Leverage does NOT need to be expended on affordable housing uses. Leverage may include infrastructure and other government expenditures that have occurred since the Main Street rejuvenation effort began. See “Definitions,” Section I.D and “Program Requirements,” Section III.C of this NOFA for more information about Leverage.

(a)To be counted as Leverage, the application must contain a letter from the leverage resource. The letter must be in writing and signed by a person authorized to make the commitment, and must explicitly state:

(i)The amount of the leverage; and

(ii)That the leverage has been or will be expended on the Main Street Area rejuvenation effort.

(b)To be counted as Leverage, the resource must also be included on pages 12 and 13 of the “HOPE VI Main Street Application Data Sheet,” form HUD-52861. All columns, except the last, “Leverage Period More than 2 Years,” must be filled in. No narrative discussion of Leverage is necessary.

(c)Funds/in-kind services that are included as match resources CANNOT be included in Leverage and should not be duplicated in Leverage documentation.

(5)Retention of Historic or Traditional Architecture. The Rating Factor Narrative Exhibit should include the age of, and restoration work being done to, façades that are part of the Main Street affordable housing project, along with other significant preservation or restoration that has taken place or is planned as part of the rest of the Main Street Area rejuvenation effort.

(6)Section 3. The Rating Factor Narrative Exhibit should contain a Section 3 plan that must include at least the general methods that the applicant will use to comply with implementing regulations at 24 CFR part 135 and give job training, employment, contracting, and other economic opportunities to Section 3 residents and Section 3 business concerns. A Section 3 plan that exceeds this may contain more specific information, e.g., goals by age group, types of jobs, and other opportunities to be provided by the applicant, and plans for tracking and evaluation of goals. To include Logic Model Section 3 information in the Section 3 plan, the applicant should make reference to such information in the Section 3 Narrative.

(7)Energy Star. The Rating Factor Narrative Exhibit should include examples of any of the following Energy Star activities that will be performed under a grant from this NOFA:

(a)It will use Energy Star-labeled products;

(b)It will promote Energy Star design of affordable units; and

(c)If the application includes the development of homeownership units, it will include Energy Star in required homeownership counseling. d. Rating Factor 4—Program Administration and Fiscal Management.

(1)Documentation that demonstrates program administration and fiscal management MUST include a list of any findings issued or material weaknesses found by HUD or other Federal or State agencies. If any of these exist, documentation must also include a description of how the applicant addressed the findings and/or weaknesses. If no findings or material weaknesses were exposed or existed on or before the publication date of this NOFA, include a statement to that effect in the narrative. HUD will consider this statement an applicant's certification of fact.

(2)Program Schedule. The Program Schedule should contain all of the milestones stated in “Administrative Requirements,” Section VI.B of this NOFA. The Narrative Exhibit for this Rating Factor should describe the methodology used in developing the schedule, including the parties that were contacted and contributed information to the applicant.

(3)Development, Financial, and Fiscal Management. The Rating Factor narrative should include identification of the Team members, their positions in the team, and the methods they will use to manage:

(a)General administration of the grant activities and reporting;

(b)Construction activities, including inspections;

(c)Leverage and match resources to guarantee fulfillment of commitments;

(d)Accounting and distribution of grant funds; and

(e)Local, State, and Federal procurement requirements of the applicant government.

(4)Tracking and Reporting. The grantee will be required to submit quarterly reports to HUD using a HUD-developed, on-line data input system. The application's Rating Factor Narrative Exhibit should describe the method that the applicant will use to collect production information and the type of computers and Internet access that the applicant Team possesses. e. Rating Factor 5—Incentive Criteria on Regulatory Barrier Removal.

(1)The applicant must include the completed form HUD-27300 in the application, along with background documentation where required by the form, in order to receive up to 2 policy priority points for removal of barriers to affordable housing. See Section V.B of the General Section. f. Rating Factor 6—RC/EZ/EC-IIs.

(1)To receive up to two bonus points for performing the NOFA activities in a RC/EZ/EC-II area, the applicant must complete, sign, and submit the “Certification of Consistency with RC/EZ/EC Strategic Plan” (form HUD-2990) as part of the application and meet the requirements of the General Section. C. *Submission Dates and Times.* 1. Application deadline date. Electronic applications must be received and validated by Grants.gov by 11:59:59 p.m. eastern time on the application deadline date. If a waiver to the electronic submission is granted, paper copy applications must be received by the application deadline date. See the General Section and Section IV.F below. 2. No Facsimiles or Videos. HUD will not accept for review, evaluation, or funding any entire application sent by facsimile (fax). However, third-party documents or other materials sent by facsimile in compliance with the instructions under Section IV of the General Section, and that are received by the application deadline date will be accepted. Also, videos submitted as part of an application will not be viewed. D. *Intergovernmental Review.* 1. Executive Order 12372, Intergovernmental Review of Federal Programs. Executive Order 12372 was issued to foster intergovernmental partnership and strengthen federalism by relying on State and local processes for the coordination and review of Federal financial assistance and direct Federal development. HUD implementing regulations are published in 24 CFR part 52. The executive order allows each State to designate an entity to perform a State review function. The official listing of State Points of Contact (SPOCs) for this review process can be found at *http://www.whitehouse.gov/omb/grants/spoc.html.* States not listed on the Web site have chosen not to participate in the intergovernmental review process and, therefore, do not have a SPOC. If the applicant's State has a SPOC, the applicant should contact it to see if it is interested in reviewing the application prior to submission to HUD. The applicant should allow ample time for this review process when developing and submitting the applications. If the applicant's State does not have a SPOC, the applicant may send applications directly to HUD. E. *Funding Restrictions.* 1. Grant funds must only be used to provide assistance to carry out eligible affordable housing activities, as stated in Section III.C of this NOFA. 2. HOPE VI funds may not be used to meet the match requirement. 3. Non-allowable Costs and Activities. Grant funds awarded through this NOFA must not be expended on: a. Total demolition of a building (including where a building foundation is retained); b. Sale or lease of the Main Street affordable housing project site, excluding:

(1)Long-term lease or transfer of title for the purposes of obtaining tax credits or implementation of extended use restrictions, provided that the recipient owner entity of the title or lease includes the applicant;

(2)Transfer of title from a private owner to the applicant for deminimus consideration, *e.g.* , $1;

(3)Acquisition of land or property for the purpose of developing, reconfiguring, or rehabilitating affordable housing units; c. Funding of project reserves of any type; d. Payment of the applicant's administrative costs; e. Payment of any and all legal fees; f. Development of public housing replacement units (defined as units that replace disposed of or demolished public housing); g. Housing Choice Vouchers; h. Transitional security activities; i. Main Street technical assistance consultants or contracts; and j. Costs incurred prior to grant award, including the cost of application preparation. 4. Cost Controls. a. The total amount of HOPE VI funds expended shall not exceed the TDC, as published by HUD in Notice PIH 2006-22 (HA), “Public Housing Development Cost Limits,” for the number of affordable housing units that will be developed through this NOFA. The TDC limits can be found through HUD's HUDClips Web site at *http://www.hudclips.org/sub_nonhud/cgi/ nph-brs.cgi?d=PIHN&s1=(06-22)[no]&op1 =AND& l=100&SECT1=TXT_HITS& SECT5=HEHB&u=./hudclips.cgi& p=1&r=1&f=G* . This information is also included as background data in form HUD-52861, “HOPE VI Main Street Application Data Sheet.” b. Cost Control Safe Harbors apply. Grantees must comply with HOPE VI Main Street Cost Control and Safe Harbor Standards, as follows:

(1)Developer Fee Safe Harbor. The HOPE VI Main Street Safe Harbor for the developer fee is 9 percent or less of total Main Street affordable housing project costs that are funded by grant funds or leverage funds included in the NOFA application (less the total amount of all reserve accounts and less the developer fee, itself.) The maximum developer fee is 12 percent of total Main Street affordable housing project costs that are funded by grant funds or leverage funds included in the NOFA application. Any fee above the 9 percent safe harbor must be justified and approved by HUD in advance. Possible justifications for exceeding the 9 percent safe harbor include:

(a)Developer independently obtains project financing, including tax credits. The more sources of financing, the greater the justification for a higher developer fee;

(b)Developer obtains site control from an entity other than the Grantee. The more sites acquired the greater the justification for a higher developer fee;

(c)The project is complex ( *e.g.* , in financial, legal, environmental, and/or political terms.)

(d)The developer bears more than 25 percent of the predevelopment costs;

(e)The developer fee is deferred or paid out of positive cash flow from the project;

(f)The developer guarantee(s) is for a large dollar amount in proportion to the project size and/or the guarantee(s) is for a long term.

(2)General Contractor Fee Safe Harbor. The HOPE VI Main Street Safe Harbor for the general contractor fee is as follows:

(a)General Requirements: 6 percent of hard-costs (including contingency and bond premium);

(b)Overhead: 2 percent of hard-costs plus general requirements;

(c)Profit: 6 percent of hard-costs, general requirements, and overhead;

(d)The maximum Safe Harbor for these combined costs is 14 percent, unless adequate justification is provided to HUD. 5. Community and Supportive Services (“CSS”). Furnishing CSS to residents is voluntary, except for homeownership counseling when the application includes development of homeownership units. If the applicant chooses to furnish CSS, expenditures are limited to 15 percent of the grant amount. 6. Statutory time limit for award, obligation, and expenditure. a. The estimated award date will be 21 days after the application deadline date for this NOFA. b. Funds available through this NOFA must be obligated (awarded) on or before September 30, 2007. c. In accordance with 31 U.S.C. 1552 (Pub. L. 97-258, Sept. 13, 1982, 96 Stat. 935; Pub. L. 101-510, div. A, title XIV, Sec. 1405(a)(1), Nov. 5, 1990, 104 Stat. 1676), all HOPE VI funds that were appropriated in FY 2006 must be expended by September 30, 2012, and funds appropriated in FY 2007 must be expended by September 30, 2013. Any funds that are not expended by these dates will be cancelled and recaptured by the United States Treasury, and thereafter will not be available for obligation or expenditure for any purpose. 7. Withdrawal of Funding. If a grantee under this NOFA does not proceed within a reasonable time frame (in accordance with Section VI of this NOFA), HUD retains the right to unilaterally withdraw any grant amounts that have not been obligated by the grantee. HUD shall redistribute any withdrawn amounts to one or more other applicants eligible for assistance under the HOPE VI program. 8. Transfer of Funds. HUD has the discretion to transfer to any other HOPE VI program funds available through this NOFA. 9. Limitation on Eligible Expenditures. Expenditures on services, equipment, and physical improvements must directly relate to project activities allowed under this NOFA. 10. Pre-Award Activities. Award funds shall not be used to reimburse pre-award expenses. F. *Other Submission Requirements.* 1. Application Submission and Receipt Procedures. See Sections IV.B and F of the General Section. 2. Timely Receipt Requirements and Proof of Timely Submission. a. Electronic Submission. All electronic applications must be received and validated by *http://www.grants.gov* by 11:59:59 p.m. eastern time on or before the deadline date established for this NOFA. See Sections IV. B and F of the General Section. Applicants are advised to submit their applications at least 48 to 72 hours in advance of the deadline date and when the Grants.gov help desk is open so that any issues can be addressed prior to the deadline date and time. Please note that validation may take up to 72 hours. b. Applications Receiving Waivers to Submit a Paper Copy Application.

(1)Requests for HUD to waive the requirement that NOFA applications be submitted electronically must be made in writing to: Department of Housing and Urban Development, Office of Public Housing Investments, Attention: Susan Wilson, Director, 451 Seventh Street, SW., Washington, DC 20410-5000.

(2)Waiver requests must include justification explaining why the application cannot be submitted electronically, and must be submitted no later than 15 days prior to the application deadline date.

(3)See Section IV of the General Section for additional information about waivers.

(4)Applicants granted a waiver of the electronic submission requirement must submit their applications, in their entirety, to the applicable HUD office by the application deadline date. Written notification of waiver approval will include information on mailing instructions and timely receipt of the application by HUD. HUD will not accept a paper application without a waiver being granted. c. No Facsimiles of Entire Application. HUD will not accept fax transmissions from applicants who receive a waiver to submit a paper copy application. Paper applications must be complete and submitted, in their entirety, on or before the application deadline date. 3. General Section References. Section IV of the General Section is hereby incorporated by reference. V. Application Review Information A. *Selection Criteria (Rating Factors)* . 1. Rating Factor 1—Capacity (up to 25 points). This factor addresses whether the applicant Team has the capacity and organizational resources necessary to implement successfully the proposed activities within the grant period. Please do not include the Social Security Number of any Team member. a. Past Experience (up to 15 points).

(1)The applicant will earn a maximum of 15 points if the applicant demonstrates that the applicant's Team has extensive experience of affordable housing development and historic preservation requirements; that is, that the applicant's Team has developed or rehabilitated housing projects, including BOTH affordable housing projects and National Register for Historic Preservation

(NRHP)or traditional architecture projects over the past 3 years.

(2)The applicant will earn a maximum of 10 points if the applicant demonstrates that the applicant's Team has superior experience of affordable housing development and historic preservation requirements; that is, that the applicant's Team has developed or rehabilitated housing projects, including EITHER affordable housing projects OR NRHP or traditional architecture projects over the past 3 years.

(3)The applicant will earn a maximum of 5 points if the applicant demonstrates that the applicant team has adequate experience in housing development; that is, that the applicant's Team has developed or rehabilitated more than one housing project over the past 3 years.

(4)The applicant will earn a maximum of 0 points if the applicant cannot demonstrate that its team has at least adequate experience in housing development. b. Knowledge of Key Personnel (up to 10 points).

(1)The applicant will earn a maximum of 10 points if the applicant demonstrates that its key personnel have extensive knowledge in the development or rehabilitation of housing projects, including BOTH affordable housing projects AND NRHP or traditional architecture projects.

(2)The applicant will earn a maximum of 5 points if the applicant demonstrates that the applicant Team's key personnel have adequate knowledge in the development or rehabilitation of housing projects, including EITHER affordable housing projects OR NRHP or traditional architecture projects.

(3)The applicant will earn a maximum of 0 points if the applicant cannot demonstrate that its key personnel have adequate knowledge in the development or rehabilitation of housing projects, including EITHER affordable housing projects OR NRHP or traditional architecture projects. 2. Rating Factor 2—Need for Affordable Housing (up to 10 points). a. For the applicant's PMSA/MSA or nonmetropolitan county/parish, if the ratio of the maximum affordable rent for a three-person very low-income family to the FMR of a two-bedroom size unit (affordable rent divided by FMR) is equal to or less than 0.9, the applicant will receive 10 points. Affordable rent is 30 percent of the Income Limit for a very low-income family, divided by 12 (months per year). b. For the applicant's PMSA/MSA or nonmetropolitan county/parish, if the ratio of the maximum affordable rent for a three-person, very low-income family to the FMR of a two-bedroom size unit (affordable rent divided by FMR) is greater than 0.9, but less than or equal to 1.2, the applicant will receive 5 points. Affordable rent is 30 percent of the Income Limit for a very low-income family, divided by 12 (months per year). c. For the applicant's PMSA/MSA or nonmetropolitan county/parish, if the ratio of the maximum affordable rent for a 3-person very low-income family to the FMR of a two-bedroom size unit (affordable rent divided by FMR) is greater than 1.2, the applicant will receive 0 points. Affordable rent is 30 percent of the Income Limit for a very low-income family, divided by 12 (months per year). 3. Rating Factor 3—Readiness and Appropriateness of the Main Street affordable housing project (up to 48 points). a. Appropriateness and Feasibility of the Main Street Affordable Housing Project (up to 10 points).

(1)You will receive 10 points if your application demonstrates the following about your Main Street affordable housing project:

(a)It is appropriate and suitable, in the context of the community and other affordable housing options, *e.g.* , rehabilitation versus new construction;

(b)Fulfills the needs of the Main Street Area rejuvenation effort;

(c)Is marketable, in the context of local conditions;

(d)If the affordable housing units that will be developed under a grant from this NOFA are not a separable part of a larger development effort, and you include market-rate housing or retail structures in that larger development, you must provide a signed letter from an independent, third-party, market research firm real estate professional that describes its assessment of the demand and associated pricing structure for the proposed residential units and retail structures, based on the market and economic conditions of the Main Street Area;

(e)Is financially feasible, as demonstrated in the proforma and financial exhibits proposed in the application;

(f)Describes the cost controls that will be used in implementing the project, in accordance with the Funding Restrictions and Program Requirements sections of this NOFA; and

(g)Includes a completed TDC/Grant Limitations Worksheet in the application and follows the Funding Restrictions and Program Requirements sections of this NOFA.

(2)You will receive 5 points if your application demonstrates at least 3 of the criteria above.

(3)You will receive 0 points if your application does not demonstrate the criteria above or your application does not provide sufficient information to evaluate this factor. b. Promotion and Marketing (2 Points).

(1)The applicant will receive 2 points if the application sets forth a plan to promote and market the Main Street Area rejuvenation effort to financiers, to other parties that may be involved in the rejuvenation effort, and to possible future residents of the Main Street affordable housing project, including (in accordance with affirmative fair housing marketing requirements) the population that is least likely to apply.

(2)The applicant will receive 0 points if the application does not include a discussion of promotion or marketing of the Main Street Area rejuvenation effort. c. Readiness (Site Control, Zoning, and Developer/Construction Agreement) (up to 12 points).

(1)In order to perform the activities required under a grant from this NOFA, the applicant must:

(a)Have obtained site control of the Main Street affordable housing project site(s). (Note that an applicant that does not have site control prior to HUD's receipt of the application must not acquire title to any sites until completion of the HUD environmental review. In addition, any purchase option entered into after HUD receipt of the application must be contingent upon notification from HUD that the property is acceptable, following a HUD environmental review, and the cost of the option must be no more than a nominal portion of the purchase price);

(b)Have received local zoning approval that allows residential use of the Main Street affordable housing project site(s); and

(c)Have either:

(i)Begun discussions toward execution of an agreement or contract with a developer, construction manager, or construction company to develop the Main Street affordable housing project. (Note that under 24 CFR 50.3, the grantee must not enter into a binding agreement for choice-limiting actions until HUD completes an environmental review); or

(ii)Had such a contract in place, before application submission, to develop affordable housing that may be partially funded by this NOFA. (Note that, prior to HUD's completion of its environmental review, funds from this NOFA must not be committed or used to fund construction activities that started under a binding contract that was executed before application submission).

(2)Scoring:

(a)The applicant will receive 12 points if the application includes documentation demonstrating that (a), (b), and (c), above, has occurred.

(b)The applicant will receive 8 points if the application includes documentation demonstrating that any two of (a), (b), and (c), above, have occurred.

(c)The applicant will receive 4 points if the application includes documentation demonstrating that only one of (a), (b), and (c), above, has occurred.

(d)The applicant will receive 0 points if the application does not include documentation demonstrating that either (a), (b), and (c), above, has occurred. d. Main Street Area Rejuvenation Leverage (up to 15 points). Main Street Area Leverage includes leverage used for activities related to the Main Street Area rejuvenation effort as a whole, along with leverage that will be used directly for allowable activities in the development of the Main Street affordable housing project.

(1)The applicant must provide leverage funds/in-kind services that are firmly committed to the Main Street rejuvenation effort as a whole, including leverage specifically committed to development of the Main Street affordable housing project. This Leverage must demonstrate government and private-sector community support for the Main Street Area rejuvenation effort.

(2)Match is NOT included in Leverage. Match is a separate, statutorily required contribution of funds. If a resource is listed as match in the “HOPE VI Main Street Application Data Sheet,” form HUD-52861, that is included in the application, HUD will not count that resource as Leverage.

(3)This Rating Factor measures the community support that the Main Street Area rejuvenation project has.

(4)Points are assigned based on the following scale, as a percent of the requested grant amount: Leverage as percent of grant amount Points awarded Less than 75 percent of the requested grant amount 0 points Greater than or equal to 75 percent but less than 150 percent 5 points Greater than or equal to 150 percent but less than 225 percent 10 points 225 percent or more 15 points e. Retention of Historic or Traditional Architecture (up to 6 points).

(1)The applicant will receive 6 points if the application demonstrates that the buildings in the project will maintain all of the historic or traditional architecture and design features on all floors of the buildings.

(2)The applicant will receive 3 points if the application demonstrates that the buildings in the project will retain some of the historic or traditional architecture and design features on some or all of the floors of the buildings.

(3)The applicant will receive 0 points if the application does not demonstrate that the buildings in the project will retain historic or traditional architecture and design features. f. Economic Opportunities for Low- and Very-Low-Income Persons (Provision of Section 3) (up to 2 points).

(1)HOPE VI grantees must comply with Section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) (Economic Opportunities for Low- and Very-Low-Income Persons in Connection with Assisted Projects) and its implementing regulations at 24 CFR 135.32, “Responsibilities of the recipient,” which can be found through *http://www.gpoaccess.gov/cfr/index.html* . One of the purposes of the assistance is to give, to the greatest extent feasible, and consistent with existing Federal, State, and local laws and regulations, job training, employment, contracting, and other economic opportunities to Section 3 residents and Section 3 business concerns.

(2)The applicant will receive 2 points if the application includes a feasible plan to implement Section 3 that not only meets the minimum requirements, but also exceeds those requirements.

(3)The applicant will receive 0 points if the application does not include a feasible plan to implement Section 3 that not only meets the minimum requirements, but also exceeds those requirements. g. Energy Star (up to 1 point).

(1)Promotion of Energy Star compliance is a HOPE VI Main Street program goal. See “Program Requirements,” Section III.C of this NOFA.

(2)You will receive 1 point if your application demonstrates that you will:

(a)Use Energy Star-labeled products;

(b)Promote Energy Star design of affordable units; and

(c)If your application includes the development of homeownership units, include Energy Star in required homeownership counseling.

(3)You will receive 0 points if your application does not demonstrate that you will perform

(a)and

(b)above, and, if applicable,

(c)above. 4. Rating Factor 4-Program Administration and Fiscal Management (up to 15 points). a. Program Schedule (up to 5 points).

(1)The applicant may receive a maximum of 5 points if the applicant demonstrates that the milestones in the Program Schedule are realistic and achievable; that is, that the application demonstrates that the applicant has performed the following actions and, where applicable, has obtained information that was used in developing the Program Schedule:

(a)Contacted the State Historic Preservation Officer, the local HUD Field Office, architects, materials suppliers, and other parties that milestones depend upon, to ensure that the milestones can reasonably be met;

(b)Checked to see if any litigation or court orders exist that will affect the milestones; and

(c)Prepared a chart that states the estimated production milestones, their relative time frames, and each milestone's time to completion, *e.g.* , in a Gantt Chart.

(2)The applicant may receive a maximum of 3 points if the applicant has performed two of the three actions in

(a)through

(c)above and, where applicable, has obtained information that was used in developing the Program Schedule.

(3)The applicant will receive 0 points if the applicant has not performed at least two of the three actions in

(a)through

(c)above. b. Tracking and Reporting System for Production Milestones (up to 2 points).

(1)The applicant will earn a maximum of 2 points if the applicant demonstrates that a tracking and reporting system for key production milestones has existed and has been in use continuously for the Main Street Area rejuvenation effort, and the applicant demonstrates how the tracking and reporting system will be used to implement a grant awarded through this NOFA.

(2)The applicant will earn a maximum of 1 points if a tracking and reporting system exists as of the application deadline date ( *i.e.* , was developed as a result of this NOFA), but has not been used on the Main Street Area rejuvenation effort, provided that the applicant demonstrates how it will be used to implement a grant awarded through this NOFA.

(3)The applicant will receive 0 points if:

(a)A tracking and reporting system does not exist; or

(b)The applicant does not demonstrate how one will be used to implement a grant awarded through this NOFA. c. Development and Fiscal Management (up to 8 points).

(1)Development and fiscal management includes management of the grant in general (administration and reporting), the construction activities, receipt of financial commitments, accounting and distribution of grant funds, and government procurement activities.

(2)If the applicant demonstrates management controls that are adequate to manage a grant from this NOFA for all of the above areas, the applicant will receive 8 points.

(3)If the applicant demonstrates management controls that are adequate to manage a grant from this NOFA for some of the above areas, the applicant will receive 4 points.

(4)If the applicant does not demonstrate management controls that are adequate to manage a grant from this NOFA, the applicant will receive 0 points. 5. Rating Factor 5—Incentive Criteria on Regulatory Barrier Removal—(up to 2 points). a. Description.

(1)HUD's Notice, “America's Affordable Communities Initiative, HUD's Initiative on Removal of Regulatory Barriers: Announcement of Incentive Criteria on Barrier Removal in HUD's FY 2004 Competitive Funding Allocations,” **Federal Register** Docket Number FR-4882-N-03, published on March 22, 2004, provides that most HUD competitive NOFAs will include an incentive for local and State governments to decrease their regulatory barriers to the development of affordable housing.

(2)Form HUD-27300 contains questions that explore the applicant's efforts to decrease regulatory barriers. b. Scoring.

(1)If the applicant is considered a local unit of government with land use and building regulatory authority, an agency or department of a local unit of government, a nonprofit organization, or other qualified applicant applying for funding for a project located in the jurisdiction of the local unit of government, the applicant is invited to answer the 20 questions in Part A of form HUD-27300. For those applications in which regulatory authority is split between jurisdictions ( *e.g.* , county/parish and town), the applicant should answer the question for the jurisdiction that has regulatory authority over the issue at question.

(a)If the applicant checked Column 2 for five to ten questions from Part A, the applicant will receive 1 point in the NOFA evaluation.

(b)If the applicant checked Column 2 for 11 or more questions from Part A, the applicant will receive 2 points in the NOFA evaluation.

(2)Part B of the form is for an applicant that is a State government or an agency or department of a State government. State governments are not eligible to apply for this NOFA and, as such, Part B of the form is not applicable.

(3)In no case will an applicant receive more than two points for barrier removal activities.

(4)To receive the points for this policy priority, an applicant must submit the documentation requested in the questionnaire or provide a Web site address

(URL)where the documentation can be readily found. See Section IV of the General Section for documentation requirements. 6. Bonus Points: RC/EZ/EC-II (up to 2 points). a. RC/EZ/EC-IIs. This NOFA provides for the award of two bonus points for eligible activities/projects that the applicant proposes to locate in federally designated Empowerment Zones (EZs), Renewal Communities (RCs), or Enterprise Communities, designated by the U.S. Department of Agriculture in round II (EC-IIs), that are intended to serve the residents of these areas, and that are certified to be consistent with the area's strategic plan or RC Tax Incentive Utilization Plan (TIUP). (For ease of reference in this notice, all of the federally designated areas are collectively referred to as “RC/EZ/EC-IIs” and residents of any of these federally designated areas as “RC/EZ/EC-II residents.”) This NOFA contains a certification, “Certification of Consistency with RC/EZ/EC Strategic Plan” (form HUD-2990), that must be completed for the applicant to be considered for RC/EZ/EC-II bonus points. A list of RC/EZ/EC-IIs can be obtained from HUD's Web page at *http://www.hud.gov/cr.* Applicants can determine if their program/project activities are located in one of these designated areas by using the locator on HUD's Web site at *http://www.hud.gov/crlocator.* B. *Review and Selection Process.* 1. HUD's selection process is designed to ensure that grants are awarded to eligible local governments with the most meritorious applications. 2. Application Screening. a. HUD will screen each application to determine if:

(1)It meets the threshold criteria listed in Section III.C of this NOFA; and

(2)It is deficient, i.e., contains any technical deficiencies. b. Corrections to Deficient Applications. The subsection entitled “Corrections to Deficient Applications” in Section V.B of the General Section applies. Clarifications or corrections of technical deficiencies in accordance with the information provided by HUD must be submitted within 14 calendar days of the date of receipt of the HUD notification. c. Applications that will not be rated or ranked.

(1)HUD will not rate or rank applications that are deficient at the end of a 14-calendar day cure period, as described in Section V.B.2.b above and the General Section.

(2)HUD will not rate or rank applications that have not met the thresholds described in Section III.C of this NOFA. Such applications will not be eligible for funding. 3. Preliminary Rating and Ranking. a. Rating.

(1)HUD staff will preliminarily rate each eligible application, SOLELY on the basis of the Rating Factors described in Section V.A of this NOFA.

(2)When rating applications, HUD reviewers will not use any information included in any application submitted for another NOFA.

(3)HUD will assign a preliminary score for each Rating Factor and a preliminary total score for each eligible application.

(4)The maximum number of points for each application is 100, plus a possible 2 RC/EZ/EC-II bonus points.

(5)Minimum Score. Applications that do not have a preliminary score of at least 50 points will not be eligible for funding. b. Ranking.

(1)After preliminary review, applications with a minimum score of 50 or above will be ranked in score order. 4. Final Panel Review. a. A Final Review Panel made up of HUD staff will:

(1)Review the Preliminary Rating and Ranking documentation to:

(a)Ensure that any inconsistencies between preliminary reviewers have been identified and rectified; and

(b)Ensure that the Preliminary Rating and Ranking documentation accurately reflects the contents of the application.

(2)Assign a final score to each application; and

(3)Recommend for selection the most highly rated applications, subject to the amount of available funding, described in Section II of this NOFA. 5. HUD reserves the right to make reductions in funding for any ineligible items included in an applicant's proposed HOPE VI column of the application's Sources and Uses, or HOPE VI budget. 6. In accordance with the FY 2007 HOPE VI appropriation, HUD may not use HOPE VI funds, including HOPE VI Main Street funds, to grant competitive advantage in awards to settle litigation or pay judgments. 7. Tie Scores. If two or more applications have the same score and there are insufficient funds to select all of them, HUD will select for funding the application(s) with the highest score for the Capacity Rating Factor. If a tie remains, HUD will select for funding the application(s) with the highest score for the Capacity Rating Factor. HUD will select further tied applications with the highest score for the Need Rating Factor. 8. Remaining Funds. a. HUD reserves the right to reallocate remaining funds from this NOFA to other eligible activities under Section 24 of the Act.

(1)If the total amount of funds requested by all applications found eligible for funding under Section V.B of this NOFA is less than the amount of funds available from this NOFA, all eligible applications will be funded and those funds in excess of the total requested amount will be considered remaining funds.

(2)If the total amount of funds requested by all applications found eligible for funding under Section V.B of this NOFA is greater than the amount of funds available from this NOFA, eligible applications will be funded until the amount of non-awarded funds is less than the amount required to fund feasibly the next eligible application. In this case, the funds that have not been awarded will be considered remaining funds. 9. The following subsections of Section V of the General Section are hereby incorporated by reference: a. HUD's Strategic Goals; b. Policy Priorities; c. Threshold Compliance; d. Corrections to Deficient Applications; e. Rating; and f. Ranking. VI. Award Administration Information A. *Award Notices.* 1. Initial Announcement. The HUD Reform Act prohibits HUD from notifying the applicant as to whether or not the applicant has been selected to receive a grant until HUD has announced all grant recipients. If the application has been found to be ineligible or if it did not receive enough points to be funded, the applicant will not be notified until the successful applicants have been notified. HUD will provide written notification to all eligible applicants, whether or not they have been selected for funding. 2. Authorizing Document. The “Assistance Award/Amendment,” form HUD-1044, signed by the Assistant Secretary for Public and Indian Housing (grants officer) is the authorizing document. This executed form will be delivered via the United States Postal Service to the applicant's authorized signatory at the applicant's address, as stated on the form SF-424. 3. General Section References. Section VI of the General Section is hereby incorporated by reference. B. Administrative and National Policy Requirements. 1. Administrative Requirements. a. Grant Agreement Execution. The grantee must execute the Grant Agreement within 90 days after HUD mails the Grant Agreement to the grantee. b. Grant term. The time period for completion shall not exceed 30 months from the date the “Assistance Award/Amendment,” form HUD-1044, is executed by HUD. c. Sub-Grants and Contracts. Grant funds may be expended directly by the applicant or they may be granted or loaned by the applicant to a third-party procured developer or Construction Manager who is undertaking the development of the Project. d. Reasonable Time Frame. Grantees must proceed within a reasonable time frame to complete the following milestone activities:

(1)Development Proposal. Grantees must submit a development proposal for the project within 12 months after the grant award date.

(a)Development proposals must include the following documents and information:

(i)Completed HUD Environmental Review, including the State Historic Preservation Officer approval, in accordance with 24 CFR part 50;

(ii)Identification of parties to the project development;

(iii)Activities and relationships of parties, e.g., Party A will loan $50,000 to Party C via a hard loan with an interest rate of 6 percent, with a 30-year amortization and a 15-year term;

(iv)Financing, i.e., sources and uses in the form HUD-52861 format;

(v)Unit description, i.e., unit number and sizes;

(vi)Site locations, i.e., lot and block, street address, or legal description;

(vii)Development construction cost estimate; and

(viii)Certification that open competition has been or will be used by the grantee to select a development partner and/or owner entity, if applicable.

(2)First Construction Start. Grantees must start housing unit construction within 18 months after grant award date.

(3)Last Construction Completion. Grantees must complete construction on a number and mix of units that accounts for an amount of TDC equal to, or greater than, the amount of the grant (TDC Units), within 30 months from the grant award date.

(4)In determining reasonableness of such time frame, noted in the paragraph above, HUD will take into consideration those delays caused by factors beyond the applicant's control.

(5)In accordance with the threshold requirement in Section III.C of this NOFA and the threshold documentation in Section IV.B of this NOFA, the above time frames must be stated in a Program Schedule that includes the following milestones, at a minimum:

(a)Grant Award Date (assume 2 months after application deadline date);

(b)Grant Agreement Execution Date (the Grant Agreement will be mailed to the grantee within one month after notice of award. The grantee will be given a maximum of 90 days to execute the Agreement);

(c)Development Plan Submission Date;

(d)Date of closing of financing of the first phase. If the applicant plans not to have a financial closing, it must state so in the Schedule;

(e)Date of the start of construction of the first housing unit;

(f)Date of the completion of construction of the last TDC Unit; and

(g)If the Main Street affordable housing project is part of a larger housing development, the date of completion of construction of the last housing unit. e. Preliminary Environmental Approval Only. HUD's notification of award to a selected applicant constitutes a preliminary approval by HUD, subject to the completion of an environmental review of the proposed sites in accordance with 24 CFR part 50. See Section III.C of this NOFA for information about environmental requirements. f. Flood Insurance. In accordance with the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001-4128), the application may not propose to provide financial assistance for acquisition or construction (including rehabilitation) of properties located in an area identified by the Federal Emergency Management Agency

(FEMA)as having special flood hazards, unless:

(1)The community in which the area is situated is participating in the National Flood Insurance program (see 44 CFR parts 59 through 79), or less than one year has passed since FEMA notification regarding such hazards; and

(2)Where the community is participating in the National Flood Insurance Program, flood insurance is obtained as a condition of execution of a Grant Agreement. g. Coastal Barrier Resources Act. In accordance with the Coastal Barrier Resources Act (16 U.S.C. 3501), the application may not target properties in the Coastal Barrier Resources System. h. Information for Research and Evaluation Studies. As a condition of the receipt of financial assistance under a HUD Program NOFA, all successful applicants will be required to cooperate with all HUD staff or contractors performing HUD-funded research and evaluation studies. i. Final Audit. Grantees are required to obtain a complete final closeout audit of the grantee financial statements for the grant funds. The audit must be completed by a certified public accountant

(CPA)in accordance with generally accepted government audit standards, if the Grantee expends $500,000 or more in a calendar or program year. A written report of the audit must be forwarded to HUD within 60 days of issuance. Grant recipients must comply with the requirements of 24 CFR part 84 or 24 CFR part 85 as stated in OMB Circulars A-110, A-87, and A-122, as applicable. 2. National Policy Requirements. a. See references to the General Section in Section III of this NOFA. C. * Reporting.* 1. Quarterly Administrative and Compliance Checkpoints Report (Quarterly Report). a. If the applicant is selected for funding, the applicant must submit a Main Street Quarterly Report to HUD. The report will be completed on-line. The Grantee will enter into the Quarterly Progress Report:

(1)On a quarterly basis:

(a)Administrative and production milestones, called “Checkpoints;”

(b)Financial status, by Budget Line Item as listed on form HUD-52825-A, “HOPE VI Budget,” including the grant budget, amounts authorized by HUD for expenditure, and amounts expended to date; and

(c)A short status narrative.

(2)On an annual basis, the Total real estate tax assessment for the census tract that includes the Main Street Area. b. HUD will provide training and technical assistance on the filing and submitting of Main Street Quarterly Progress Reports. c. Filing of Quarterly Progress Reports is mandatory for all grantees, and failure to do so within the required quarterly time frame will result in suspension of grant funds until the report is filed and approved by HUD. d. Grantees will be held to the milestones that are reported in the Quarterly Progress Report, as approved by HUD. 2. LOCCS. On a quarterly basis, grantees must report all obligations and expenditures in HUD's Line of Credit Control System (LOCCS), or its successor system. 3. Logic Model Reporting. The grantee's Logic Model will be based upon the Logic Model included in the application. Provided that the Logic Model complies with the requirements of this NOFA, the General Section, and the Grant Agreement, HUD will approve the Logic Model's outputs and outcomes at the time of approval of the Development Proposal. Beginning after HUD approval, at a minimum, the grantee will be required to submit a completed Logic Model showing outputs and outcomes achieved quarterly. See Logic Model reporting in the General Section. 4. Final Report. a. Within 30 days after the grantee obtains the results of the Final Audit, the grantee shall submit a final report. The final report will include a financial report, a narrative evaluating overall performance against its HOPE VI Main Street application and Main Street Quarterly Progress Report, and a completed Logic Model (form HUD-96010), including responses to the management questions. Grantees shall use quantifiable data to measure performance against goals and objectives outlined in its application. For FY2007, HUD is considering a new concept for the Logic Model. The new concept is a Return on Investment

(ROI)statement. HUD will be publishing a separate notice on the Return on Investment

(ROI)concept. The financial report shall contain a summary of all expenditures made from the beginning of the grant agreement to the end of the grant agreement and shall include any unexpended balances. b. The final narrative, financial report, and closeout documentation, as required by HUD, and the Logic Model shall be due to HUD 90 days after either the full expenditure of funds, or when the grant term expires, whichever comes first. c. Racial and Ethnic Data. HUD requires that funded recipients collect racial and ethnic beneficiary data. It has adopted the OMB Standards for the Collection of Racial and Ethnic Data. In view of these requirements, you should use form HUD-27061, Racial and Ethnic Data Reporting Form (instructions for its use), found on *http://www.HUDclips.org* ; a comparable program form; or a comparable electronic data system. VII. Agency Contacts A. *Technical Corrections to the NOFA.* 1. Technical corrections to this NOFA will be posted to the Grants.gov Web site. 2. Any technical corrections will also be published in the **Federal Register** . 3. The applicant is responsible for monitoring Grants.gov and the **Federal Register** during the application preparation period. Applicants may sign up for the Grants.gov notification service. Applicants signed up for the service will receive notification from Grants.gov if HUD issues any modifications to the NOFA, application package, or application instructions. B. *Technical Assistance.* Before the application deadline date, HUD staff will be available to provide the applicant with general guidance and technical assistance on this NOFA. However, HUD staff is not permitted to assist in preparing the application. If the applicant has a question or needs clarification, the applicant may call Lawrence Gnessin at

(202)402-2676, may send an e-mail to *lawrence.gnessin@hud.gov* , or may contact Ms. Dominique Blom, Deputy Assistant Secretary for Public Housing Investments, Department of Housing and Urban Development, 451 Seventh Street, SW., Room 4130, Washington, DC 20410-5000; telephone

(202)401-8812; fax

(202)401-2370 (these are not toll-free numbers). Persons with hearing and/or speech impairments may access these telephone numbers via text telephone

(TTY)by calling the toll-free Federal Information Relay Service at

(800)877-8339. For technical support about downloading an application, registering with Grants.gov, and submitting an application, please call Grants.gov Customer Support at

(800)518-GRANTS (This is a toll-free number) or e-mail Grants.gov at *support@grants.gov.* C. General Information. General information about HUD's HOPE VI programs can be found on the Internet at *http://www.hud.gov/offices/pih/programs/ph/hope6/.* General information specifically about HUD's HOPE VI Main Street program can be found on the Internet at *http://www.hud.gov/offices/pih/programs/ph/hope6/grants/mainstreet/.* VIII. Other Information A. *General Section References.* The following subsections of Section VIII of the General Section are hereby incorporated by reference: 1. Executive Order 13132, Federalism; 2. Public Access, Documentation, and Disclosure; 3. Section 103 of the HUD Reform Act; and B. *Environmental Impact.* A “Finding of No Significant Impact” (FONSI) with respect to the environment has been made for this notice in accordance with HUD regulations at 24 CFR part 50 that implement Section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332). The FONSI is available for public inspection between 8 a.m. and 5 p.m. in the Office of the General Counsel, Regulations Division, Department of Housing and Urban Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410-0500. C. *Paperwork Reduction Act Statement.* The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB), under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB Control Number 2577-0208. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number. Public reporting burden for the collection of information is estimated to average 68 hours per annum per respondent for the application and grant administration. This includes the time for collecting, reviewing, and reporting the data for the application, quarterly reports, and final report. The information will be used for grantee selection and monitoring the administration of funds. Response to this request for information is required in order to receive the benefits to be derived. Dated: June 22, 2007. Paula O. Blunt, General Deputy Assistant Secretary for Public and Indian Housing. [FR Doc. E7-12583 Filed 6-28-07; 8:45 am] BILLING CODE 4210-67-P 72 125 Friday, June 29, 2007 Notices Part V Environmental Protection Agency Establishment of the Total Coliform Rule Distribution System Advisory Committee and Meeting of the Total Coliform Rule Distribution System Advisory Committee; Notices ENVIRONMENTAL PROTECTION AGENCY [FRL-8333-2] Establishment of the Total Coliform Rule Distribution System Advisory Committee AGENCY: Environmental Protection Agency (EPA). ACTION: Notice; Establishment of Federal Advisory Committee. SUMMARY: As required by section 9(a)(2) of the Federal Advisory Committee Act, the United States Environmental Protection Agency (EPA or Agency) is giving notice that it is establishing the Total Coliform Rule Distribution System Advisory Committee (TCRDSAC). The purpose of the TCRDSAC is to provide advice and make recommendations to the Agency on revisions to the Total Coliform Rule (TCR), and on what information about distribution systems is needed to better understand the public health impact from the degradation of drinking water quality in distribution systems. EPA has determined that this Advisory Committee is in the public interest and will assist the Agency in performing its duties as directed in the 2006 EPA Appropriations Act. For the revision effort, EPA would like the Advisory Committee to advise the Agency on how the rule could be revised to improve implementation and strengthen public health protection. For the distribution system issues, EPA would like the Committee to evaluate available data and research on aspects of distribution systems that may create risks to public health and consider how to address the risks. TCRDSAC will be composed of approximately 16 members who will serve as representative members and regular government employees (RGE). In selecting nominees for a balanced committee, EPA will consider candidates from EPA, State and local public health and regulatory agencies; Native American tribes; large and small drinking water suppliers; consumer, environmental and public health organizations; and local elected officials. Copies of the Committee Charter will be filed with the appropriate congressional committees and the Library of Congress. FOR FURTHER INFORMATION CONTACT: Jini Mohanty, (Mail Code 4607M) Office of Ground Water and Drinking Water, Office of Water, 1200 Pennsylvania Avenue, NW., Washington, DC 20460, by e-mail *mohanty.jini@epa.gov,* or call

(202)564-5269. Dated: June 22, 2007. Benjamin H. Grumbles, Assistant Administrator, Office of Water. [FR Doc. E7-12649 Filed 6-28-07; 8:45 am] BILLING CODE 6560-50-P ENVIRONMENTAL PROTECTION AGENCY [FRL-8333-4] Meeting of the Total Coliform Rule Distribution System Advisory Committee—Notice of Public Meeting AGENCY: Environmental Protection Agency (EPA). ACTION: Notice. SUMMARY: Under Section 10(a)(2) of the Federal Advisory Committee Act, the United States Environmental Protection Agency

(EPA)is giving notice of a meeting of the Total Coliform Rule Distribution System Advisory Committee (TCRDSAC). The purpose of this meeting is to discuss the charge for the Advisory Committee, the purpose, efficacy, and applicability of the Total Coliform Rule (TCR), determine the availability of data and research to better understand the potential public health impact of the degradation of water quality in distribution systems, and discuss existing data sources and potential analyses to support the advisory committee. The TCR provides public health protection from microbial contamination in drinking water, while indicating the adequacy of treatment and the integrity of the drinking water distribution system. EPA committed to begin the process of revising the TCR as part of the 6-year review requirements of the Safe Drinking Water Act. EPA believes that an opportunity for implementation improvement exists in revising the TCR; the Agency plans to assess the effectiveness of the current TCR in reducing public health risk and what technically supportable alternative/additional monitoring strategies are available to improve implementation while maintaining or improving public health protection. Attendees will discuss the current TCR and its objectives, develop consensus recommendations on potential opportunities for improvements to the current rule, and discuss available data on distribution systems. Attendees will also discuss the proposed scope, possible discussion topics, and protocols for the Total Coliform Rule/Distribution System Advisory Committee. DATES: The public meeting will be held on Tuesday, July 17, 2007 (8:30 a.m. to 6 p.m., Eastern Daylight Time (EDT)) and Wednesday, July 18, 2007 (8 a.m. to 3 p.m. EDT). Attendees should register for the meeting by calling Jason Peller at

(202)965-6387 or by e-mail to *jpeller@resolv.org* no later than July 13, 2007. ADDRESSES: The meeting will be held at the Washington Marriott at 1221 22nd Street, NW., Washington, DC 20037. FOR FURTHER INFORMATION CONTACT: For general information, contact Jason Peller of RESOLVE at

(202)965-6387. For technical inquiries, contact Tom Grubbs ( *grubbs.thomas@epa.gov,*

(202)564-5262) or Ken Rotert ( *rotert.kenneth@epa.gov,*

(202)564-5280), Standards and Risk Management Division, Office of Ground Water and Drinking Water (MC 4607M), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460; fax number:

(202)564-3767. SUPPLEMENTARY INFORMATION: The meeting is open to the public. The Committee encourages the public's input and will take public comment at 5:15 p.m. on July 17, 2007, for this purpose. It is preferred that only one person present the statement on behalf of a group or organization. To ensure adequate time for public involvement, individuals interested in presenting an oral statement may notify Jini Mohanty by telephone at 202-564-5269 no later than July 16, 2007. Special Accommodations For information on access or services for individuals with disabilities, please contact Jini Mohanty at 202-564-5269 or by e-mail at *mohanty.jini@epa.gov.* To request accommodation of a disability, please contact Jini Mohanty, preferably at least 10 days prior to the meeting to give EPA as much time to process your request. Dated: June 26, 2007. Nancy Gelb, Acting Director, Office of Ground Water and Drinking Water. [FR Doc. E7-12648 Filed 6-28-07; 8:45 am] BILLING CODE 6560-50-P 72 125 Friday, June 29, 2007 Rules and Regulations Part VI Department of Energy Federal Energy Regulatory Commission 18 CFR Part 292 New PURPA Section 210(m) Regulations Applicable to Small Power Production and Cogeneration Facilities; Final Rule DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Part 292 [Docket No. RM06-10-001; Order No. 688-A] New PURPA Section 210(m) Regulations Applicable to Small Power Production and Cogeneration Facilities Issued June 22, 2007. AGENCY: Federal Energy Regulatory Commission, DOE. ACTION: Final rule; order on rehearing. SUMMARY: In this order on rehearing, the Federal Energy Regulatory Commission (Commission) denies rehearing on most major issues decided in Order No. 688, which amended its regulations governing small power production and cogeneration in response to section 1253 of the Energy Policy Act of 2005 (EPAct 2005), which added section 210(m) to the Public Utility Regulatory Policies Act of 1978 (PURPA). The Commission also clarifies certain aspects of the rule and adopts some additional filing requirements. DATES: *Effective Date:* The revisions to our regulations in this order on rehearing will become effective July 30, 2007. FOR FURTHER INFORMATION CONTACT: Susan G. Pollonais (Technical Information), Office of Energy Markets and Reliability, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426,

(202)502-6011. Marka Shaw (Technical Information), Office of Energy Markets and Reliability, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426,

(202)502-8641. Samuel Higginbottom (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426,

(202)502-8561. Mason Emnett (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426,

(202)502-6540. Eric Winterbauer (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426,

(202)502-8329. SUPPLEMENTARY INFORMATION: *Before Commissioners:* Joseph T. Kelliher, Chairman; Suedeen G. Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff. Order on Rehearing and Clarification I. Introduction 1. On October 20, 2006, the Federal Energy Regulatory Commission (Commission) issued Order No. 688, 1 in which the Commission revised its regulations governing the purchase requirement for electric energy produced by qualifying cogeneration and small power production facilities (QFs). This rulemaking proceeding was initiated to implement section 210(m) of the Public Utility Regulatory Policies Act of 1978 (PURPA), 2 which mandates termination of the requirement that an electric utility enter into a new contract or obligation to purchase electric energy from QFs 3 if the Commission finds that the QF has nondiscriminatory access to one of three categories of markets defined in section 210(m)(1)(A), (B), or

(C)of PURPA, as amended. 2. As relevant here, section 210(m) provides for the following: 1 *New PURPA Section 210(m) Regulations Applicable to Small Power Production and Cogeneration Facilities,* Order No. 688, 71 FR 64342 (Nov. 1, 2006), FERC Stats. & Regs. ¶ 31,233

(2006)(Final Rule). 2 Section 210(m) was added to PURPA by section 1253 of the Energy Policy Act of 2005 (EPAct 2005). *See* Pub. L. 109-58, 1253, 119 Stat. 594, 967 (2005). 3 The requirement that an electric utility enter into a new contract or obligation to purchase electric energy from QFs is referred to herein as either the mandatory purchase obligation or, more simply, the purchase requirement.

(i)Termination of the requirement that an electric utility enter into a new contract or obligation to purchase electric energy from a QF after certain specified findings are made by the Commission;

(ii)Reinstatement of the purchase requirement upon a showing that the conditions for terminating the requirement are no longer met;

(iii)Termination of the requirement that an electric utility enter into new contracts to sell electric energy to QFs after certain specified findings are made by the Commission;

(iv)Reinstatement of the sale requirement upon a showing that the conditions for terminating the requirement are no longer met; and,

(v)Preservation of existing contracts and obligations to purchase electric energy or capacity from, or to sell electric energy or capacity to, a QF. The Final Rule amended Part 292 of the Commission's regulations, pertaining to electric utilities' obligation to purchase electric energy from or sell electric energy to a QF, to address these provisions of section 210(m) and also to provide a process for applying for the reinstatement of the requirements to purchase electric energy from or to sell electric energy to QFs upon a showing that the conditions for the removal of those requirements are no longer met. 3. New § 292.309 of the Commission's regulations describes the findings that the Commission must make to justify relieving an electric utility's obligation to enter into new QF purchase contracts. If the Commission finds that the QF has nondiscriminatory access to one of three types of wholesale markets described in subparagraphs (A), (B), and

(C)of section 210(m)(1), the requirement that the electric utility enter into new contracts or obligations is terminated. In the Final Rule, the Commission concluded that the four existing “Day 2” markets 4 satisfy the requirements of subparagraph (A). The Commission found that the “Day 1” markets 5 satisfy some, but not all, of the requirements of subparagraph (B). Finally, the Commission found that the markets operated by the Electric Reliability Council of Texas (ERCOT) satisfy the requirements of subparagraph (C). All of these markets are administered by regional transmission organizations

(RTOs)or independent system operators (ISOs). 4 The four existing “Day 2” markets are those auction based day-ahead and real-time markets operated by the Midwest Independent Transmission System Operator Corp. (MISO), PJM Interconnection, LLC (PJM), New York Independent System Operator, Inc. (NYISO), and ISO New England, Inc. (ISO-NE). 5 The existing “Day 1” markets are those real-time markets operated by the California Independent System Operator Corporation (CAISO) and the Southwest Power Pool (SPP). 4. With regard to analyzing whether a QF has nondiscriminatory access to one of these markets, the Commission adopted three rebuttable presumptions. First, the Final Rule concluded that the existence of an open access transmission tariff (OATT), or a reciprocity tariff filed by a non-public utility pursuant to the Commission's open access regulations, 6 justified a rebuttable presumption that QFs have nondiscriminatory access to the markets in the transmission provider's service territory. Second, the Commission adopted a rebuttable presumption that QFs located within one of the four existing “Day 2” markets also have nondiscriminatory access to those markets. Third, the Commission concluded that QFs with a net capacity no greater than 20 MW may not have nondiscriminatory access to any market, notwithstanding the availability of service under an OATT or their location within a “Day 2” market. The Commission therefore adopted a rebuttable presumption that such small QFs do not have nondiscriminatory access to any market. 6 18 CFR 35.28(e). An OATT provides interconnection as well as transmission services on a nondiscriminatory basis. 5. Requests for rehearing and/or clarification of these rulings, and the procedure implementing them, were received from the American Forest and Paper Association (American Forest & Paper) and California Cogeneration Council (CCC), Central Vermont Public Service Corporation (Central Vermont), Cogeneration Association of California and the Energy Producers and Users Coalition (Cogeneration Association of California), the Council of Industrial Boiler Owners (CIBO), Deere & Company (Deere), Edison Electric Institute (EEI), Oklahoma Gas and Electric Company (OG&E), jointly from the Electricity Consumers Resource Council (ELCON), the American Iron and Steel Institute, the American Chemistry Council, and the Council of Industrial Boiler Owners (Industrial Parties), National Rural Electric Cooperative Association, (NRECA), Occidental Chemical Corporation (Occidental), PacifiCorp, and Public Interest Organizations (PIOs). Southern California Edison

(SCE)and PJM Interconnection, Inc.

(PJM)filed answers to the requests for rehearing. ELCON and Cogeneration Association of California filed answers those answers. 7 7 Rule 713(d) of the Commission's Rules of Practice and Procedure, 18 CFR 383.713(d), provides that the Commission will not permit answers to requests for rehearing. We will, accordingly, reject SCE and PJM's answers to the requests for rehearing. Rule 213(a)(2) of the Commission's Rules of Practice and Procedure, 18 CFR 385.213(a)(2), prohibits an answer to an answer unless otherwise ordered by the decisional authority. We are not persuaded to accept the answers of ELCON and Cogeneration Association of California and will, therefore, reject them. The alternative motions to reject of ELCON and Cogeneration Association of California are rejected as moot. 6. As discussed below, the Commission generally denies the requests for rehearing of the Final Rule. The Commission continues to believe that the Final Rule appropriately implements section 210(m) by identifying what type of markets satisfy the requirements of sections 210(m)(1)(A), (B), and

(C)and the criteria that will be used to determine whether a QF has nondiscriminatory access to one of those markets. We therefore do not disturb the basic implementation structure established in that order. We do, however, grant clarification regarding certain specific matters. The Commission addresses each of these issues in turn. II. Discussion A. Three Types of Markets 7. Section 210(m)(1) identifies three types of markets, nondiscriminatory access to which will satisfy the findings the Commission must make to terminate an electric utility's purchase requirement. As the Commission explained in the Final Rule, the statutory language of sections 210(m)(1)(A), (B), and

(C)requires us to differentiate among distinct types of markets when analyzing whether an electric utility will be relieved of its purchase obligation. The Commission must terminate the mandatory purchase obligation if we find that a QF has nondiscriminatory access to:

(A)“independently administered, auction-based day ahead and real time wholesale markets for the sale of electric energy” and “wholesale markets for long-term sales of capacity and electric energy”;

(B)“transmission and interconnection services that are provided by a Commission-approved regional transmission entity and administered pursuant to an open access transmission tariff that affords nondiscriminatory treatment to all customers” and “competitive wholesale markets that provide a meaningful opportunity to sell capacity, including long-term and short-term sales, and electric energy, including long-term, short-term and real-time sales, to buyers other than the utility to which the [QF] is interconnected”; 8 or, 8 In determining whether a meaningful opportunity to sell exists, section 210(m)(1)(B) directs the Commission to consider, among other factors, evidence of transactions within the relevant market.

(C)“wholesale markets for the sale of capacity and electric energy that are, at a minimum, of comparable competitive quality as markets described in subparagraphs

(A)and (B).” 8. In the Final Rule, the Commission considered the specific criteria set forth in these statutory provisions and concluded that certain markets in the United States satisfied some or all of the requirements of each. The Commission rejected proposals to adopt a single standard for relief, which in effect would interpret sections 210(m)(1)(A), (B), and

(C)as collectively defining a single type of market, access to which would require termination of the purchase requirement. The Commission found that the most reasonable interpretation of section 210(m)(1) is that Congress, in separately describing three different types of markets, was requiring the Commission to differentiate among each type of market when determining whether to terminate the purchase requirement. 1. Section 210(m)(1)(A) 9. Section 210(m)(1)(A) of PURPA requires the Commission to terminate an electric utility's obligation to purchase from a QF if the QF has nondiscriminatory access to

(i)independently administered, auction-based, day ahead and real time wholesale markets for the sale of electric energy; and

(ii)wholesale markets for long-term sales of capacity and electric energy. In the Final Rule, the Commission found that the four existing “Day 2” markets, MISO, PJM, ISO-NE and NYISO, satisfy the first prong of section 210(m)(1)(A) because the markets administered by these RTO/ISOs are, as required by the statute, independently administered, auction-based day ahead and real time wholesale markets for electricity. 9 The Commission further found that the existence of bilateral long-term contracts for long-term sales of capacity and energy in these markets satisfies the second prong of section 210(m)(1)(A). Since both of these requirements are satisfied, the Commission concluded that a showing of nondiscriminatory access to any of these “Day 2” markets would terminate the purchase requirement. 9 The Commission stated that any future determinations of whether a new “Day 2” market satisfies the requirements of section 210(m)(1)(A) would be considered on a case-by-case basis, either in response to an application for termination of the mandatory purchase obligation or a petition for declaratory order. Requests for Rehearing 10. No petitioner challenges the Commission's determination that the existing “Day 2” RTO/ISO markets satisfy the requirements of the first prong of section 210(m)(1)(A), *i.e.,* that they are independently administered, auction-based day ahead and real time wholesale electricity markets. Requests for rehearing instead focus on the second prong, regarding whether a wholesale market for long-term sales of capacity and electric energy also exists in these regions. PIOs argue that the mere existence of some bilateral long-term contracts does not demonstrate the existence of a competitive wholesale market for long-term sales or actual “meaningful opportunities” for QFs to sell energy or capacity long-term to multiple buyers. PIOs therefore contend that the Commission erred in finding that the “Day 2” markets satisfy the requirements of section 210(m)(1)(A). Cogeneration Association of California agrees that the existence of a “Day 2” market does not equate to a long-term market, arguing that access to a long-term market is essential to provide the assurance of long-term revenue necessary to provide incentives for construction of new resources. 11. American Forest & Paper and CCC argue that there has never been a time in the history of the power industry when some bilateral contracts did not exist. They contend that there is no evidentiary basis that shows such contracts are available to QFs on a nondiscriminatory basis or that there is a market for such contracts. They argue that the word “market” presumes more than an occasional, isolated transaction. American Forest & Paper and CCC argue that in the Final Rule the Commission not only fails to explain why the existence of bilateral contracts constitutes a meaningful competitive market, but also fails to establish any standard for what constitutes a “long term sale,” examine any of the bilateral contracts it believes exist to determine if they meet any such standard, or consider whether bilateral contracts are in fact available to QFs in any meaningful sense. 12. Cogeneration Association of California adds that the insufficiency of the bilateral markets is also demonstrated by the lack of meaningful participation in utility requests for offers. Cogeneration Association of California argues that the current practice of bilateral contracting is not indicative of a competitive market, nor is it proof that QFs have a meaningful opportunity to participate in whatever markets are there. It argues that there is significant discrimination against QFs when they attempt to enter into bilateral contracts. 13. American Forest & Paper and CCC also argue that the Final Rule errs as a matter of law by determining generically that “Day 2” markets satisfy section 210(m)(1)(A) rather than requiring utilities to demonstrate, on a case-by-case basis, the factual basis upon which relief is requested, which they argue is required by section 210(m)(3). American Forest & Paper and CCC contend that the Commission simply presumed adequate wholesale markets existed in the “Day 2” markets, rendering the language of section 210(m)(1)(A)(ii) of the statute a nullity by not requiring applicants to set forth the factual basis on which relief is requested. American Forest & Paper and CCC complain that QFs have been denied the opportunity to challenge the specific findings after sufficient notice of the factual claims being made. 14. American Forest & Paper and CCC cite *Alliant Energy Corporate Services Inc.* 10 as support for its belief that section 210(m)(3) requires notice to each affected QF prior to the Commission making a determination under section 210(m)(1). American Forest & Paper and CCC compare the Commission's generic treatment of “Day 2” markets with its case-by-case procedures for the reinstatement of the obligation, despite the almost identical statutory language in sections 210(m)(3) and 210(m)(4). American Forest & Paper argues that “regulations cannot alter the statutory scheme,” 11 stating that the procedural requirements have been inappropriately interpreted away in the Final Rule. 10 113 FERC ¶ 61,024 (2005). 11 American Forest & Paper Request for Rehearing at 13 ( *citing P. Gioso & Sons, Inc.* v. *Occupational Safety and Health Review Commission* , 115 F.3d 100, 105 (1st Cir. 1997)). 15. In American Forest & Paper and CCC's view, Congressional intent to encourage QF development supports interpreting section 210(m)(1)(A)(ii) as requiring the Commission to find, based on specific evidence, that there is a meaningfully competitive market prior to terminating the mandatory purchase obligation. American Forest & Paper and CCC note, for example, that EPAct 2005 did not repeal PURPA and provided for termination of the purchase requirement only if a very particular demonstration is made. 16. Industrial Parties similarly argue that the Commission erred in categorically finding that “Day 2” markets provide QFs with access to long-term wholesale markets. Industrial Parties contend that the Commission has ignored evidence that establishes that these markets are in their infancy. While acknowledging that suppliers will offer QFs a bilateral contract in the organized markets, Industrial Parties argue that the rates and terms and conditions of such contracts typically are not truly long-term and are discriminatory. Industrial Parties state that the long-term markets that exist are predominantly for resale—generators selling to load serving entities that in many cases have divested generation—and that these contracts are typically for a period of 6 to 18 months. 17. Industrial Parties also argue that the Commission incorrectly assumed that access to short-term “Day 2” markets is equivalent to a finding of access to long-term markets under section 210(m)(1)(A)(ii). Industrial Parties contend that the Commission must address the definition of “long-term,” arguing that the Commission appears to view a market in excess of one year as long-term. Industrial Parties contend that a long-term market is a market of several years' duration or at least the timeframe for planning a new generator, which they state is three to five years for a gas-fired combined cycle unit. Industrial Parties ask that the Commission require utility applicants to present information on the short- and long-term capacity obligations of load-serving entities in the relevant markets, their practices for meeting such obligations, and any barriers to entry into such markets. 18. Finally, American Forest & Paper and CCC argue that the Commission's interpretation of section 210(m)(1)(A)(ii) violates rules of statutory construction. Because subparagraph

(C)specifically refers to markets for the sale of capacity under both subparagraphs

(A)and (B), defining a third type of market that is “similar” to subparagraphs

(A)and (B), American Forest & Paper and CCC argue it is nonsensical to conclude that the markets for capacity referenced in subparagraphs (A)(ii) and (B)(ii) are not similar as between themselves. American Forest & Paper and CCC therefore argue that the Commission erred by not interpreting subparagraph (A)(ii) as imposing qualitative requirements comparable to those imposed under subparagraph (B)(ii). In American Forest & Paper and CCC's view, otherwise the inclusion of a requirement that the Commission review specific “evidence of transactions” in subparagraph (B)(ii) would require the Commission to ignore evidence of transactions when applying subparagraph (A)(ii), which the Commission did not do in the Final Rule. Commission Determination 19. The Commission denies rehearing of the determination that the four existing “Day 2” markets (MISO, PJM, NYISO, and ISO-NE) satisfy the requirements of the second prong of section 210(m)(1)(A). Petitioners on rehearing essentially argue that the Commission should have imposed a standard higher than what the statutory language literally requires, *i.e.* , nondiscriminatory access to “wholesale markets for long-term sales of capacity and electric energy.” The Commission declined to do so in the Final Rule and we affirm that determination here. 20. The Commission did not simply assume the existence of long-term markets in the “Day 2” markets, as some petitioners argue. Rather, the Commission found that the existence of bilateral long-term contracts for long-term sales of capacity and energy is a sufficient indication of a market. The Commission continued that it is reasonable to conclude that the subparagraph (A)(ii) requirement for long-term markets is met because bilateral long-term contracts are available to participants in the footprints of the MISO, PJM, ISO-NE, and NYISO. The Commission noted that long-term contracts were to be expected in these markets because of the nature of these markets. In this regard, the transmission access offered by RTOs allows suppliers (including QFs) the opportunity to enter into long-term bilateral contracts. RTOs have no incentive to favor one set of suppliers over others in providing transmission access. By eliminating pancaked rates, eliminating problems with internal loop flows, and improving the reliability of transmission operations over a broad multi-utility region, an RTO offers regional transmission service which facilitates longer-term contracting practices. This is because an RTO's footprint encompasses many different wholesale buyers, providing significant opportunity for a seller to reach many potential wholesale buyers. 21. In addition, organized markets operated by an RTO facilitate long-term bilateral contracts between sellers (including QFs) and wholesale buyers by reducing the costs to sellers of making long-term bilateral supply commitments. In the event a seller is unable to produce the energy required under a bilateral contract (for example, because of an outage), the seller can easily acquire replacement energy from the organized market at a transparent and competitive price. Even when the seller is physically capable of producing its contractually-required energy, the seller can acquire the energy from the RTO's market whenever it is cheaper to do so. Both of these factors reduce the cost to a seller of entering into a long-term bilateral contract. 12 12 Final Rule at P 120. 22. With respect to bilateral long-term markets in these RTO/ISOs, the Commission noted that no commenters argued that long-term contracts do not exist in these markets or that QFs are precluded from entering into them with willing buyers. 13 The Commission also pointed out that electronic quarterly report

(EQR)filings indicate that there are in fact contracts for long-term sales of capacity and energy in each of the “Day 2” markets. The Commission concluded that the existence of these long-term contracts is a sufficient indication that long-term wholesale markets exist in those regions. It is telling that no petitioner on rehearing challenges (indeed, several petitioners concede) that long-term contracts exist in the “Day 2” markets. Instead, petitioners argue that existence of such contracts does not necessarily indicate that an *adequate* market for long-term energy and capacity exists. Yet the very fact that buyers and sellers of long-term energy and capacity have found each other, evidenced by the contracts they have entered into, demonstrates that a market for such products does in fact exist, which is all that the statute requires. 13 Final Rule at P 117-20. 23. The thrust of many of the arguments on rehearing is that the Commission should have considered whether these long-term markets were competitive or as robust as QFs would like. That is not the standard set forth by Congress in section 210(m)(1)(A)(ii), which requires only that a long-term market is present, not that it be competitive or that it meet the subjective preferences of all QFs. As the Commission noted in the Final Rule, Congress knew how to impose a more specific level of review regarding the quality of the relevant long-term market since, in contrast to the language it used in section 210(m)(1)(A)(ii), it expressly used prescriptive language in section 210(m)(1)(B)(ii). 24. Section 210(m)(1)(A)(ii) requires only that we find access to “wholesale markets for long-term sales of capacity and electric energy.” The term “market” is not defined with respect to any particular number of purchasers or sellers or the quality of the contracts available. One definition is “the action or business of buying and selling; an instance of this, a commercial transaction; a (good or bad) bargain.” 14 Another definition is “a meeting together of people for the purpose of trade by private purchase and sales and usually not by auction.” 15 These standard definitions support the Commission's finding that the ability of QF sellers to reach purchasers and the existence of long-term contracts for capacity and energy are sufficient to determine that “markets” exist for purposes of section 210(m)(1)(A)(ii). In contrast to section 210(m)(1)(A)(ii), section 210(m)(1)(B)(ii) requires us to find access to “competitive wholesale markets that provide a meaningful opportunity to sell capacity, including long-term and short-term sales, and electric energy, including long-term, short term and real-time sales.” Under this statutory directive, the Commission must not only find that markets exist, but it must assess the quality of the markets and find that they are “competitive.” Congress chose not to require a finding of “competitive” long-term markets as a condition of invoking section 210(m)(1)(A)(ii) and we have given reasonable meaning to this difference in language. 16 14 *The New Oxford English Dictionary* Vol. 1 A-M (1993 ed.). 15 *Webster's New Collegiate Dictionary* (1979 ed.). 16 Some petitioners argue that the Commission's reliance on EQR reports to find the existence of a long-term market in “Day 2” regions is contradicted by Congress' reference to “evidence of transactions” in section 210(m)(1)(B), but not in section 210(m)(1)(A). The requirement in subparagraph

(B)for evidence of transactions does not bar the use of such evidence in subparagraph (A), but merely indicates that such evidence is not required under subparagraph (A). 25. Congress's decision to establish different standards in subparagraphs

(A)and

(B)makes sense in light of the ultimate question of whether a QF has nondiscriminatory access to potential purchasers other than the host utility, sufficient to justify terminating the purchase requirement, which is the overarching theme of section 210(m)(1). In the “Day 2” markets, which were in existence when EPAct 2005 was enacted and of which Congress was aware when it was considering PURPA reform, energy sold under bilateral long-term contracts as well as in the competitive day-ahead and real-time energy markets is simply scheduled as a delivery to the RTO and ISO grid. These market conditions make it possible for parties to enter into long-term contracts with confidence that electric energy sold pursuant to these contracts will be delivered. It is reasonable to conclude, therefore, that Congress considered the criteria specified for long-term contracts in section 210(m)(1)(B) unnecessary for section 210(m)(1)(A). This explains the distinctions embedded in the standards set forth in sections 210(m)(1)(A) and 210(m)(1)(B). 26. It is true, as petitioners point out, that in some “Day 2” markets there is no formalized market for long-term sales of energy and capacity. It may also be true that such long-term markets are nascent and that the sales that do occur are predominantly to load serving entities for resale. All that is required by section 210(m)(1)(A)(ii), however, is that there be a market, not that it has particular market attributes desired by petitioners. Petitioners have offered no reasonable alternative to our interpretation of section 210(m)(1). 27. Petitioners are correct to point out that the Commission did not expressly define what length of contract it considered “long-term” within the meaning of section 210(m)(1)(A)(ii). The Commission explained, however, that it was relying on EQR data to find that long-term contracts existed in the “Day 2” markets. Long-term contracts are defined for EQR purposes as having a term of one year or more and, thus, the Commission's findings regarding long-term contracts in the Final Rule incorporated that definition. While some petitioners argue that a longer-term should have been used, we continue to believe that contracts of a year or more are sufficiently long-term to meet the statutory requirement that there be “wholesale markets for long-term sales of capacity and energy” within the meaning of section 210(m)(1)(A)(ii). 17 17 Although the statute contrasts real-time, day-ahead, and long-term wholesale sales, it provides no definition of those categories of transactions. Nevertheless, the terms real-time and day-ahead markets were well known with respect to ISOs and RTOs at the time EPAct 2005 was enacted and definitions of these markets were well understood, *i.e.* , Congress knew the meaning the terms as used with respect to ISOs and RTOs existing at the time of enactment of EPAct 2005. Additionally, the Commission at the time of enactment of EPAct 2005 had for years defined long-term contracts under the OATT as one year or longer. Similarly, the Commission has treated power sales with a contract term of greater than one year to be “long-term” for reporting purposes. *See* , *e.g.* , *Revised Public Utility Filing Requirements* , Order No. 2001, 67 FR 31043, FERC Stats. & Regs. ¶ 31,127 (2002), Order No. 2001-A, 100 FERC ¶ 61,074, *reconsideration and clarification denied* , Order No. 2001-B, 100 FERC ¶ 61,342 (2002). We thus believe it is reasonable to use the convention of treating contracts of a year or more as “long-term” consistent with our longstanding practice. 28. We note that the Commission has initiated a proceeding to explore ways to improve the operation of wholesale organized electric markets administered by RTOs and ISOs, including actions the Commission might take to further improve opportunities for long-term contracting in RTO and ISO regions. 18 While we disagree with petitioners who argue that QFs above 20 MW do not have access to long-term contracting opportunities in organized markets, or that section 210(m)(1)(A) requires us to find “competitive” or “robust” contracting opportunities, we are taking steps to facilitate additional opportunities for long-term contracting. 18 *Wholesale Competition in Regions with Organized Electric Markets* , 119 FERC ¶ 61,306. 29. The Commission also rejects arguments that it may not make generic findings in this rulemaking as to the “Day 2” markets satisfying the requirements of section 210(m)(1)(A). The Commission has broad discretion to adopt generic policy or make generic findings through the rulemaking process rather than case-by-case adjudications. 19 Establishing generic findings in this rulemaking provides all parties, including electric utilities and QFs alike, a reasonable chance to be heard on common issues that arise in various market structures and involving classes of QFs. Indeed, no party has sought rehearing of the Commission's conclusion that the “Day 2” markets satisfy the first prong of section 210(m)(1)(A). It is just as appropriate for the Commission to find generically, in this rulemaking, that long-term markets exist in the “Day 2” RTO/ISOs as it is to find that those RTO/ISOs operate independently administered, auction-based day ahead and real time wholesale markets within the meaning of section 210(m)(1)(A)(i). 19 *Securities and Exchange Comm'n* v. *Chenery* , 332 U.S. 194, 202-03, *reh'g denied* , 332 U.S. 747 (1947). 30. These generic findings do not violate the requirements of section 210(m)(3), as some petitioners argue. Under section 210(m)(1), the Commission must terminate the purchase requirement if it makes certain findings regarding nondiscriminatory access to specified markets. That provision of the statute does not specify the particular procedural mechanism the Commission must use in making those findings and, thus, the Commission has discretion to act through a rulemaking, case-by-case determinations, or some combination thereof. Section 210(m)(3) does not, as the petitioners appear to assume, require the Commission to await an application from an electric utility in order to make any of the particular findings specified in section 210(m)(1). While the Commission made certain generic findings in the Final Rule, it also required electric utilities (including those in the “Day 2” markets) that seek relief from the obligation to enter into new contracts or obligations with QFs to file an application pursuant to regulations implementing section 210(m)(3). 20 Thus, the Commission has incorporated the application process into its implementing regulations, combining the application procedures with generic findings and rebuttable presumptions to streamline the Commission's review. The resulting structure is fully consistent with the requirements of both sections 210(m)(1) and 210(m)(3). 21 20 Final Rule at P 102. 21 The comparative structures of sections 210(m)(3) and 210(m)(4) do not support a different outcome. Section 210(m)(4) specifies the procedural requirements for reinstating the purchase requirement *after* the Commission has entered an order terminating that requirement and, thus, does not govern the Commission's initial procedures for acting to terminate the requirement. 2. Section 210(m)(1)(B) 31. Section 210(m)(1)(B) requires termination of the purchase obligation if a QF has nondiscriminatory access to

(i)transmission and interconnection services provided by a Commission-approved regional transmission entity pursuant to an open access tariff and

(ii)competitive wholesale markets providing a meaningful opportunity to sell long-term and short-term capacity and electricity to buyers other than the interconnecting electric utility. The Commission concluded in the Final Rule that the CAISO and SPP are regional transmission entities within the meaning of the first prong of section 210(m)(1)(B), but made no findings as to the second prong for any market, including those operated by CAISO and SPP. The Commission also stated that any future determinations of what transmission providers qualify as a regional transmission entity within the meaning of the first prong will be made on a case-by-case basis. The Commission provided examples of factors it may consider in making that determination, such as sufficient regional scope or configuration of the multiple discrete transmission systems the regional transmission entity controls. Requests for Rehearing 32. Occidental argues that the Commission erred in reserving the discretion to deem an entity a “Commission-approved regional transmission entity” in the context of a section 210(m) proceeding. Because section 210(m)(1)(B)(i) refers to a “Commission-approved” entity, Occidental argues that a transmission provider must have been deemed by the Commission to be a “regional transmission entity” prior to the filing of an application for relief from the purchase requirement. 33. PacifiCorp argues that evidence of robust bilateral markets or actual sales by a QF to wholesale non-PURPA purchasers should be considered when the Commission determines whether QFs have the requisite “meaningful opportunity” to sell capacity and energy to other buyers within the meaning of section 210(m)(1)(B)(ii). PacifiCorp offers factual examples of QF plans to participate in wholesale markets, depending on market prices, although it acknowledges that the examples it used are extreme and did not materialize. PacifiCorp asks the Commission to establish a rebuttable presumption that evidence of a robust bilateral market featuring liquid trading points, or actual sales by QFs, should be adopted for purposes of implementing section 210(m)(1)(B)(ii). Alternatively, PacifiCorp asks the Commission to provide further guidance as to how the standards of that section will be applied. 34. With regard to the SPP market, OG&E argues that the Commission erred in declining to find that utilities operating in SPP also satisfy the second prong of section 210(m)(1)(B) or to provide guidance with respect to the information required for utilities to make such a showing. OG&E argues that its comments on the NOPR adequately demonstrated that QFs have nondiscriminatory access to competitive markets within SPP. If the evidence it submitted was insufficient, OG&E claims the Commission erred by failing to provide guidance as to what type of information would satisfy the Commission's requirements. OG&E contends that such guidance would reduce the costs and burdens associated with preparing an application under section 210(m). 35. With regard to the CAISO market, Cogeneration Association of California argues that the lack of new construction in California, despite a clear supply shortage, is evidence that competitive long-term markets do not exist in that region. Cogeneration Association of California also argues that competitive markets must have price transparency, including both pricing terms and non-price terms, contending that there is virtually no disclosure to any market participant of prices secured or approved for capacity or energy purchased by utilities. Industrial Parties point to other characteristics of the California market that, in their view, would preclude a finding of access to sufficiently competitive markets, such as exit fees, the lack of direct access, and the dominance of utility generation in an otherwise thinly traded market. Commission Determination 36. We disagree with Occidental's assertion that a transmission entity must have been deemed by the Commission to be a “regional transmission entity” prior to the filing of an application for relief from the purchase requirement. As we explained in the Final Rule, section 210 does not define regional transmission entity and, therefore, the Commission has discretion in interpreting that term. At the time of enactment of section 210(m), Congress was aware of the existence of Commission-approved RTOs and ISOs with varying degrees of regional scope (some spanning many states and some covering only large individual states), as well as the continuing voluntary development of various types of transmission organizations. 22 It is reasonable to conclude that Congress, by using the generic term “regional transmission entity” in section 210(m)(1)(B)(i), intended to leave it to the Commission's discretion to determine on a case-be-case basis whether or not an entity is regional within the meaning of the statute. 23 22 Indeed Congress, in EPAct 2005 incorporated into the Federal Power Act

(FPA)definitions of RTO and ISO, with the RTO definition specifically recognizing that such an entity must be of sufficient “regional” scope, whereas the ISO definition does not contain a sufficient regional scope element. Pub. L. 109-58, 1291, 119 Stat. 594, 984

(2005)(codified at 16 U.S.C. 796(27), (28)). *Cf.* Pub. L. 109-58, 1286, 119 Stat. 594, 981

(2005)(adding section 206(a)(2) to the FPA, allowing Commission to order refunds for certain sales in “organized” markets). 23 Congress in section 210(m) did not use the term “regional transmission organization” and thus presumably did not intend to limit a “regional transmission entity” to the regional scope requirements of Order No. 2000. *Regional Transmission Organizations* , Order No. 2000, 65 FR 809 (Jan. 6, 2000), FERC Stats. & Regs. ¶ 31,089 (1999), *order on reh'g* , Order No. 2000-A, 65 FR 12088 (Mar. 8, 2000), FERC Stats. & Regs. ¶ 31,092 (2000), *dismissed sub nom. Pub. Util. Dist. No. 1 of Snohomish County, Washington* v. *FERC* , 272 F.3d 607 (D.C. Cir. 2001). 37. We also deny rehearing of the decision not to find in the context of this rulemaking that the SPP market satisfies the second prong of section 210(m)(1)(B). While OG&E claims to have provided in its initial comments evidence demonstrating the quality of the SPP market, 24 what OG&E provided was little more than cursory comments and a description of bidding procedures that are being adopted in Oklahoma. Section 210(m)(1)(B)(ii) requires a showing of “competitive wholesale markets that provide a meaningful opportunity to sell capacity, including long-term and short-term sales, and electric energy, including long-term, short-term and real-time sales, to buyers other than the utility to which the qualifying facility is interconnected.” This provision also provides that “[i]n determining whether a meaningful opportunity to sell exists the Commission shall consider, among other factors, evidence of transactions within the relevant market.” We do not find OG&E's cursory submission sufficient to meet the statutory requirements. Moreover OG&E did not include any evidence of transactions in the SPP market. There was, and continues to be, an insufficient record in this proceeding to find that the SPP market satisfies the second prong of section 210(m)(1)(B). 24 OG&E Comments at 4-6. 38. With regard to OG&E's and PacifiCorp's requests for further guidance, we believe that the statutory language requiring that a QF have a meaningful opportunity to sell capacity and energy to buyers other than the interconnected utility means an actual, and not just theoretical, opportunity. Concrete evidence of transactions would further that finding, as the statutory language implies. To the extent such evidence is not available, we would expect at a minimum a petitioning electric utility to explain any lack of evidence of transactions and to provide a reasoned explanation of how the Commission could find that a meaningful opportunity to sell to buyers other than the interconnected utility exists in the absence of a history of transactions. 25 PacifiCorp's evidence of QF proposals that never reached fruition does not provide an adequate basis for the Commission to make any presumptions regarding whether particular markets satisfy the requirements of section 210(m)(1)(B)(ii). We continue to believe that it is best to address on a case-by-case basis whether non-RTO/ISOs and RTO/ISOs that do not have both auction-based real-time and day-ahead markets satisfy those statutory requirements. 26 25 The Commission is aware that certain types of evidence of transactions may contain information that an electric utility considers to be confidential. If information is considered confidential by the electric utility, procedures exist to maintain its confidentiality. 26 Final Rule at P 145. 39. The claims of Cogeneration Association of California and the Industrial Parties regarding the lack of a sufficiently competitive market in California can be addressed in any individual cases concerning California. We note that the CAISO has been found only to satisfy section 210(m)(1)(B)(i) and that a separate finding of “competitive wholesale markets” is required under section 210(m)(1)(B)(ii). Thus, if a California utility makes a filing pursuant to section 210(m)(3) and § 292.310 of the Commission's regulations, and claims that it satisfies the section 210(m)(1)(B) criteria for relief from the purchase obligation, the issue of whether “competitive wholesale markets” exist will be an issue in that proceeding and the burden will be on the applicant to make the required demonstration. 27 27 The Commission also left open the option of California utilities seeking a determination that the California market satisfies section 210(m)(1)(A) by filing requests for declaratory orders, after there is a functioning “Day 2” RTO/ISO in California. Final Rule at P 157. 3. A Single Standard of Relief 40. As explained above, the Commission concluded in the Final Rule that the most reasonable interpretation of section 210(m)(1) is that Congress, in setting forth three discrete tests for three different types of markets, was directing the Commission to differentiate among three different markets, access to which would require termination of the purchase requirement provided such access is available on a nondiscriminatory basis. A number of petitioners had advocated a different interpretation of section 210(m)(1), arguing that subparagraphs (A), (B), and (C), when read together, establish a single standard for relief from the purchase requirement. In their view, these separate provisions together require electric utilities to demonstrate that a QF would remain economically viable or would otherwise have access to the technical equivalent of the purchase requirement in order to terminate the purchase requirement. The Commission rejected that view by interpreting section 210(m)(1) as establishing different standards for each of the three types of markets identified in subparagraphs (A), (B), and (C). Requests for Rehearing 41. American Forest & Paper and CCC again challenge the Commission's determination that the three standards of relief described in section 210(m)(1) were intended to be different in terms of the organization and competitiveness of the relevant market or the evidentiary showings required for each. They argue that EPAct 2005 did not repeal PURPA or the Commission's obligation to encourage QF development and, therefore, the Commission's interpretation of section 210(m)(1) is unreasonable. American Forest & Paper and CCC suggest that section 210(m)(1)(C) clearly requires markets under subparagraphs (A),

(B)and

(C)to be of similar competitive quality since markets that satisfy subparagraph

(C)must be “similar” to those described in subparagraphs

(A)and (B). American Forest & Paper and CCC conclude that the Commission has adopted an unreasonable statutory construction by interpreting section 210(m)(1) as referring to three distinct types of markets. Commission Determination 42. The Commission denies requests for rehearing of the determination not to adopt a single test to evaluate whether the requirements of section 210(m)(1) are met. We continue to believe, as we found in the Final Rule, that the most reasonable interpretation of section 210(m)(1) is that Congress, in setting forth discrete tests for three different types of markets, was requiring the Commission to differentiate among these markets and the differing circumstances they present in determining whether a utility is relieved of the purchase requirement. As discussed above, this interpretation is supported by the different language Congress used in subparagraphs

(A)and

(B)and the consequent need to make meaningful distinctions in the explicit statutory language Congress used. Otherwise, subparagraphs

(A)and

(B)presumably would have been collapsed by Congress into one test. 43. We agree the reference in section 210(m)(1)(C) to markets that are of “comparable competitive quality as markets described in subparagraphs

(A)and (B)” indicates Congress' belief that those two types of markets share a certain set of competitive qualities. It does not follow, however, that the Commission should disregard the specific statutory tests in each of those subparagraphs when applying section 210(m)(1). The structure of section 210(m)(1), which separately describes different types of markets, makes clear that Congress was establishing a particular set of tests for the Commission to apply. In the Final Rule, the Commission adopted the most reasonable interpretation of subparagraph (C)—that Congress believed the two types of markets identified in subparagraphs

(A)and (B), while distinct between themselves, contain certain competitive qualities that justify termination of the purchase requirement for any QF with nondiscriminatory access to those markets. Subparagraph

(C)directs the Commission to consider these competitive qualities when analyzing whether there are other markets that, while not meeting the specific requirements of subparagraphs

(A)and (B), are sufficiently competitive to justify termination of the purchase requirement. 44. The fact that the markets identified in subparagraphs

(A)and

(B)contain certain competitive qualities does not mean that they are the same type of market, or that a single test must be adopted for determining whether a particular market satisfies the requirements of a particular subparagraph. Such an interpretation would undermine Congress's decision to separately identify the two types of markets that it believes are sufficiently competitive to justify termination of the purchase requirement. It would also conflict with the particular determinations to be made under each of the subparagraphs. Subparagraph

(A)explicitly refers to both “day ahead and real time” ( *i.e.* , “Day 2”) organized markets. RTO/ISO day-ahead and real time markets are operated pursuant to Commission tariffs containing market rules and market mitigation aimed at preventing exercises of market power. It is reasonable to conclude that Congress assumed these markets to be sufficiently competitive, in combination with markets for long-term contracts, to justify termination of the mandatory purchase obligation. 45. As we noted in the Final Rule, “Day 2” markets are generally recognized as providing greater opportunities for QFs and other independent generators to make sales to a large number of buyers than other markets because the existence of day-ahead and real-time energy markets allows all competing generators to submit bids to participate on a nondiscriminatory basis in a market from which many buyers over a large area make purchases. While the “Day 1” markets also provide opportunities for independent generators to compete, the markets are more limited. It is therefore not surprising that the factual showing required under section 210(m)(1)(B) is more difficult relative to section 210(m)(1)(A), which enjoys the benefit of the “Day 2” market structures. These different standards support, rather than undermine, the Commission's interpretation that subparagraphs

(A)and

(B)separately identify the particular markets that Congress has deemed sufficiently competitive to justify termination of the purchase requirement. 46. The Commission's task under section 210(m)(1)(C) is, therefore, to determine the set of competitive qualities that are shared by markets satisfying the requirements of subparagraphs

(A)and (B). Recognizing this task, the Commission declined in the Final Rule to adopt any bright line tests when applying subparagraph (C). Simply put, the common objective of subparagraphs

(A)and (B), and therefore subparagraph (C), is the identification of a wholesale marketplace where QFs have alternatives to their local utility to sell their electric energy. We believe the three-tiered structure of section 210(m)(1) indicates a finding by Congress that two particular market designs provide those alternatives, while directing the Commission to consider whether other market designs might as well. 47. Congress could have stated a broad, general finding to be made by the Commission such as “workably competitive markets.” Instead, Congress tailored subparagraphs

(A)and

(B)to establish criteria specific to each market design that, in its view, provide sufficient sales alternatives for QFs. Under these circumstances, we believe it appropriate to use the market designs identified in subparagraphs

(A)and

(B)as guides when analyzing whether an alternative market design satisfies the requirements of subparagraph (C). For example, the Commission found in the Final Rule that the markets in ERCOT satisfy the statutory requirements of subparagraph

(C)because they are of comparable quality to those described in subparagraph (A). We continue to believe that finding is appropriate and note that no petitioner challenges it on rehearing. 48. Finally, while it is true that EPAct 2005 did not repeal PURPA or the Commission's obligation to encourage QF development, enactment of section 210(m) of PURPA clearly changed the rights of QFs under PURPA. The Commission has no discretion other than to terminate the purchase requirement if it finds that a QF has nondiscriminatory access to any of the markets described in section 210(m)(1)(A),

(B)or (C). It would be inappropriate for the Commission to ignore this mandate by implementing section 210(m)(1) in a way that undermines the specific standards of relief Congress chose to establish in the statute. B. Nondiscriminatory Access to a Market 49. The Commission also must determine that a QF has nondiscriminatory access to a PURPA section 210(m)(1) market in order to terminate the purchase requirement. In the Final Rule, the Commission adopted several presumptions to be used in determining whether access to a particular market is available on a nondiscriminatory basis in order to streamline processing of applications for termination of the purchase requirement. 50. First, the Final Rule found that a QF's eligibility for service under an OATT, or a reciprocity tariff filed by a non-public utility, creates a rebuttable presumption that the QF has nondiscriminatory access to the relevant market. Second, the Commission adopted a rebuttable presumption that QFs interconnected with electric utility members of a “Day 2” RTO/ISO have nondiscriminatory access to the “Day 2” market. Finally, regardless of available transfer capability

(ATC)under an OATT or location within a “Day 2” market, the Final Rule establishes an additional rebuttable presumption that QFs with a net capacity no greater than 20 MW do not have nondiscriminatory access to wholesale markets. 51. These rebuttable presumptions were designed to work together to facilitate prompt Commission review of requests to terminate the purchase requirement within the 90-day time frame mandated in the statute. Various petitioners challenge the adoption of these presumptions on rehearing, which we address below. 1. The OATT 52. The Commission first established a rebuttable presumption that a QF has nondiscriminatory access to a market if it is eligible for service under a Commission-approved OATT, or Commission-filed reciprocity tariff, and Commission-approved interconnection rules. 28 If the Commission determines that a particular market meets the criteria of section 210(m)(1)(A), (B), or (C), and a QF in that market is eligible for service under an OATT or reciprocity tariff, a QF may seek to rebut the presumption of access to the market by providing specific and credible evidence that the QF does not have nondiscriminatory access due to operational characteristics or transmission constraints. If the QF is unable to make this demonstration, the purchase requirement will be terminated. 28 Transmission providers are required to provide interconnection as well as transmission services on a nondiscriminatory basis under their OATTs. 53. In the Final Rule, the Commission determined that only issues other than issues related to the provision of open access transmission under the OATT would be considered when analyzing whether the presumption of nondiscriminatory access to markets has been rebutted. The Commission rejected requests to allow a QF to litigate open access implementation issues in the context of these 90-day applications, concluding that complaint proceedings are the appropriate forum for such disputes. The Commission also rejected arguments that it is unreasonable to rely on a presumption that a Commission-approved OATT provides nondiscriminatory access to markets in light of the then-pending NOPR in the OATT reform rulemaking, Docket Nos. RM05-17, *et al.* , in which reforms to the pro forma OATT had been proposed. Requests for Rehearing 54. Occidental challenges the Commission's reliance on an OATT to create a rebuttable presumption that QFs have nondiscriminatory access to the relevant wholesale markets. Occidental argues that the Commission's actions in the OATT reform rulemaking have demonstrated that, notwithstanding the existence of an OATT, there remain continuing opportunities for undue discrimination by transmission entities. Occidental contends that the Commission's statement in the Final Rule that it had not found actual discrimination in the OATT reform rulemaking is inconsistent with findings in the OATT reform NOPR that deficiencies in the OATT needed to be addressed. In Occidental's view, the Commission's determination in the OATT reform NOPR that there are remaining opportunities for undue discrimination bear directly on the finding that the Commission must make under section 210(m) that a utility is administering its OATT in a nondiscriminatory manner. 55. Occidental argues that the Commission's determination that only issues not related to the provision of open access transmission under the OATT may be raised to rebut the presumption of nondiscriminatory access is inconsistent with the statutory language of section 210(m) and is a violation of due process. Industrial Parties assert that the Commission must consider evidence of discrimination when analyzing whether the presumption has been rebutted. Failure to do so would, in their view, violate the Commission's statutory obligation to eradicate discrimination. 56. Occidental further argues that the Commission should clarify that QFs under section 210(m)(1)(B) and

(C)have the same opportunity to rebut the presumption of nondiscriminatory access as QFs under section 210(m)(1)(A). Occidental notes that the Commission lists several factors in the Final Rule as a possible rebuttal to a finding of nondiscriminatory access to the markets set forth in subparagraph (A), but that it is not clear if the factors are also relevant to the question of whether the purchase obligation should be terminated under subparagraphs

(B)and (C). If the Commission does not grant clarification, Occidental requests rehearing on this issue. 57. Cogeneration Association of California argues that existence of an OATT is insufficient to guarantee nondiscriminatory access since it may not provide physical transmission rights. Because QFs generate electricity as a necessary by-product of their service to their thermal hosts, Cogeneration Association of California contends that a cogenerator must have a physical location to deliver the electricity. Cogeneration Association of California argues that this requires physical transmission rights that recognize the operating requirements of cogeneration operations. In its view, the lack of physical delivery rights places a cogeneration QF in the untenable situation of either ceasing operation or violating ISO tariff and scheduling protocols, thereby incurring penalties or sanctions. Cogeneration Association of California goes on to illustrate its concern using the California market redesign effort as an example. Because the congestion revenue rights are allocated first to load-serving entities, and the remainder are auctioned to other market participants, Cogeneration Association of California fears that existing QFs would be unable to hedge congestion and that new projects would be unable to obtain long-term rights necessary to support long-term contacts, a prerequisite for financing. 58. Occidental adds that, if the Commission does not reject the OATT presumption on rehearing, it should require applicants to submit at a minimum additional information such as clear and specific definitions and descriptions of each real-time, short- and long-term market the utility claims in its section 210(m) application that the QF is able to access on a nondiscriminatory basis. 59. Multiple petitioners argue that the Commission erred by establishing any form of rebuttable presumption. Industrial Parties contend that the Administrative Procedure Act requires that the applicant for relief—in this case an electric utility—has the burden of proof. 29 Industrial Parties argue that an agency may not use a presumption to shift the burden of proof if the result is not in keeping with the statutory purpose and, in their view, it runs counter to section 210(m) to impose on QFs the burden to prove a lack of nondiscriminatory access to markets since the relevant information concerning transmission and access to markets is most likely in the possession of the utility rather than the QF. 29 Industrial Parties Request for Rehearing at 7 ( *citing Hi-Tech Furnace Sys.* v. *FCC,* 224 F. 3d 781 (D.C. Cir. 2000); *Pub. Serv. Comm'n of New York* v. *FERC,* 866 F.2d 487 (D.C. Cir. 1989)). 60. PIOs argues that creating rebuttable presumptions that electric utilities meet section 210(m) requirements is contrary to the plain language of section 210(m)(3). PIOs argues that, when a utility seeks relief from the mandatory purchase obligation, the Commission is required by section 210(m)(3) to consider evidence of the assertion that the required access and markets are actually available to QFs in the utility's service territory, including a utility in an RTO. In PIOs' view, the Commission is not authorized to permit utilities to escape the obligation to set forth facts that demonstrate that the conditions provided in section 210(m)(1)(A),

(B)or

(C)have been met for the QFs in its territory. 61. American Forest & Paper and CCC agree, *citing NICOR Exploration Co.* v. *FERC* 30 for the proposition that the Commission incorrectly shifts the burden of proof away from electric utilities through adoption of rebuttable presumptions. American Forest & Paper and CCC state that *NICOR* found that the Commission erred by shifting the burden for a natural gas producer to prove that an area rate clause authorized incentive based rates. 31 American Forest & Paper and CCC argue that that situation is directly analogous to the issue in this proceeding, where the Commission has relieved electric utilities of proving that QFs have non-discriminatory access to wholesale markets and, instead, forced QFs to prove the absence of such access. 30 *NICOR Exploration Co.* v. *FERC,* 50 F.3d 1341 (5th Cir. 1995) ( *NICOR* ). 31 American Forest & Paper and CCC Request for Rehearing at 25. Commission Determination 62. The Commission denies rehearing of the adoption of a rebuttable presumption that eligibility for service under a Commission-approved OATT, or Commission-filed reciprocity tariff, provides nondiscriminatory access to the market. We first address arguments against the use of any form of rebuttable presumption and then turn to arguments against relying on the OATT in particular. 63. The Commission denies rehearing regarding the use of rebuttable presumptions in processing requests to terminate the purchase requirement. As discussed in paragraph 30 above, under the plain language of section 210(m)(1), it is the Commission's responsibility to find that there is nondiscriminatory access to certain specified markets prior to terminating the purchase requirement. The use of rebuttable presumptions serves to identify, in advance, the Commission's preliminary analysis, subject to future evidentiary submissions, thereby streamlining the application review process. The Commission believes this will facilitate prompt processing of applications under section 210(m), which is required by section 210(m)(3), and ultimately benefit QFs and electric utilities alike by providing advance notice of how the Commission will consider certain issues. Abandoning the use of rebuttable presumptions, as some petitioners advocate, would unduly complicate the application process and impair the Commission's ability to act within the 90-day timeframe required by section 210(m)(3). Moreover, these rebuttable presumptions were not created in a vacuum. They are based on the Commission's experience in implementing non-discriminatory open access transmission over the past 11 years, its experience with QF issues (including interconnection issues) over the past 29 years, and its experience with RTO/ISO markets over almost 10 years. 64. The cases cited by petitioners, which taken together stand for the proposition that the proponent of a rate change bears the burden of proving that change satisfies the relevant statutory or regulatory requirements, are therefore inapposite. 32 The rebuttable presumptions do not relieve the Commission of its ultimate responsibility to make findings under section 210(m)(1) prior to relieving an electric utility of the purchase requirement. Instead, they simply provide advance notice of how the Commission will carry out that responsibility. 32 *See Hi-Tech Furnace Sys.* v. *FCC,* 224 F.3d 781 (D.C. Cir. 2000); *Pub. Serv. Comm'n of New York* v. *FERC,* 866 F.2d 487 (D.C. Cir. 1989); *NICOR Exploration Co.* v. *FERC,* 50 F.3d 1341 (5th Cir. 1995). 65. The rebuttable presumptions are also consistent with the requirements of section 210(m)(3), which establishes the procedures to be followed when an electric utility requests that the Commission make the finding of nondiscriminatory access to a market identified in section 210(m)(1)(A), (B), or (C). As required in section 210(m)(3), the regulations promulgated in the Final Rule clearly require a petitioning electric utility to state the factual basis on which it relies and describe why the conditions set forth in subparagraphs (A), (B), or

(C)are met. 33 That factual basis could include the factual determinations made in the Final Rule regarding certain markets satisfying the criteria of those subparagraphs, the presumptions adopted in the Final Rule regarding nondiscriminatory access, or any other factor the electric utility considers relevant to the determination the Commission must make under section 210(m)(1). There is no conflict between the use of rebuttable presumptions and the procedural requirements of section 210(m)(3). 33 *See* 18 CFR 292.310. 66. We reiterate that the rebuttable presumptions adopted in the Final Rule—some of which are presumptions in favor of the electric utility and some of which are in favor of the QF—are not final determinations. Each of these presumptions is expressly rebuttable. Electric utilities and QFs alike will have the opportunity to present case-specific evidence in support of or against application of the presumption on review of a request to terminate the purchase requirement. For example, regarding the OATT presumption in particular, there may be circumstances unique to a particular QF that interfere with that QF's nondiscriminatory access notwithstanding its eligibility for service under an OATT. The QF might have operational characteristics that effectively prevent its participation in a market. The QF might lack access to a mechanism to schedule transmission service or make advance sales on a consistent basis. Each QF will be in the best position to have knowledge of the particular circumstances that interfere with its ability to access the market through the OATT and, thus, requiring the QF to submit evidence of its lack of nondiscriminatory access is entirely reasonable. The Commission clarifies that the ability to rebut the presumption of nondiscriminatory access applies regardless of the market in which the QF is located. 67. The Commission was nonetheless sensitive to the QFs' potential need for information relevant to rebutting the presumption of nondiscriminatory access. The Commission therefore required petitioning electric utilities to submit information regarding transmission constraints, levels of congestion, and interconnections in order to give potentially affected QFs data that may be relevant to rebutting the presumption that they have access to the market. With these informational safeguards in place, we believe that reliance on a rebuttable presumption regarding nondiscriminatory access to the market is reasonable. 68. We also reject arguments on rehearing that the Commission failed to justify reliance on the OATT in particular when formulating its rebuttable presumptions. Since issuance of the Final Rule, the Commission has issued Order No. 890, adopting reforms to the OATT to ensure that transmission customers continue to have nondiscriminatory access to transmission service. 34 The Commission's findings in Order No. 890 do not, however, conflict with the rebuttable presumption adopted in this proceeding, as petitioners claim. The Commission did not find in Order No. 890 that any transmission provider actually discriminated against a particular customer and, instead, found that there remained *opportunities* for such discrimination that needed to be remedied. 35 The fact that opportunities remained for discrimination in the provision of transmission service (which, we add, we have now addressed) would conflict with an irrebuttable presumption of nondiscriminatory access, not a rebuttable presumption. The rebuttable nature of the presumption acknowledges that a QF may not actually have nondiscriminatory access and leaves that determination for case-by-case review by the Commission. 34 *Preventing Undue Discrimination and Preference in Transmission Service,* Order No. 890, 72 FR 12266 (Mar. 15, 2007), FERC Stats. & Regs. ¶ 31,241 at P 443 (2007). 35 *Id.* at P 42. 69. At the same time, the underlying structure of the OATT, even before the reforms adopted in Order No. 890 are implemented, and certainly after, counsels in favor of the rebuttable presumption that eligibility for service under an OATT provides nondiscriminatory access to markets. Under the OATT, transmission providers must make transmission capacity available to all customers on a nondiscriminatory basis, thereby ensuring a level playing field for all market participants attempting to access supplies. That requirement by definition satisfies the nondiscriminatory access criteria of section 210(m). To the extent a QF believes that it in fact is not receiving nondiscriminatory access to the market, however, it can make that demonstration in response to an electric utility's application to terminate the purchase requirement. 70. In response to arguments by Cogeneration Association of California that the existence of an OATT is insufficient to guarantee nondiscriminatory access because it may not provide physical rights, we note that in organized markets which offer financial transmission rights, these financial rights are in addition to, not in place of, physical rights. In essence, the Cogeneration Association of California is arguing that the Commission should provide a QF with transmission services superior to those available to other generators in the organized markets. However, section 210(m)(1) requires that a QF have nondiscriminatory access to one of the markets specified in section 210(m)(1)(A), (B), or (C); it does not guarantee a QF preferential access to transmission service. To the extent that Cogeneration Association of California also argues that a QF that has contractual obligations to thermal hosts does not have the flexibility to participate in markets where the access is provided by financial, rather than physical, transmission rights, the Commission in its regulations has provided each QF the opportunity to argue that its operational characteristics prevent the qualifying facility's participation in a market. Thus any QF that believes it does not have nondiscriminatory access to the market (regardless of whether access is provided by physical or financial rights) has the right to rebut the OATT presumption of access in response to an electric utility filing seeking termination of the mandatory purchase obligation. 71. The Commission also declines to adopt Occidental's recommendation to require additional information from electric utilities relying on the OATT presumption. The filing requirements of § 292.310 of the Commission's regulations, as modified below, are sufficient to provide the Commission with the information necessary to promptly process applications for termination of the purchase requirement. 72. Finally, the Commission grants clarification of its determination in the Final Rule that only issues other than issues related to the provision of open access transmission under the OATT will be considered when analyzing whether the presumption of nondiscriminatory access to markets has been rebutted. The Commission continues to believe that complaint proceedings are the appropriate forum for such disputes. However, where there are pending complaints raising credible issues concerning a transmission provider's implementation or administration of its OATT, the Commission will also consider that fact, as appropriate, when evaluating whether a QF does in fact have nondiscriminatory access to the market. 2. “Day 2” Markets 73. The Final Rule provided for a second rebuttable presumption specific to QFs operating in a “Day 2” market. Because members of the “Day 2” RTO/ISOs have turned over the operation of their transmission facilities to an independent entity that has no stake in the marketplace and that ensures all users of the transmission system are treated on a nondiscriminatory basis and are provided access to their markets, the Commission established a rebuttable presumption that QFs interconnected with electric utility members of a “Day 2” RTO/ISO have nondiscriminatory access to that “Day 2” market. Since the Commission found that the existing “Day 2” markets satisfied the requirements of section 210(m)(1)(A), this creates a rebuttable presumption that electric utility members of the existing “Day 2” RTO/ISOs are relieved of the purchase requirement. 74. The Commission declined to apply this presumption of nondiscriminatory access to entities that are not members of the “Day 2” RTO/ISOs. In order for such entities to obtain relief of the purchase requirement, the Commission stated that they must file an application pursuant to either section 210(m)(1)(B) or (C), to be reviewed on a case-by-case basis by the Commission. Requests for Rehearing 75. Industrial Parties argue that the Commission does not have sufficient experience to impose a presumption of access in the “Day 2” markets. In their view, these markets are nascent and the Commission does not have the ability to determine whether QFs have sufficient access to competitive alternatives to justify relieving electric utilities within those markets of the mandatory purchase obligation. 76. NRECA, on the other hand, argues that it is arbitrary and capricious to deny to non-member utilities within or adjacent to the footprint of a “Day 2” RTO/ISO the same presumption accorded to RTO/ISO members. NRECA contends that there is no basis for denying non-RTO member utilities adjacent to an RTO the same presumption where the non-RTO member utilities have a Commission-approved OATT or reciprocity tariff. NRECA also argues that the Final Rule appears inconsistent as to which standard a non-RTO member within a “Day 2” RTO footprint must satisfy in order to obtain a waiver from the purchase requirement. Although the Final Rule provides that non-RTO members, if they are located within or adjacent to the footprint of a “Day 2” RTO, must satisfy the section 210(m)(1)(B) or

(C)standards in order to remove the purchase obligation, NRECA notes that the Final Rule also states that any electric utility may file an application for relief from the purchase requirement by showing nondiscriminatory access to any of the section 210(m)(1)(A),

(B)or

(C)markets. 36 36 NRECA Request for Rehearing at 8 ( *citing* Final Rule at P 125, 151). 77. NRECA also argues the Final Rule effectively allows QFs interconnected to an RTO member that has had its purchase requirement terminated to have the option of participating in that RTO market or requesting wheeling service to whichever non-member utility within or adjacent to the RTO's footprint has the highest avoided cost. NRECA expresses concern that the QF in this circumstance could seek to consummate a mandatory purchase agreement with a distant utility, notwithstanding termination of the purchase obligation for its interconnected utility. NRECA therefore asks the Commission to address this unintended consequence on rehearing. 78. Even if Congress assumed that QFs in RTO regions have access to nondiscriminatory transmission services, as well as meaningful opportunities to sell long-term capacity/energy in competitive markets, PIOs argues that it does not follow that Congress intended to permit utilities in those regions to bypass section 210(m)(3) requirements or to authorize the Commission not to consider evidence of actual QF access to required services and markets when utilities in those regions seek to end their PURPA obligations. Commission Determination 79. The Commission denies rehearing of its decision to adopt a rebuttable presumption that QFs interconnected with electric utility members of a “Day 2” market have nondiscriminatory access to that “Day 2” market. Arguments that the “Day 2” markets do not provide QFs sufficient competitive alternatives are rejected above. 37 The Commission has sufficient experience with the four “Day 2” markets to determine that QFs have nondiscriminatory access to those markets. Industrial Cogenerators offers no reason to depart from the statutory language and impose a more rigorous standard. 37 *See supra* P 19-30, 41-48. 80. The Commission also denies rehearing of its decision to limit application of the “Day 2” presumption only to member utilities of the particular “Day 2” RTO/ISO. Member utilities have turned over control of their transmission to the regional organization. As a result, QFs interconnected with a member utility may offer their energy into the RTO/ISO day ahead and real time energy markets without any additional concerns about securing transmission capacity. These QFs face few, if any, barriers to be able to sell energy and capacity to any willing purchaser within the RTO/ISO region, subject to the purchaser's willingness to pay any relevant congestion charges. 81. In contrast, non-member utilities have retained control over their transmission facilities and, thus, control the only access interconnected QFs have to the market. While an OATT or reciprocity tariff will provide a QF interconnected with a non-member utility with access to the market within that particular utility's subregion, the QF must compete with the non-member utility to secure transmission service in order to access the nearby regional market. Issues may arise concerning ATC and a range of other open access, commercial, and coordination (with the RTO or ISO) matters that are more appropriately examined on a case-specific basis. 38 Accordingly, it is reasonable for the Commission to limit application of the rebuttable presumption that the four RTO/ISOs meet the statutory standards under PURPA 210(m)(1)(A) only to member utilities of those regional organizations. Non-member utilities remain free, though, to seek termination of the obligation to purchase from QFs in individual cases. 38 For example, QFs interconnected with member utilities would not experience rate pancaking for transmission service to access the market, additional risks and costs of possible curtailment outside of the locational marginal price

(LMP)managed market, or increased scheduling burdens associated with taking service over an intervening transmission system under the OATT (in comparison to directly scheduling energy deliveries in the day-ahead and real-time LMP markets). 82. NRECA is correct that any electric utility may file an application for relief of the purchase obligation under any subparagraph of section 210(m)(1). We clarify that the Commission's conclusion not to apply a presumption of nondiscriminatory access to non-member utilities of a “Day 2” RTO/ISOs does not preclude such utilities from seeking to satisfy the requirements of subparagraphs (A), (B), or (C), as the regulations in Part 292 of the Commission's regulations expressly provide. 83. In response to NRECA's concern that a QF interconnected with a member utility of a “Day 2” market will seek PURPA contracts with adjacent utilities, using QF wheeling rights, we do not interpret section 210(m) to permit this. Section 210(m)(1) provides that “no electric utility” shall be subject to the purchase requirement if the Commission finds that the QF has nondiscriminatory access to one of the specified markets. Thus, once the Commission makes a finding that a particular QF has nondiscriminatory access to one of the specified markets, no electric utility shall be required to enter into a new contract or obligation with that QF. The QF would therefore no longer be able to impose the purchase requirement on any electric utility. If a QF that has been found to have nondiscriminatory access to one of the specified markets pursuant to the request of a particular electric utility seeks to enforce the purchase obligation against another electric utility, the second electric utility may file an application to terminate its purchase obligation with respect to that QF, and the Commission would consider its findings in the first proceeding to be determinative, absent a showing by the QF that circumstances, either nondiscriminatory access or the state of the markets, have changed. 3. Small Size 84. Notwithstanding the presumption of nondiscriminatory access afforded by the OATT or the structure of the “Day 2” markets, the Commission concluded in the Final Rule that certain QFs may nonetheless have difficulty accessing the market due to their small size. The Commission, therefore, adopted an additional rebuttable presumption that small QFs do not have nondiscriminatory access to the market, regardless of whether the QF is an eligible customer under an OATT or interconnected with a member utility of a “Day 2” RTO/ISO. Although the Commission did not specify in the Final Rule what evidence would be sufficient to rebut this presumption, it did note that relevant evidence could include the extent to which the small QF has been participating in the market or is owned by, or is an affiliate of, an entity that has been participating in the relevant market. The Commission also found that a reasonable and administratively workable definition of “small” is 20 MW net capacity or smaller. Requests for Rehearing 85. On rehearing, petitioners raise several issues regarding the rebuttable presumption for small QFs. Some utilities argue that there should be no special treatment of small QFs and that the rebuttable presumption is an impermissible waiver of section 210(m). Some QFs, however, argue that small QFs should be completely exempt from termination of the mandatory purchase obligation. Various petitioners argue that the Commission should set the threshold for “small” lower or higher. 86. Central Vermont argues that making exceptions for certain QFs because of their small size goes against the plain language of the statute, contending that the statute says nothing about allowing the Commission to consider whether it is practical or economical for the QF to reach the wholesale market in question. Central Vermont argues that the Commission's findings with respect to QFs interconnected with member utilities of the “Day 2” RTO/ISO should apply equally to all QFs regardless of size. NRECA similarly argues that Congress did not establish exceptions for size, characterizing the Commission's standards for overcoming this presumption as insurmountable and, therefore, arbitrary and capricious. 87. Deere argues, however, that the purchase requirement for small QFs should be retained in full in any market in which that obligation is otherwise lifted for large generators. Otherwise, Deere contends, the rebuttable presumption will be an invitation for expensive litigation. Deere argues that the Commission should treat small QFs in a manner that prevents the costs of defending the rebuttable presumption from becoming a discouragement to the development of small renewable projects. 88. CIBO argues that the Commission should expand the size presumption to apply to QFs with a net capacity of 80 MW or less. CIBO contends such treatment would be consistent with the Commission's obligation under EPAct 2005 to issue a rule that ensures continuing progress in the development of efficient electric energy generating technology. CIBO argues that Congress defined “small” in PURPA as 80 MW for small biomass, waste, renewable resources and geothermal resource power generation and, therefore, the Commission's defining of small QFs at 20 MW contravenes Congress's longstanding support of QFs, creates obstacles for some but not all small QFs and upsets capital investment. CIBO argues that the Commission makes no attempt to explain how 20 MW QFs differ from 80 MW QFs and that any differentiation for purposes of unequal statutory treatment must have a rational basis. 89. CIBO further argues that the orders cited by the Commission in favor of a 20 MW threshold, such as Order No. 671 39 and Order No. 2006, 40 do not address the operational limits or difficulties that larger QFs have in accessing “Day 2” markets, such as widely fluctuating steam-host demand, siting issues and transmission versus distribution interconnection access issues. Without guaranteed access to markets, CIBO contends that many QFs in the 20-80 MW range will simply stop cogenerating and new industrial cogeneration will not be developed. 39 *Revised Regulations Governing Small Power Production and Cogeneration Facilities,* Order No. 671, 71 FR 7852 (Feb. 15, 2006), FERC Stats. & Regs. ¶ 31,203 (2006), *order on reh'g,* Order No. 671-A, 71 FR 30585 (May 30, 2006), FERC Stats. & Regs. ¶ 31,219 (2006). 40 *Standardization of Small Generator Interconnection Agreements and Procedures,* Order No. 2006, 70 FR 34189 (June 13, 2005), FERC Stats. & Regs. ¶ 31,180 (2005), *order on reh'g,* Order No. 2006-A, 70 FR 71760 (Nov. 30, 2005), FERC Stats. & Regs. ¶ 31,196 (2005). 90. Finally, CIBO argues that increasing the threshold to 80 MW adds a very small number of QFs and would add little to the amount of capacity compared to total nationwide capacity. In CIBO's view, the Final Rule already requires utilities to purchase power from QFs that are less than 20 MW and, thus, there would not be any material increase in administrative burden for electric utilities to use an 80 MW threshold. 91. Industrial Parties argue that the Commission should expand the small size presumption to include any QF that is unable to sell power in 50 MW blocks, regardless of the particular capacity of the facility. Industrial Parties contend that certain over the counter bilateral contracts stipulate a minimum lot increment of 50 MW, which can be a problem for larger QFs ( *i.e.* , above the 20 MW threshold) because their intermittent production of surplus power cannot always or easily be packaged in 50 MW x 16 hour increments. Industrial Parties state that QFs that cannot sell 50 MW blocks have only very limited access to financial markets, at disadvantageous terms. 92. NRECA argues that the Commission's 20 MW threshold is too generous. NRECA states there is evidence in the record that RTOs are capable of transacting with generators with capacities as small as one or two MW depending on the RTO. NRECA contends that no party has demonstrated that the existing RTO processes for utilities between one and 20 MW are ineffective, unduly complicated or overly burdensome. NRECA also suggests that the Commission's earlier decision to simplify interconnection for generators with capacities of less than 20 MW is unrelated to the question of whether QFs have access to markets or, if related, demonstrates that they have such access. 93. With regard to how the Commission measures the size of a QF for purposes of applying the rebuttable presumption, the Cogeneration Association of California requests the Commission to clarify it is by reference to capacity delivered to the grid. The Cogeneration Association of California state that cogenerators often supply electricity to on-site load and only supply a portion of their maximum electrical output to the grid. In its view, electricity used to supply on-site load should not be counted for purposes of applying the size presumption. Commission Determination 94. The Commission denies the requests for rehearing regarding the rebuttable presumption that small QFs do not have nondiscriminatory access to the market. We continue to believe it is appropriate to adopt a rebuttable presumption that certain QFs do not have nondiscriminatory access to markets because of their small size. The purchase requirement will therefore remain in effect, in all markets, for all QFs with a net capacity of 20 MW or smaller, although electric utilities will have the opportunity to rebut the presumption by showing that a small QF does in fact have nondiscriminatory access to the relevant market. 95. We share CIBO's goal of continuing progress in the development of efficient electric generating technology, but disagree with CIBO and other petitioners that we have unreasonably differentiated “small” from “large” QFs. There is no perfect bright line that can be drawn and we have reasonably exercised our discretion in adopting a 20 MW or below demarcation for purposes of determining which QFs are unlikely to have nondiscriminatory access to markets. Moreover, any QF above 20 MW is permitted to demonstrate an inability to access the markets, and any electric utility is permitted to demonstrate that a QF 20 MW or smaller is able to access the markets. The Commission's development of rebuttable presumptions is based on its experience with QFs, transmission interconnections and related market issues, and is designed to provide a reasoned and fair approach for processing applications within the 90-day time frame dictated by the statute. 96. While the Final Rule does not make a generic finding that QFs interconnected at a distribution level lack nondiscriminatory access to markets, we believe that it is reasonable to conclude that some, perhaps most, small QFs at or below the 20 MW level can be distinguished from larger QFs by the type of delivery facilities to which they typically interconnect. Most QFs larger than 20 MW are interconnected to higher voltage lines, typically considered to be transmission lines, while smaller QFs tend to be interconnected to lower voltage radial lines, frequently considered to be distribution. 41 Many lower voltage facilities are radial systems designed to carry power from the high-voltage grid downstream to loads, and there may be technical enhancements required to move power injected into such facilities upstream to the transmission grid to access the broader wholesale market. Smaller QFs are also more likely to have to overcome other obstacles, such as jurisdictional differences, pancaked delivery rates, and perhaps additional administrative procedures, to obtain access to distant buyers. 42 Taken together, these factors support a rebuttable presumption that smaller QFs have substantially less ability to access wholesale markets than do larger QFs. 41 *See, e.g., Standardization of Small Generator Interconnection Agreements and Procedures* , Order No. 2006-A, 70 FR 71760 (Nov. 30, 2005), FERC Stats. & Regs. 31,196 at P 105 (2005), (“We expect the vast majority of small generator interconnections will be with state interconnection programs.”); *Id.* at P 102 (“a QF selling at retail is not eligible to interconnect under either Order No. 2003 or Order No. 2006. Under the Public Utility Regulatory Policies Act of 1978, such interconnections are governed by state law.”) (citations omitted). 42 *See, e.g., Standardization of Small Generator Interconnection Agreements and Procedures,* Notice of Proposed Rulemaking, 68 FR 49974 (Aug. 19, 2003), FERC Stats. & Regs. ¶ 32,572

(2003)at P 23-25. 97. Although there is no unique and distinct megawatt size that uniquely determines if a generator is small, in other contexts the Commission has used 20 MW, based on similar considerations to those presented here, to determine the applicability of its rules and policies. Indicative of this is the Commission's reliance in the Final Rule on its findings in Order No. 671, where the Commission retained exemptions for QFs that are 20 MW or smaller from sections 205 and 206 of the FPA, and Order Nos. 2006 and 2006-A, where the Commission recognized that generators 20 MW or smaller should have different standards for interconnection than large generators. We continue to believe that 20 MW is the appropriate level at which to apply this rebuttable presumption. 98. We disagree with CIBO that the Commission's small QF threshold of 20 MW contradicts Congress's 80 MW definition of small power producers in PURPA section 210(a). 43 The 80 MW threshold in section 210(a) of PURPA defines the qualification of small power producers eligible for the rights, privileges and protections of QFs. The use of 20 MW in the Commission's implementation of section 210(m) of PURPA serves a fundamentally different purpose. The Commission is distinguishing between small and large facilities to reflect the ability of particular QFs to access markets. Categorically applying the presumption to all small power production facilities, through adoption of a 80 MW threshold, would not appropriately take into account the different considerations that affect a QF's ability to access markets. 43 16 U.S.C. 796(17)(A)(ii). 99. We also disagree that use of a 20 MW threshold defeats Congressional intent to foster small power production. The purchase requirement remains in place for small power producers that do not have nondiscriminatory access to one of the markets identified in section 210(m)(1)(A), (B), or (C). The purchase requirement can be terminated only if the Commission finds nondiscriminatory access to such markets, which in turn means the small power producers will have the ability to sell their energy and capacity into the wholesale marketplace. 100. We reject the request that the Commission expand the small size presumption to include any QF that is unable to sell power in 50 MW blocks, regardless of the particular capacity of the facility. While it may be true that certain over-the-counter bilateral contracts stipulate a minimum lot increment of 50 MW, and while also it may be true that such a contractual requirement may be a problem for some QFs that are larger than 20 MW because of their intermittent production of surplus power, the Commission has provided these larger QFs the opportunity to rebut the presumption of access to the “Day 2” market by showing, among other things, operational characteristics that effectively prevent the QF's participation in a market or that the QF has no access to a mechanism to schedule transmission service or make sales in advance on a consistent basis because of variability of the QF's electric energy production or because of market rules that prevent the QF from scheduling transmission service or participating in organized markets. 44 The effect of needing to sell in 50 MW blocks may therefore be presented to the Commission in the context of a particular request to terminate the purchase requirement. Expansion of the small size rebuttable presumption to reflect this concern, which may not be relevant in all cases, is thus neither necessary nor appropriate. 44 Final Rule at P 82-84; 18 CFR 292.309(e)(1). 101. The Commission rejects requests to apply the small size presumption only to much smaller QFs, such as those with a net capacity of one or two MW. We set the rebuttable presumption at an appropriate level, reflecting our understanding of the general nature of QFs' interconnection practices and the relative capabilities of small entities. However, we again stress that the presumption is rebuttable. Electric utilities are free to argue that smaller entities have nondiscriminatory access to qualifying markets. We believe that the best place to consider such arguments is in the individual cases that electric utilities bring to the Commission. 102. Petitioners arguing that the Commission has inappropriately waived the effects of section 210(m) for small QFs mischaracterize the Final Rule. The Commission made clear in the Final Rule that no class of QFs had been shown to uniformly lack nondiscriminatory access based on a single factor and, as such, no justification existed for exempting any category of QFs from any future orders which may terminate a utility's purchase requirement. The Commission did, however, create a rebuttable presumption that small QFs may not have nondiscriminatory access to markets because of their small size. As we explain above, the use of such rebuttable presumptions is fully consistent with the Commission's obligation under section 210(m) and the Commission's need to identify ways to expedite processing of applications. 103. To be clear, the use of a rebuttable presumption does *not* prevent a utility from seeking to terminate the obligation to purchase power from small QFs, as would be the case if the Commission implemented a waiver. Instead, the use of the rebuttable presumption simply leaves the burden on the utility to show that these smaller entities indeed have nondiscriminatory access. This approach recognizes that, more often than not, a small QF will have greater difficulty obtaining nondiscriminatory access to markets due to the tendency for small QFs to be interconnected to lower voltage radial lines, and the consequent need to overcome other potential obstacles to nondiscriminatory access, such as local distribution access rules that are not within the Commission's jurisdiction, pancaked delivery rates and additional administrative burdens to obtain access to buyers other than the interconnected utility. It is therefore appropriate in the first instance to place on the electric utility the burden of demonstrating that a small QF does in fact have nondiscriminatory access to the types of markets identified in sections 210(m)(1)(A),

(B)or (C). Similarly, the rebuttable presumption that QFs above 20 MWs do have nondiscriminatory access to markets does not prevent a QF from providing evidence to the contrary. 104. With regard to the request to clarify how the 20 MW threshold will be measured, the Commission explained in the Final Rule that a QF is required to state its size in terms of “net capacity” when certifying its status as a QF. 45 Net capacity is the maximum amount of power that the facility is able to produce (gross capacity) less any auxiliary load for devices that are necessary and integral to the power production process (station power). Any power consumed by on-site load at the location of the QF for purposes unrelated to the power production process should not be subtracted from gross capacity for purposes of reporting net capacity. Whether the facility is a Commission-certified facility or a self-certified facility, both are certified at net capacity. Therefore, a QF's Commission-certified (or self-certified) net capacity would determine whether the QF qualifies for the “small size” rebuttable presumption. 45 Final Rule at P 72, n.41. C. Filing Requirements 105. In the Final Rule, the Commission found that a utility electing to file for relief from the purchase requirement must submit an application with the Commission providing certain information, including transmission constraints within its service territory in order to give potentially affected QFs information that may be useful in rebutting the presumption that they have access to all aspects of the applicable “Day 2” markets. 46 The filing requirements are contained in new § 292.310(d) of the Commission's regulations. 46 Final Rule at P 102. Requests for Rehearing 106. Industrial Parties contend that the Commission is not sufficiently prescriptive as to the level of detail on transmission availability that utilities should provide in their applications. Industrial Parties argue that the Commission should require the same information on transmission access as in *UniSource Energy Corporation.* 47 Industrial Parties also argue that to enable effective input by QFs and other interested parties, any information provided to support an electric utility's application to terminate its purchase obligation must be provided to all affected QFs at the time of filing. Industrial Parties continue that if a QF later seeks to reinstate the purchase obligation, the electric utility needs to provide current data, and not rely on the data it used to justify termination of the purchase obligation. 47 *UniSource Energy Corporation* , 109 FERC ¶ 61,047

(2004)( *UniSource* ) (reviewing a market monitoring plan submitted in support of a request for Commission authorization of the disposition of jurisdictional facilities for purposes of identifying anticompetitive conduct). 107. EEI, however, believes the filing requirements in § 292.310(d)(3) of the Commission's regulations are unduly broad and potentially burdensome. EEI urges the Commission to exempt utilities operating within the footprint of Commission-approved RTO/ISOs that have financial, rather than physical, transmission rights models and ERCOT (which likewise operates under a financial transmission rights model) from the information submission requirements in § 292.310(d)(3). Since a QF has the right to interconnect to transmission within an RTO/ISO that operates under a financial transmission rights model, EEI contends that the QF has access to that market regardless of whether a physical path exists for electric sales. As a result, EEI argues that interconnection and other transmission constraint and congestion studies are of little relevance in determining whether a QF has nondiscriminatory access to transmission in any market with a financial rights transmission model. 108. EEI argues that even in markets without financial transmission rights, all new QFs have nondiscriminatory access if they are willing to fund on an up-front basis the transmission upgrades necessary to receive network resource status, *i.e.* , if they are willing to comply with Order Nos. 2003 and 2006. Despite the fact that any upgrade costs for firm transmission service are typically rolled into rates, EEI contends that the Commission's transmission pricing policy could require that *existing* QFs bear the incremental cost of upgrades if firm transmission service is not available and the costs of the upgrades exceed the rolled-in rate. As a result, EEI argues that the only grounds for rebuttal of the presumption of nondiscriminatory access when OATT service is available should be related to unique operational characteristics of the specific QF or in the rare circumstance in which there is not a sufficient opportunity to relieve a transmission constraint because of unique factors, such as the inability to secure regulatory approval for upgrades or otherwise to remedy physical system limitations. EEI therefore asks the Commission to limit the informational filing requirements to those particular circumstances. 109. In addition, EEI requests the Commission to clarify what is intended by “[r]elevant system impact studies for the generation interconnections, already completed” for both non-RTO/ISO and RTO/ISO regions. EEI states that it is unclear what studies, and what time frames, are contemplated by this requirement and whether this language is intended to refer to the interconnection studies for existing QFs or for all generator interconnections. EEI requests clarification that “relevant” studies will be limited to studies that are the most recent regarding the QF's impact on the system or the most recent generic studies of the applicable control area. EEI states that, for the last several decades, interconnection studies for QFs not selling to the market have been performed under state oversight. EEI requests that the Commission clarify whether the equivalent of system impact studies performed for QFs pursuant to state regulation should be provided. 110. Lastly, if the Commission chooses to maintain the requirements in § 292.310(d)(3) of the Commission's regulations, EEI requests that the requirements identified in paragraph

(iii)of § 292.310(d)(3), regarding system impact studies for generator interconnections, be clarified to require all Commission-approved RTO/ISOs to identify and make available to their member transmission owners confidential and public versions of each interconnection study it performs for submission to the Commission. They argue that it is not clear how electric utilities that have transferred operational control of their transmission to RTO/ISOs could fulfill the requirement to provide “relevant system impact studies” without imposing certain requirements on the RTO/ISO. EEI urges the Commission to clarify that submitting studies conducted by the RTO/ISO will be sufficient to meet the informational requirements. Commission Determination 111. In order to ensure that a potentially affected QF has an adequate opportunity to evaluate potential obstacles to nondiscriminatory access, despite the existence of an OATT or the QF's location in a “Day 2” market, the Commission will maintain the requirement for applicants to submit transmission-related information relevant to a QF's evaluation of this question. Information about the applicant's long-term transmission plan, the location of transmission constraints, levels of congestion, system impact studies, and links to applicant's Open Access Same Time Information System (OASIS) for ATC information will allow a potentially affected QF to detect whether it might be located on a portion of a utility's system where limited transfer capability may constrain its ability to transfer power into the wholesale market. In response to Industrial Parties' concerns that QFs be provided any information used to support an electric utility's application, our rules currently provide that an electric utility must identify with names and addresses all potentially affected QFs. 48 Electric utilities serve potentially affected QFs with a copy of the application. In addition, the Commission by letter provides notice of the application to the potentially affected QFs and explains comment procedures and how the QFs can access the electric utility's filings. 49 An interested potentially affected QF should intervene in the proceeding and would then receive any subsequent information provided by an electric utility. 48 18 CFR 292.310. 49 In the unlikely event a potentially affected QF is intentionally or unintentionally omitted by the electric utility and not served notice of an application, the Commission will take remedial steps as appropriate. 112. We disagree with EEI that the filing requirements are unduly broad or burdensome. It is reasonable to place those obligations on the petitioning electric utility, the party requesting the Commission to make the findings required by section 210(m)(1) of PURPA. These filing requirements will facilitate timely processing of the application by the Commission, while also providing QFs with the information necessary for their own evaluation of nondiscriminatory access to wholesale markets. We find that EEI's claim of burden is overstated, since we do not require anything which has not already been developed. It is our experience that most of this documentation is in electronic format and available through online resources. 50 We clarify, moreover, that an applicant can provide a hyperlink to the relevant studies, if available, rather than submitting complete studies and reports. 51 We therefore believe that the burden on a utility of providing existing information is minimal and that the benefits to the QFs and the Commission of providing this information readily in one filing will outweigh any such minimal burdens. 50 We note that the following public and non-public sources contain transmission information: RTO websites for links to publicly available regional transmission plans; OASIS websites for system impact studies including various transmission service requests, available through confidentiality agreements; OASIS websites for posted ATC values, available through an OASIS certificate; and, FERC Form 715 for the Annual Transmission Planning and Evaluation Report submitted to the Commission, available on the FERC website through the Critical Energy Infrastructure Information

(CEII)process. 51 The filing should identify the relevance of the material in the hyperlink. And to the extent that the filing discusses particular portions of such studies and reports, the electric utility should clearly identify those portions by page, paragraph, or similar reference. 113. We deny EEI's request to exempt utilities operating within the footprint of a Commission-approved RTO/ISOs from submitting the information to the extent it is otherwise available from or provided by the RTO or ISO. The fact that electric utilities in RTO/ISO regions may be able to access information required in those filings on an equal basis as other parties, *i.e.* , through the RTO/ISO website or databases, does not eliminate the Commission's underlying need for the information to process the application in a timely manner. Furthermore, we emphasize that § 202.310(d)(3) of the Commission's regulations requires the submission of non-publicly available information to the extent it is the only relevant available resource responsive to this requirement. Any need to maintain confidentiality can be addressed in the context of the particular application. 114. We also disagree that the information required in § 292.310(d)(3) is not necessary in RTO/ISO markets with financial transmission rights models. This information is relevant even in the context of financial RTO markets as it will help potentially affected QFs understand the transmission market circumstances they would face if the Commission approves the utility's application. The filing requirements will, in this regard, therefore not be changed for any electric utility seeking termination of the purchase requirement. 115. As to the argument that transmission-related information is unnecessary since new QFs have nondiscriminatory access if they fund transmission upgrades necessary to receive network resource status, we disagree. Information about transmission system constraints will allow a potentially affected QF to evaluate the impact of a utility's request on the QF. Transmission constraints also provide valuable information about the scope and geographic reach of the market a potentially affected QF may reach as an alternative to selling to the local utility. 116. With regard to EEI's request to explain the phrase “[r]elevant system impact studies for the generation interconnections, already completed,” we clarify that the studies we consider relevant are the most recent system impact studies, already completed, that analyze the generation interconnection to the applicant's transmission substation that is “electrically close” to the QF's substation. 52 With respect to EEI's question whether the equivalent of system impact studies performed for QFs pursuant to state regulation should be provided, we clarify that these studies must be submitted if they provide responsive information relevant to the filing requirements. 52 By “electrically close” we mean any interconnection to the same substation where the QF is connected or to any adjacent substation or interconnection point where power injection to the transmission system has the same or similar impact on the transmission facilities' loadings, as the QF's power injection. 117. We also clarify, as requested by EEI, that submitting studies conducted by an RTO/ISO will be sufficient to meet the informational requirements, provided the submission is complete, *i.e.* , the applicant submits every study required (or hyperlinks to the relevant studies) and all related information listed in § 292.310(d). However, we deny EEI's request that the Commission require RTO/ISOs to identify and make available confidential and public versions of each interconnection study it performs. We believe this request is unnecessary. It is our understanding that the current practice within the RTO/ISOs is that the electric utility receives the confidential version of the study from the RTO/ISO, and likely has participated at least in an advisory role in the performance of the study. Therefore, we expect that these studies would already be in the applicant's possession or could be made available to them without placing any extra requirements or burdens on the RTO/ISOs. It is the utility who is filing an application seeking relief from the purchase requirement and, therefore, we believe it is their responsibility to gather and submit the information to the Commission. Additionally, while the publicly available reports are available through the OASIS websites, an applicant still needs to identify those studies that are relevant, and provide them (either physically or by hyperlink) with the filing. 53 53 *See supra* note 51. 118. In response to the Industrial Parties' argument that the Commission is not sufficiently prescriptive as to the level of detail regarding transmission availability required under the Commission's regulations, we deny rehearing in part. As a general matter, we believe the information identified in § 292.310(d)(3) is sufficient to give potentially affected QFs information relevant to evaluate whether there is adequate transmission available for new selling arrangements, subsequent to termination of the utility's purchase requirement. 54 In addition, the information on processes to be followed to access the markets, identified in § 292.310(d)(4) and (5), is sufficient to give affected QFs information relevant to evaluating nondiscriminatory access to the markets described in section 210(m)(1) of PURPA. The relevant transmission information referred to by Industrial Parties in the *UniSource* proceeding is thus embedded in the studies we require to be filed. We do not agree that the other elements offered by *UniSource* in the market monitoring plan for its proposed merger are either relevant or necessary to evaluating nondiscriminatory access in this context. 54 However, we note, in order for a QF to evaluate potential ATC on an applicant's OASIS, the QF will need to determine the type, firmness and duration of transmission service that the affected QF will need for the power it intends to sell on a prospective basis. While this information will provide a potentially affected QF with information about current ATC, it is no guarantee that service from a particular source to a particular load can be provided on a firm basis. Only submission of a request and subsequent reservation of transmission service can provide that level of certainty to any prospective customer. 119. We do, however, believe that § 292.310 of the Commission's regulations lacks certain information that will facilitate the Commission's processing of section 210(m) applications. The Commission has processed applications in Docket Nos. QM07-2-000 and QM07-4-000 and as a result of its experience in those dockets finds that additional information from electric utilities would help avoid the need to issue “deficiency” letters or send additional information requests, ultimately slowing down the processing of requests for relief. The Commission therefore amends its regulations to require that the following additional information be submitted: the docket number assigned to each potentially affected QF if it filed for self-certification of QF status or an application for Commission-certification of QF status; the net capacity of each potentially affected QF; the location of each potentially affected QF depicted by state and county and the name and location of the substation where each potentially affected QF is interconnected; the interconnection status of each potentially affected QF including whether the QF is interconnected as an energy or a network resource; and the expiration date of the energy and/or capacity agreement between the applicant utility and each potentially affected QF. The introductory paragraph of § 292.310(c) is thus amended to read as follows:

(c)An electric utility must submit with its application for each potentially affected qualifying facility: the docket number assigned if a qualifying facility filed for self-certification or an application for Commission certification of qualifying facility status; the net capacity of the qualifying facility; the location of the qualifying facility depicted by state and county, and the name and location of the substation where each qualifying facility is interconnected; the interconnection status of each potentially affected qualifying facility including whether the qualifying facility is interconnected as an energy or a network resource; and, the expiration date of the energy and/or capacity agreement between the applicant utility and each potentially affected qualifying facility. All potentially affected qualifying facilities shall include: 120. Additionally, in reviewing the regulations adopted in the Final Rule, we have discovered a mistake in § 292.310(d)(3) that we will correct here. The applicant's “long-term transmission plan” referred to in § 292.310(d)(3) was intended to be information required to be filed with an application. Therefore the applicant's “long-term transmission plan” is redesignated as § 292.310(d)(3)(i). Also, in § 292.310(d)(3)(vi), the term “available transmission capacity (ATC)” will be corrected to state “available transfer capability (ATC).” The new § 292.310(d)(3) is amended to read as follows:

(3)Transmission Studies and related information, including:

(i)The applicant's long-term transmission plan, conducted by applicant, or the RTO, ISO or other relevant entity;

(ii)Transmission constraints by path, element or other level of comparable detail that have occurred and/or are known and expected to occur, and any proposed mitigation including transmission construction plans;

(iii)Levels of congestion, if available;

(iv)Relevant system impact studies for the generation interconnections, already completed;

(v)Other information pertinent to showing whether transfer capability is available; and

(vi)The appropriate link to applicant's OASIS, if any, from which a qualifying facility may obtain applicant's available transfer capability

(ATC)information. 121. Finally, Industrial Parties asks us to clarify that if a QF later seeks to reinstate the purchase obligation pursuant to § 292.311, the electric utility, if it chooses to answer the QF's petition to reinstate, needs to provide current data, and not rely on the data it used to originally justify termination of the mandatory purchase obligation. We decline to make a generic determination here on this matter. If an electric utility answers the QF's petition, it is free to decide what information to file so as to present its best arguments, based on the content of the QF's filing, the amount of time since the prior proceeding and any indications of changed circumstances in the interim. Our decision on whether to reinstate the purchase obligation will be based on all of the information presented. D. Obligation To Sell 122. Section 210(m)(5) of PURPA removes the requirement that an electric utility sell electric energy to any QF if the Commission finds that: “Competing retail electric suppliers are willing and able to sell and deliver electric energy to the qualifying cogeneration facility or qualifying small power production facility; and the electric utility is not required by State law to sell electric energy in its service territory.” 123. In the Final Rule, the Commission clarified that lifting the obligation from a particular utility to purchase electric energy from a QF did not relieve such utility of its obligation to sell supplemental, backup, standby and maintenance power to the QF. The Commission explained that any finding under section 210(m)(5) would be made under a separate standard and in a separate proceeding pursuant to § 292.312 of the Commission's regulations. The Commission emphasized that it would strictly interpret the statutory language in such proceedings, noting in particular the reference to “competing retail electric providers” in section 210(m)(5). The Commission concluded that the reference required a finding that the QF has available at least two competing suppliers who are not affiliated with the interconnecting utility. Requests for Rehearing 124. Industrial Parties request that the Commission condition releasing electric suppliers from their obligation to sell standby and backup power on a finding that a competitive market for power exists. Although utilities in the organized markets may assert that there are multiple retail providers, Industrial Parties contend that in many cases the providers have little capacity to serve the QF profile or would attach a large premium to the price given their interest in serving a stable load. They argue that some utility or other supplier being willing to sell a QF power at some exorbitant price does not satisfy the Commission's duty under PURPA to see that QFs are not exploited and under the FPA to ensure that rates are just and reasonable rates. Industrial Parties also assert one or two suppliers do not make a competitive market and that rates paid by QFs cannot be just and reasonable unless the Commission finds that market power cannot be exercised by those suppliers. 55 55 Industrial Parties at P 19-20. Commission Determination 125. We deny Industrial Parties' request to condition termination of the sales obligation on the existence of a competitive market for replacement power. We continue to believe a strict interpretation of section 210(m)(5) is appropriate in response to requests to terminate the obligation to sell standby and backup power to QFs. All the statute requires is a finding that “competing retail electric suppliers are willing and able to sell and deliver electric energy to” the QF. Competing retail electric suppliers implies two or more sellers, and the word competing suggests some level of competition between them. The requirement that the suppliers be willing and able to deliver also appears to require sufficient capacity to actually make sales. 126. In proceedings on applications requesting termination of the sales obligation under § 292.312 of the Commission's regulations, QFs opposing termination of an electric utility's obligation to sell may certainly argue that current practices in a particular market may provide a basis for the Commission to find that there are no “competing retail electric suppliers” in some instances. We will decline to rule generically on such issues in this rulemaking. 127. We also reject the Industrial Parties' request to condition relief under section 210(m)(5) on a finding that rates for replacement power are reasonable. We affirm our decision in the Final Rule that the rates for retail service are beyond the Commission's jurisdiction. The Industrial Parties are simply wrong to imply that the Commission must first find a competitive retail market before terminating an electric utility's obligation to sell power to a QF. That argument is based on the same false premise that this Commission is responsible for setting retail rates. Section 210(m) does not shift responsibility for setting or maintaining appropriate retail rates from the States to this Commission. Rather, section 210(m)(5) requires the Commission, before it terminates an electric utility's obligation to sell electric energy to a QF, to find that “competing retail electric suppliers are willing and able to sell and deliver electric energy to the” QF, and that “the electric utility is not required by State law to sell electric energy in its service territory.” Section 210(m)(5) does not require this Commission to pass judgment on State-approved retail rates. E. Existing Rights and Remedies Background 128. Section 210(m)(6) of PURPA protects the rights and remedies under a contract or obligation in effect or pending approval before a state regulatory authority. In the Final Rule, the Commission interpreted the term “obligation” as a “legally enforceable obligation,” which is established through a state's implementation of PURPA. The Commission stated that a QF that had initiated, prior to date of enactment of section 210(m) ( *i.e.* , August 8, 2005), a state PURPA proceeding that may result in a contract or legally enforceable obligation would be considered to have triggered an “obligation” with an electric utility regarding section 210(m)(6). 129. The Commission found that, when a QF contract terminates by its own accord, an electric utility would not be compelled to enter into a new, successor contract with the QF if the purchase requirement has been terminated for the QF. As long as there is mutual agreement between a QF and the electric utility to terminate a contract, the electric utility is not compelled to enter into another contract with the QF. The Commission stated that nothing in the Final Rule was intended to abrogate existing contracts. The Commission noted, however, that there may be contracts containing provisions that provide that legislation such as EPAct 2005, or a Final Rule such as this one, trigger termination of the contract. To the extent the parties to a contract cannot agree whether a termination clause has been triggered, the Commission determined that the issue would be best determined in an individual case-specific proceeding in which the particulars of the contract can be examined. Requests for Rehearing 130. Deere argues that clarification is required to preserve state law processes as creating legally enforceable obligations in the context of section 210(m)(1). Deere contends that language in paragraph 213 of the Final Rule indicates that an obligation is triggered prior to the utility applying for relief of the PURPA purchase requirement if a QF “has initiated a state's PURPA proceeding that may result in a contract or legally enforceable contract or obligation.” Deere argues that the phrase “state's PURPA proceeding” is too narrow and should be broadened because it does not recognize that a “legally enforceable obligation” can be created under state law processes which do not involve a docketed state proceeding, such as issuance of regulations. 131. Deere also notes that some states have adopted PURPA implementation approaches that require QFs to first start construction, if not complete it, before an obligation is created in connection with section 210(m). Deere argues that the Commission should therefore clarify that a QF located in a “build first” state triggers a legally enforceable obligation if, prior to the time of the utility PURPA relief application, it has already begun construction. Deere argues that otherwise, QFs that are nearly complete in the construction will be unfairly penalized and the significant capital resources they have committed will be impaired. 132. OG&E asks the Commission to clarify that it is not prejudging when—or if—a QF's state PURPA application gives rise to a legally enforceable obligation under PURPA. OG&E contends that the Commission has consistently held that it is for the states, not the Commission, to determine “the specific parameters of individual QF power purchase agreements, including the date at which a legally enforceable obligation is incurred under state law.” 56 OG&E states that presuming that a section 210(m)(1) “obligation” exists as of the date a QF files a state application that “may” lead to a legally enforceable obligation is inconsistent with how many states address this issue. OG&E adds that the Commission should also clarify that it is not dictating what factors the states can consider when evaluating whether a QF has established a legally enforceable obligation. 56 OG&E Request for Rehearing at 5 ( *citing Metropolitan Edison Co.* , 72 FERC ¶ 61,015 at 61,050 (1995)). 133. OG&E asks that the Commission clarify that a utility has the opportunity to respond to a purported legally enforceable obligation by making a section 210(m) filing particularly if the state legally enforceable obligation filing was made between August 8, 2005 and the effective date of the Final Rule, as may be revised on rehearing. OG&E contends that the utility should be able to respond by filing a section 210(m)(1) application with the Commission. 134. OG&E also asks that the Commission establish a formal process that allows section 210(m)(1) issues to be evaluated in response to a state PURPA “obligation” filing. It argues that a QF attempting to establish a legally enforceable obligation should be required to provide the utility with formal notice of such a filing, and that within sixty days of such notice, the utility must file the necessary application to satisfy the market criteria. OG&E argues that this opportunity to rebut an obligation is essential where a QF seeks to establish a state-mandated obligation between January 19, 2006 and the effective date of the Final Rule. OG&E states that the Commission made clear in the NOPR that a utility would not be able to submit a section 210(m) application until after a final rule in this rulemaking. OG&E contends that it is therefore unreasonable for the Commission to require utilities to delay submitting section 210(m)(1) applications, and then hold that it is too late to avoid obligations purportedly incurred during the Commission-mandated delay. 135. With regard to termination of contracts with a QF, Industrial Parties note that many utility contracts have a change-in-law clause that allows them to terminate current contracts. To the extent that the parties to a contract cannot agree whether a termination clause has been triggered, the Industrial Parties agree that the issue will be best determined in an individual case-specific proceeding in which the particulars of the contract can be examined. Industrial Parties argue, however, that the Commission should clarify that utilities may not use such clauses to terminate their purchase obligation without obtaining a Commission determination pursuant to the processes set out in the Final Rule. Commission Determination 136. Section 210(m)(6) provides: NO EFFECT ON EXISTING RIGHTS AND REMEDIES.—Nothing in this subpart affects the rights or remedies of any party under any contract or obligation, in effect or pending approval before the appropriate State regulatory authority or non-regulated electric utility on the date of enactment of this subsection, to purchase electric energy or capacity from or to sell electric energy or capacity to a qualifying cogeneration facility or qualifying small power production facility under this Act (including the right to recover costs of purchasing electric energy or capacity). In the Final Rule, the Commission adopted the statutory language into its regulations 57 and pointed out that it had previously addressed the meaning of section 210(m)(6) in *Midwest Renewable Energy Projects, LLC* . 58 In *Midwest Renewable* , we rejected the notion that “contract” and “obligation” are synonymous terms. When a utility refuses to enter into a contract with a QF, and the QF seeks state regulatory authority assistance to enforce its PURPA regulations, a non-contractual but still legally enforceable obligation may be created pursuant to the state's implementation of PURPA. The Commission explained in the Final Rule that such obligations do not necessarily involve a single writing containing all material terms and that how QFs may initiate the process varies from state to state. As a result, narrowly defining an “obligation” to encompass only a specific legal arrangement with all the relevant and material rates, terms and conditions established could be at odds with a state's implementation of PURPA. The Commission therefore concluded in the Final Rule that the term “obligation” means a “legally enforceable obligation” which is established through a state's implementation of PURPA. 59 We affirm the Commission's determination in the Final Rule that a QF that initiated, prior to August 8, 2005, a state PURPA proceeding that may result in a contract or legally enforceable obligation would be considered to have triggered an “obligation” with the electric utility subject to section 210(m)(6) pending the state's determination of whether an enforceable obligation exists. If the state determines that no enforceable obligation exists, then relief from the utility's purchase obligation with respect to that QF may be granted. 137. The Commission clarifies that the date when an “obligation” under PURPA is established is the date such obligation is established by each state regulatory authority or nonregulated utility. In the Final Rule, the Commission noted that the statute grandfathered contracts and obligations entered into before the effective date of EPAct 2005 in section 210(m)(6) of PURPA, but that section 210(m)(1) of PURPA only gives the Commission authority to terminate the obligation to enter into new contracts or obligations. The Commission determined that a QF that has initiated a state PURPA proceeding that may result in a legally enforceable contract or obligation prior to the applicable electric utility filing its petition for relief pursuant to § 292.310 of the Commission's regulations will be entitled to have any contract or obligation that may be established by state law grandfathered. 60 We see no reason to change this determination, as the grandfathering of only pre-August 8, 2005 contracts or obligations would undermine any subsequent QF investments. 138. We do note, however, that if a QF argues that any contract or obligation was “pending approval before the appropriate State regulatory authority or non-regulated electric utility,” and thus argues that the utility's obligation to purchase from the QF ought not be terminated pursuant to a § 292.310 proceeding, the Commission will consider those claims in the individual proceedings as they arise. Whether a contract or obligation exists would depend on state law. What we do not expect to see is a race to make filings either to be grandfathered, or to negate a potential obligation filed after August 8, 2005, but prior to a utility's filing for relief from the obligation to enter new contracts or obligations. 139. Deere requests that we clarify that a legally enforceable obligation may be created not just by a state PURPA proceeding, but also by other means such as by a state issuing regulations or taking other action reasonably designed to give effect to the Commission's rules. We find that the language “or pending approval” in section 210(m)(6) implies that there has been a filing before a state regulatory authority. As we stated in *Midwest Renewable* , “the phrase `or pending approval' [is] quite significant, as it ensures that contracts or obligations that had not yet been entered into but *were being pursued in the context of the state commission proceedings* that were pending on the date of enactment of EPAct 2005 will fall within the savings clause.” 61 We therefore find that, under most circumstances, there must be some sort of filing before a state regulatory authority for a QF to be “pending approval.” Even under these circumstances, we emphasize, however, that in the division of responsibilities of administering PURPA between this Commission and state regulatory authorities (and non-regulated utilities), it is the state regulatory authorities (or non-regulated utilities) that determine whether and when a legally enforceable obligation is created, and the procedures for obtaining approval of such an obligation. QFs that believe that some other sort of state proceeding has created a legally enforceable obligation under state law may argue their claim before the Commission, and we will make such determinations on a case-by-case basis based on state law. 140. Accordingly, while we agree with Deere that QFs that have begun but not yet completed physical construction, and therefore that have not been able to complete the process for creating a legally enforceable obligation under a “build first” state law, may have utilized a particular state's implementation of PURPA in a way that results in a legally enforceable obligation, such a determination would need to be made on a case-specific basis. Whether the state regulatory authority's process for creating a legally enforceable obligation has begun, and thus there is a contract or obligation pending, depends on state law. A QF may argue that an obligation or contract is pending approval as provided by state law in any proceedings seeking termination of the purchase obligation, or pursuant to a petition for declaratory order. 141. The Commission denies OG&E's request to establish a new process by which a utility could use a section 210(m) application to nullify a state proceeding to establish a new QF purchase obligation. OG&E complains that the Commission prevented utility section 210(m) filings from January 19, 2006, when the NOPR issued, until issuance of the Final Rule, and should not now find that QFs initiating state “obligation” proceedings during that interim period, or thereafter, are grandfathered under section 210(m)(6) of PURPA. Under OG&E's proposal, a QF seeking a new state “obligation” determination would be required to notify the utility and the utility would have 60 days to file a section 210(m) application with the Commission; this application would be addressed in a final determination within 90 days. This final determination could then be taken into account by the state in deciding whether to grant the QF's application to create a new “obligation” for the local utility to purchase power from the QF. 142. We decline to create the new process requested by OG&E. We continue to believe that the Commission's determination to adopt the language of section 210(m)(6) and to look to state law to determine whether a contract or obligation is pending approval provides a sufficient balance between the rights of the electric utilities seeking relief from the obligation to enter into new contracts or obligations, and the rights of QFs under existing contracts or obligations. 57 Final Rule at P 210-11. 58 *Midwest Renewable Energy Projects, LLC* , 116 FERC ¶ 61,017

(2006)( *Midwest Renewable).* 59 Final Rule at P 211-13. 60 As we noted above, once the Commission has made a finding that a particular QF has nondiscriminatory access to one of the specified markets, this conclusion would be binding in proceedings involving the same QF and other electric utilities, absent a showing of changed circumstances. Accordingly, as of the date of the first electric utility's filing seeking termination of the obligation to purchase from a particular QF, any subsequent state filing that a QF makes will not result in a grandfathered obligation. 61 *Midwest Renewable* at P 14 (emphasis added). 143. We will grant clarification with regard to the termination of existing contracts. Industrial Parties' request is consistent with our other findings with regard to contract termination in the Final Rule. In the Final Rule, in response to comments by AEP, we stated that an electric utility will not be compelled to enter into a new contract as long as there is mutual agreement between a QF and the electric utility to terminate the existing contract. We made clear, however, that “a QF contract is to remain in effect until it terminates by mutual agreement or by its own terms.” 62 The Commission also recognized that some contracts contain clauses stating that legislation, such as EPAct 2005, or a Commission action, such as the Final Rule in this docket, may be grounds for termination of the contract. If an electric utility and a QF disagree as to the meaning of a termination clause, either the electric utility or the QF may seek a determination regarding its rights under the termination clause in the appropriate state forum since the issue of whether a QF has a continuing right to sell is a matter of contract interpretation. F. Implementation Procedures 144. Section 210(m)(3) of PURPA provides in part that “[a]ny electric utility may file an application with the Commission for relief from the mandatory purchase obligation pursuant to this subsection on a service territory-wide basis.” The Commission essentially incorporated this language into § 292.310 of its regulations. The Commission also determined that an electric utility's mandatory purchase obligation would be suspended upon the filing of its PURPA petition. When an electric utility files its PURPA petition, that electric utility will not be obligated to enter into new contracts or obligations with QFs as of the date its PURPA petition is filed. If the Commission finds that the requirements of section 210(m)(1) of PURPA have been met, then the purchase requirement for that electric utility ends as of the date of the PURPA petition. However, if the Commission finds that the requirements of section 210(m)(1) have not been met, then the electric utility's obligation to enter into new contracts or obligations is reinstated as of the date of the Commission order. Requests for Rehearing 145. PacifiCorp and EEI argue that the Commission should clarify the procedures for utilities requesting termination of the mandatory purchase obligation on a “service territory-wide” basis. PacifiCorp notes that the term “service territory-wide” is not defined in PURPA or in the Final Rule and could refer to a portion of a utility's electric infrastructure located in a specific state or could be understood to be synonymous with the control area operated by the applicant. PacifiCorp argues that a single entity (such as PacifiCorp) owning transmission facilities and operates multiple control areas should be able to file separate applications for each control area. PacifiCorp and EEI argue that such clarification would facilitate the processing of applications by the Commission within the time limitations established by Congress. PacifiCorp and EEI request that the Commission clarify that it will interpret “service territory” to be the particular control area or areas identified in the application when the applicant operates multiple control areas spanning several states. 146. If the Commission retains the small QF rebuttable presumption, Deere requests that the Commission grant rehearing of its decision to temporarily suspend a utility's PURPA obligation once a request for relief has been filed. Deere argues that the Commission should instead apply the utility's PURPA relief to small QFs only after the Commission makes the required findings with regard to the small QF issue. Deere contends that this would protect small QFs who, at the time of the utility's PURPA relief application, have already begun preliminary development work but have not yet been able to begin utilization of the applicable state law process for creating a legally enforceable obligation. Commission Determination 147. We clarify that an electric utility may specify in its application the territory within which it seeks to have its purchase obligation terminated. 148. We grant Deere's request to distinguish between particular types of QFs for purpose of suspending the mandatory purchase obligation once an application for relief has been filed under section 210(m)(3). The rebuttable presumption that small QFs do not have access to markets will remain in effect and, thus, it is reasonable to retain the mandatory purchase obligation from small QFs pending consideration a PURPA petition. We clarify that to the extent that an electric utility seeks to be relieved of the obligation to purchase from a small QF, the electric utility must rebut the presumption that the small QF does not have nondiscriminatory access to the applicable market prior to the termination of the purchase requirement as applied to that QF, and that the purchase obligation remains in effect until, and if, the Commission makes the finding that the small QF does have nondiscriminatory access to markets that warrant termination of the purchase obligation. III. Information Collection Statement 149. The regulations of the Office of Management and Budget

(OMB)63 require that OMB approve certain information requirements imposed by an agency. OMB has approved the information requirements contained in Order No. 688. Specifically, OMB approved the following information collections and assigned the corresponding OMB control numbers: Small Power Production and Cogeneration Facilities (FERC-556) (1902-0075). 150. On rehearing EEI argues that the filing requirements in § 292.310(d)(3) are unduly broad and burdensome. We have addressed those arguments elsewhere in this order. 64 151. This order on rehearing adopts a change. Specifically, we are requiring electric utilities filing an application with the Commission for relief from the mandatory purchase requirement to provide more information about the potentially affected QFs, including the docket number assigned if the QF filed for self-certification or Commission certification of qualifying facility status, the location of the QF depicted by state and county, and by the name and location of the substation where the QF is interconnected, and whether the QF is interconnected as an energy or network resource. We do not anticipate that this new requirement to provide additional information about the potentially affected QFs will impose a significant additional burden on electric utilities; the additional information we are requiring is readily available to electric utilities. Accordingly, we will allow the original projected burden estimates expressed in Order No. 688 to stand. Interested persons may obtain information on the reporting requirements by contacting the following: Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426 [Attention: Michael Miller, Office of the Executive Director, Phone

(202)502-8415, fax:

(202)273-0873, e-mail: *michael.miller@ferc.gov* ] 152. To submit comments concerning the collection of information(s) and the associated burden estimates, please send your comments to the contact listed above and to the Office of Management and Budget, Office of Information and Regulatory Affairs, Washington, DC 20503, Attention: Desk Officer for the Federal Energy Regulatory Commission; Phone:

(202)395-4650, fax:

(202)395-7285. IV. Document Availability 153. In addition to publishing the full text of this document in the **Federal Register** , the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the Internet through FERC's Home Page ( *http://www.ferc.gov* ) and in FERC's Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426. 62 Final Rule at P 219. 63 5 CFR 1320.12. 64 *See supra* P 112-17. 154. From FERC's Home Page on the Internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number excluding the last three digits of this document in the docket number field. 155. User assistance is available for eLibrary and the FERC's Web site during normal business hours from our FERC Online Support at 202-502-6652 (toll-free at 1-866-208-3676) or e-mail at *ferconlinesupport@ferc.gov* , or the Public Reference Room at

(202)502-8371 Press 0, TTY

(202)502-8659. E-Mail the Public Reference Room at *public.referenceroom @ferc.gov* . V. Effective Date 156. These revisions in this order on rehearing are effective July 30, 2007. By the Commission. Commissioner Kelly concurring with a separate statement attached. Kimberly D. Bose, Secretary. In consideration of the foregoing, the Commission amends part 292, Chapter I, Title 18, *Code of Federal Regulations* , as follows: PART 292—REGULATIONS UNDER SECTIONS 201 AND 210 OF THE PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978 WITH REGARD TO SMALL POWER PRODUCTION AND COGENERATION 1. The authority citation for part 292 continues to read as follows: Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-7352. 2. In § 292.310, paragraphs

(c)introductory text and (d)(3) are revised to read as follows: § 292.310 Procedures for utilities requesting termination of obligation to purchase from qualifying facilities.

(c)An electric utility must submit with its application for each potentially affected qualifying facility: The docket number assigned if the qualifying facility filed for self-certification or an application for Commission certification of qualifying facility status; the net capacity of the qualifying facility; the location of the qualifying facility depicted by state and county, and the name and location of the substation where the qualifying facility is interconnected; the interconnection status of each potentially affected qualifying facility including whether the qualifying facility is interconnected as an energy or a network resource; and the expiration date of the energy and/or capacity agreement between the applicant utility and each potentially affected qualifying facility. All potentially affected qualifying facilities shall include:

(d)* * *

(3)Transmission Studies and related information, including:

(i)The applicant's long-term transmission plan, conducted by applicant, or the RTO, ISO or other relevant entity;

(iii)Levels of congestion, if available;

(iv)Relevant system impact studies for the generation interconnections, already completed;

(v)Other information pertinent to showing whether transfer capability is available; and

(vi)The appropriate link to applicant's OASIS, if any, from which a qualifying facility may obtain applicant's available transfer capability

(ATC)information. KELLY, Commissioner, *concurring* : Under PURPA section 210(m)(1)(A), no electric utility shall be required to enter into a new contract or obligation to purchase electric energy from a QF under section 210(m) if the Commission finds that the QF has nondiscriminatory access to: “(i) independently administered, auction-based day ahead and real time wholesale markets for the sale of electric energy; and

(ii)wholesale markets for long-term sales of capacity and electric energy.” This order affirms the finding in Order No. 688 that the four “Day 2” markets (MISO, PJM, NYISO and ISO-NE) satisfy both requirements of section 210(m)(1)(A). By contrast to section 210(m)(1)(A)(ii), section 210(m)(1)(B)(ii) requires that a QF have nondiscriminatory access to “competitive wholesale markets that provide a meaningful opportunity to sell capacity, including long-term and short-term sales, and electric energy, including long-term, short-term and real-time sales, to buyers other than the utility to which the qualifying facility is interconnected.” Section 210(m)(1)(B)(ii) also provides that “[i]n determining whether a meaningful opportunity to sell exists, the Commission shall consider, among other factors, evidence of transactions within the relevant market.” In Order No. 688, the Commission interpreted the use of the terms “competitive,” “meaningful opportunity” and “evidence of transactions” in section 210(m)(1)(B)(ii) to mean that Congress intended for termination of the purchase requirement in a “Day 1” market, such as CAISO and SPP, only if it could be demonstrated that QFs had opportunities to make long-term and short-term sales of capacity and long-term, short-term and real-time sales of energy into competitive wholesale markets. This order clarifies that, based on the specific language contained in section 210(m)(1)(B)(ii), a petitioning electric utility located in a “Day 1” market must demonstrate an actual, not just theoretical, opportunity to meet this requirement. Accordingly, this order affirms Order No. 688 in finding that the “Day 1” markets, SPP and CAISO, have not been shown to meet the requirements of section 210(m)(1)(B)(ii). On rehearing, petitioners dispute the Commission's finding in Order No. 688 that the four “Day 2” markets meet the second prong of section 210(m)(1)(A). They argue that the mere existence of long-term bilateral contracts for sales of capacity and energy in these markets is not sufficient to demonstrate that there is a competitive market for capacity and energy sales or meaningful opportunities for QFs to sell energy or capacity long-term to multiple buyers. I sympathize with petitioners' argument, and in fact I believe that section 210(m)(1)(A)(ii) logically *should* have required a demonstration of a competitive long-term market that provides a meaningful opportunity for QFs to sell energy or capacity long-term to buyers other than the utility to which the QF is interconnected, as is required under section 210(m)(1)(B)(ii). However, the less specific language in section 210(m)(1)(A)(ii) used to describe the quality of the relevant long-term market that would satisfy this requirement indicates that either this was not Congress's intent, or that perhaps there was a drafting oversight. In any event, we must look to the plain language of the statute. Thus, in my view, the Commission has reasonably interpreted section 210(m)(1)(A)(ii) to require only that there be a “market” for long-term sales of capacity and energy with respect to electric utilities located in “Day 2” markets. Accordingly, I concur with this order. Suedeen G. Kelly [FR Doc. E7-12553 Filed 6-28-07; 8:45 am] BILLING CODE 6717-01-P 72 125 Friday, June 29, 2007 Presidential Documents Part VII The President Proclamation 8157—To Modify Duty-Free Treatment Under the Generalized System of Preferences, Take Certain Actions Under the African Growth and Opportunity Act, and for Other Purposes Title 3— The President Proclamation 8157 of June 28, 2007 To Modify Duty-Free Treatment Under the Generalized System of Preferences, Take Certain Actions Under the African Growth and Opportunity Act, and for Other Purposes By the President of the United States of America A Proclamation 1. Pursuant to section 503(c)(2)(A) of the Trade Act of 1974, as amended (the “1974 Act”)(19 U.S.C. 2463(c)(2)(A)), beneficiary developing countries, except those designated as least-developed beneficiary developing countries or beneficiary sub-Saharan African countries as provided in section 503(c)(2)(D) of the 1974 Act (19 U.S.C. 2463(c)(2)(D)), are subject to competitive need limitations on the preferential treatment afforded under the Generalized System of Preferences

(GSP)to eligible articles. 2. Section 503(c)(2)(C) of the 1974 Act (19 U.S.C. 2463(c)(2)(C)) provides that a country that is no longer treated as a beneficiary developing country with respect to an eligible article may be redesignated as a beneficiary developing country with respect to such article if imports of such article from such country did not exceed the competitive need limitations in section 503(c)(2)(A) of the 1974 Act during the preceding calendar year. 3. Section 503(c)(2)(F)(i) of the 1974 Act (19 U.S.C. 2463(c)(2)(F)(i)) provides that the President may disregard the competitive need limitation provided in section 503(c)(2)(A)(i)(II) of the 1974 Act (19 U.S.C. 2463(c)(2)(A)(i)(II)) with respect to any eligible article from any beneficiary developing country if the aggregate appraised value of the imports of such article into the United States during the preceding calendar year does not exceed an amount set forth in section 503(c)(2)(F)(ii) of the 1974 Act (19 U.S.C. 2463(c)(2)(F)(ii)). 4. Pursuant to section 503(d)(1) of the 1974 Act (19 U.S.C. 2463(d)(1)), the President may waive the application of the competitive need limitations in section 503(c)(2)(A) of the 1974 Act (19 U.S.C. 2463(c)(2)(A)) with respect to any eligible article from any beneficiary developing country if certain conditions are met. 5. Pursuant to section 503(d)(5) of the 1974 Act (19 U.S.C. 2463(d)(5)), any waiver granted under section 503(d) shall remain in effect until the President determines that such waiver is no longer warranted due to changed circumstances. 6. Pursuant to section 503(c)(2)(A) of the 1974 Act, I have determined that in 2006 certain beneficiary developing countries have exported certain eligible articles in quantities exceeding the applicable competitive need limitation, and I therefore terminate the duty-free treatment for such articles from such beneficiary developing countries. 7. Pursuant to section 503(c)(2)(C) of the 1974 Act, and subject to the considerations set forth in sections 501 and 502 of the 1974 Act (19 U.S.C. 2461 and 2462), I have determined to redesignate certain countries as beneficiary developing countries with respect to certain eligible articles that previously had been imported in quantities exceeding the competitive need limitations of section 503(c)(2)(A) of the 1974 Act. 8. Pursuant to section 503(c)(2)(F) of the 1974 Act, I have determined that the competitive need limitation provided in section 503(c)(2)(A)(i)(II) of the 1974 Act should be disregarded with respect to certain eligible articles from certain beneficiary developing countries. 9. Pursuant to section 503(d)(1) of the 1974 Act, I have received the advice of the United States International Trade Commission (USITC) on whether any industries in the United States are likely to be adversely affected by such waivers, and I have determined, based on that advice and on the considerations described in sections 501 and 502(c) of the 1974 Act, and after giving great weight to the considerations in section 503(d)(2) of the 1974 Act (19 U.S.C. 2463(d)(2)), that such waivers are in the national economic interest of the United States. Accordingly, I have determined that the competitive need limitations of section 503(c)(2)(A) of the 1974 Act should be waived with respect to certain eligible articles from certain beneficiary developing countries. 10. Pursuant to section 503(d)(5) of the 1974 Act, I have determined that certain previously granted waivers of the competitive need limitations of section 503(c)(2)(A) of the 1974 Act are no longer warranted due to changed circumstances. 11. Section 506A(a)(1) of the 1974 Act (19 U.S.C. 2466a(a)(1)), as added by section 111(a) of the African Growth and Opportunity Act (title I of Public Law 106-200)(AGOA), authorizes the President to designate a country listed in section 107 of the AGOA (19 U.S.C. 3706) as a beneficiary sub-Saharan African country if the President determines that the country meets the eligibility requirements set forth in section 104 of the AGOA (19 U.S.C. 3703), as well as the eligibility criteria set forth in section 502 of the 1974 Act (19 U.S.C. 2462). 12. Section 104 of the AGOA authorizes the President to designate a country listed in section 107 of the AGOA as an eligible sub-Saharan African country if the President determines that the country meets certain eligibility requirements. 13. Section 112(c) of the AGOA (19 U.S.C. 3721(c)) provides special rules for certain apparel articles imported from lesser developed beneficiary sub-Saharan African countries. 14. In Proclamation 7970 of December 22, 2005, I determined that the Islamic Republic of Mauritania (Mauritania) was not making continual progress in meeting the requirements described in section 506A(a)(1) of the 1974 Act and terminated the designation of Mauritania as a beneficiary sub-Saharan African country for purposes of section 506A of the 1974 Act. 15. Pursuant to section 104 of the AGOA and section 506A(a)(1) of the 1974 Act, I have determined that Mauritania now meets the eligibility requirements set forth or referenced therein, and I have decided to redesignate Mauritania as an eligible sub-Saharan African country and beneficiary sub-Saharan African country. 16. I further determine that Mauritania satisfies the criterion for treatment as a “lesser developed beneficiary sub-Saharan African country” under section 112(c) of the AGOA. 17. Presidential Proclamation 8114 of March 19, 2007, implemented section 112 of the AGOA, as amended in section 6002 of the Africa Investment Incentive Act of 2006 (Division D, Title VI, Public Law 109-432)(19 U.S.C. 3721(c)(2)(A)). Technical corrections to the Harmonized Tariff Schedule of the United States

(HTS)are necessary to implement the intended tariff treatment. 18. In Presidential Proclamation 8097 of December 29, 2006, I modified the HTS, pursuant to section 1206 of the Omnibus Trade and Competitiveness Act of 1988 (the “1988 Act”) (19 U.S.C. 3006), to conform it to the International Convention on the Harmonized Commodity Description and Coding System (the “Convention”). Additional conforming changes to the HTS are required to implement the intended tariff treatment. 19. Section 2004(b)(1)(B) of the Miscellaneous Trade and Technical Corrections Act of 2004 (Public Law 108-429) amended section 213(b)(2)(A)(v) of the Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(b)(2)(A)(v)). A modification to the HTS needs to be made to reflect this amendment. 20. On April 22, 1985, the United States entered into the Agreement on the Establishment of a Free Trade Area between the Government of the United States of America and the Government of Israel (the “Israel FTA”), which the Congress approved in the United States-Israel Free Trade Area Implementation Act of 1985 (the “Israel FTA Act”)(19 U.S.C. 2112 note). In order to maintain the general level of reciprocal and mutually advantageous concessions with respect to agricultural trade with Israel, on July 27, 2004, the United States entered into an agreement with Israel concerning certain aspects of trade in agricultural products during the period January 1, 2004, through December 31, 2008 (the “2004 Agreement”). 21. Presidential Proclamation 7826 of October 4, 2004, implemented the 2004 Agreement. Technical corrections to the HTS are necessary to reflect the tariff treatment intended under the 2004 Agreement for the years 2007 and 2008. 22. Section 604 of the 1974 Act, as amended (19 U.S.C. 2483), authorizes the President to embody in the HTS the substance of the relevant provisions of that Act, and of other Acts affecting import treatment, and actions thereunder, including the removal, modification, continuance, or imposition of any rate of duty or other import restriction. NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, acting under the authority vested in me by the Constitution and the laws of the United States, including but not limited to title V and section 604 of the 1974 Act, section 4 of the Israel FTA Act, section 1206 of the 1988 Act, and section 104 of the AGOA, do hereby proclaim:

(1)In order to provide that one or more countries that have not been treated as beneficiary developing countries with respect to one or more eligible articles should be redesignated as beneficiary developing countries with respect to such article or articles for purposes of the GSP, and, in order to provide that one or more countries should no longer be treated as beneficiary developing countries with respect to one or more eligible articles for purposes of the GSP, general note 4(d) to the HTS is modified as set forth in section A of Annex I to this proclamation.

(2)In order to designate certain articles as eligible articles for purposes of the GSP when imported from any beneficiary developing country, the Rates of Duty 1-Special subcolumn for such HTS subheadings is modified as set forth in section B(1) of Annex I to this proclamation.

(3)In order to provide that one or more countries should not be treated as beneficiary developing countries with respect to certain eligible articles for purposes of the GSP, the Rates of Duty 1-Special subcolumn for such HTS subheadings is modified as set forth in section B(2) of Annex I to this proclamation.

(4)The competitive need limitation provided in section 503(c)(2)(A)(i)(II) of the 1974 Act is disregarded with respect to the eligible articles in the HTS subheadings and to the beneficiary developing countries listed in Annex II to this proclamation.

(5)A waiver of the application of section 503(c)(2)(A) of the 1974 Act shall apply to the eligible articles in the HTS subheadings and to the beneficiary developing countries set forth in Annex III to this proclamation.

(6)The waivers of the application of section 503(c)(2)(A) of the 1974 Act to the articles in the HTS subheading and to the beneficiary developing countries listed in Annex IV to this proclamation are revoked.

(7)Mauritania is designated as an eligible sub-Saharan African country and as a beneficiary sub-Saharan African country.

(8)In order to reflect this designation in the HTS, general note 16(a) to the HTS is modified by inserting in alphabetical sequence in the list of beneficiary sub-Saharan African countries “Islamic Republic of Mauritania,” effective with respect to articles entered, or withdrawn from warehouse for consumption, on or after July 1, 2007.

(9)For purposes of section 112(c) of the AGOA, Mauritania is a lesser developed beneficiary sub-Saharan African country.

(10)In order to provide the tariff treatment intended under section 112 of the AGOA, as amended, the HTS is modified as set forth in section A of Annex V to this proclamation.

(11)In order to conform the HTS to the Convention or any amendment thereto recommended for adoption, to promote the uniform application of the Convention, to establish additional subordinate tariff categories, and to make technical and conforming changes to existing provisions, the HTS is modified as set forth in section B of Annex V to this proclamation.

(12)In order to implement section 2004(b)(1)(B) of the Miscellaneous Trade and Technical Corrections Act of 2004, the HTS is modified as set forth in section C of Annex V to this proclamation.

(13)In order to provide the tariff treatment intended under the 2004 Agreement, the HTS is modified as set forth in section D of Annex V to this proclamation.

(14)The modifications to the HTS set forth in Annexes I, IV, and V to this proclamation shall be effective with respect to articles entered, or withdrawn from warehouse for consumption, on or after the dates set forth in the respective annex.

(15)Any provisions of previous proclamations and Executive Orders that are inconsistent with the actions taken in this proclamation are superseded to the extent of such inconsistency. IN WITNESS WHEREOF, I have hereunto set my hand this twenty-eighth day of June, in the year of our Lord two thousand seven, and of the Independence of the United States of America the two hundred and thirty-first. GWBOLD.EPS Billing code 3195-01-P ED29JN07.004 ED29JN07.005 ED29JN07.006 ED29JN07.007 ED29JN07.008 ED29JN07.009 ED29JN07.010 [FR Doc. 07-3225 Filed 6-28-07; 10:30 am]

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