-----Original Message-----
From: Kasper, Roger A DATCP [mailto:Roger.Kasper@datcp.state.wi.us]
Sent: Friday, December 06, 2002 2:21 PM
To: Hadjy, Pandor
Subject: Comments on Implementation of Section 9006 of the Farm Security
and Rural Investment Act of 2002, "Expanding Rural Renewable...

Pandor Hadjy, Assistant Deputy Administrator, Business Programs
RBS, Room 5050 South Agriculture Building, Stop 3220
1400 Independence Avenue, SW.
Washington, D.C. 20250-3220

RE: Comments on Implementation of Section 9006 of the Farm Security and
Rural Investment Act of 2002, "Expanding Rural Renewable Energy Systems" 

The following Wisconsin organizations have reviewed and provided input to
the document below:

Wisconsin Department of Administration (DOA)
+ Wisconsin Focus on Energy - Production Agriculture Program
+ Wisconsin Focus on Energy - Rural Communities Program
+ Wisconsin Focus on Energy - Renewable Energy Program

Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP)
+ Rural Electric Power Service (REPS) program
+ Agricultural Development and Diversification (ADD) program

DATCP administers two programs that relate to rural energy: one program is
the Rural Electric Power Service (REPS) program and the other is the
Agricultural Development and Diversification (ADD) program. DATCP also
supports a citizen advisory council called the Rural Energy Management
Council (REMC). In addition, the Wisconsin Focus on Energy Program, an
energy efficiency and renewable energy program funded by electric utility
customers and managed by DOA has established programs in all three areas
included in Section 9006, namely renewable energy, agriculture-based energy
efficiency and rural communities. These activities have given us a chance to
work with a variety of the agencies and individuals interested in rural
energy issues in Wisconsin. These comments reflect the knowledge we have of
the status of rural energy management in Wisconsin and the ways the USDA
program could partner with the Wisconsin programs and achieve even greater
public benefits.

Your original question and statement are in ALL CAPITAL letters; DATCP's
suggestions and discussion follow each question. 

Questions or concerns with regarding these comments can be directed to 

Roger Kasper, DATCP-Rural Electric Power Service (REPS) program at
roger.kasper@datcp.state.wi.us or 608/224-5054
Or
Preston Schutt, DOA-Division of Energy at
preston.schutt@doa.state.wi.us or 608/261-8658
Or
Don Wichert, DOA-Division of Energy at don.whicert@doa.state.wi.us or
608/266-7312

Thank you for considering our input in the drafting of the rules to
implement Section 9006 of the Farm Security and Rural Investment Act of
2002.
Roger Kasper, Preston Schutt, Don Wichert 

WISCONSIN'S RESPONSE TO USDA ISSUES:
====================================
"RBS IS PARTICULARLY INTERESTED IN RECEIVING COMMENTS ON THE FOLLOWING
SPECIFIC ISSUES AS THEY RELATE TO SECTION 9006:
1. THE ACT STIPULATES THAT FINANCIAL ASSISTANCE MAY BE PROVIDED TO PURCHASE
RENEWABLE ENERGY SYSTEMS AND MAKE ENERGY EFFICIENCY IMPROVEMENTS. 
~ WHAT PROJECTS SHOULD BE ELIGIBLE FOR FUNDING? & SHOULD CERTAIN TYPES OF
PROJECTS RECEIVE PRIORITY FOR FUNDING?  

Suggestions:
1. Earmark at least 50% of the money for energy efficiency improvements and
the remainder to new renewable energy projects.
2. Require eligible projects to have an energy assessment/audit and energy
management plan. 
3. Take an overall "systems" approach to funding energy efficiency and
renewable energy projects, NOT simply funding a new "technology" approach
(e.g. funding just new type of light purchase and not system upgrades to
handle new lights safely and efficiently).

Discussion:
Both renewable energy systems and energy efficiency improvements could
benefit eligible participants and should be eligible for funding, but they
are not necessarily the ones who can afford the risks of unproven or new
applications of existing technology. Some are going to be able and willing
to take the risk of being an early adopter of an unproven system or located
so that they can take advantage of proven renewable energy technologies
(e.g. wind), but we feel a majority are more likely not. Therefore, we
suggest ear marking at least 50% of the money for energy efficiency
improvements and the remainder to new renewable energy systems. 

Just adding the most recent renewable energy or energy efficiency
technologies to a hodgepodge of systems is not necessarily in the best
overall interest of the operation. Systems that have been built up over
time, often in response to emergency needs, may have hidden safety issues
and are probably not designed with energy efficiency in mind. Many farm
operators need encouragement to spend more time and resources in getting
outside expert planning guidance for the energy management of the overall
operations. 

The effort to look at all energy usage requirements of the operation and
planning for overall system upgrades is absolutely necessary to ensure a
safe and efficient system. Important safety and power quality concerns (e.g.
stray voltage, excessive secondary voltage drop, wiring failures in process,
etc.) are often identified during this review process. Regardless of whether
the operator proceeds with funding the improvements or changes at the time,
the farmer has an outline of safety, efficiency and alternative renewable
energy concerns and options they face and a plan for future reference to
prioritize possible improvements or energy efficient replacement purchases
of failed equipment. 

We feel an energy assessment/audit that investigates both renewable energy
and energy efficiency options, along with an energy plan, should be required
of projects requesting assistance under section 9006. The nature of the
assessment/audit should be focused on energy efficiency first, then
renewable energy options. The energy assessment/audit should make simplified
estimates of savings - not detailed audits based on complex monitoring - a
sure way to waste program funds.  The overall assessment/audit should be
based on an Identification (ID) survey that utilizes basic farm factors to
estimate energy cost and saving potential for system efficiency improvements
and renewable energy systems.

We realize section 9005 of the bill was to cover these audits, but funding
of these services is unknown at this time. There are alternative providers
of assessments/audits and plans and the section 9006 program should accept
3rd party assessments/audits and plans. Knowledgeable third parties that
could potentially provide these services are state energy programs, county
or state extension services, private energy management consulting firms and
some utilities.

Often maximum effective improvements are more than just buying a "new piece"
of equipment (e.g. upgrade utility service to 3-phase power, rewiring
farmstead to modern standards, relocating ventilation / lighting equipment
within structures, etc.). The allowable expenses should NOT be just for the
"new" piece of equipment; rather, it should also cover overall system
changes required to take full advantage of all potential energy savings for
the system. 

An example would be the conversion from standard, incandescent lighting to
energy efficient lighting at a location that needs rewiring before
considering any change. An extra $10,000 to $20,000 may allow the upgrade so
that the operator could take advantage of the much more efficient lighting
option. If this additional cost is not covered, the operator may not be able
to afford the overall changes required to be as energy efficient as
possible. The upgrading/extending of 3-phase service has also been an issue
with the ability to connect wind turbines more efficiently to the utility
grid. Many other examples exist of the need to upgrade, rewire or modify the
operations to take full advantage of energy efficiency improvements or adopt
a renewable energy system.

A basic benefit cost ratio should be required when evaluating the grant or
loan amount that pays for a "system" expansion that does not directly lead
to energy efficiency.  It is possible that these system expansions will
subsidize non-energy efficiency and renewable energy technologies.  To
ensure the good use of program funds, a ceiling should be placed on
"indirect" or "system" upgrades.

~ SHOULD PREFERENCE BE GIVEN TO NEW, INNOVATIVE TECHNOLOGIES OR PROVEN
TECHNOLOGIES?
Suggestions:
1. All potentially 'viable' project technologies should have a chance to
participate in the program. However, there should be a reasonable maximum
allowable payback criteria established (e.g. projects more than a 10- to
15-year simple payback are NOT eligible).

Discussion:
Due to the limited annual funding for section 9006, we believe that any
renewable energy or energy efficiency projects should NOT be eligible for a
grant, if the payback is two years or less OR greater than ten to fifteen
years. Projects with paybacks greater than ten to fifteen years should not
be funded. It is our understanding that the goal of this USDA program is to
maximize current implemented energy savings and adoption of renewable
energy. The USDA should encourage innovation; however, it should rely on
other programs and efforts to establish the market viability of new
technologies before allowing them to access funds through this program.

Appropriate USDA or DOE authorities will need to determine which
technologies constitute a 'viable option'. The funding of "zero point
energy", perpetual motion or other questionable systems should be
discouraged as they are not likely to benefit the farmers or businesses
involved with the program.

Below are examples of technologies that might be considered either "proven"
or "new technologies".

"Proven 'off-the-shelf' technologies"
~ Most lamps and lighting systems
~ Variable speed fans
~ Milk system pre-coolers
~ High-volume low-speed fans in livestock housing areas
~ Efficient stock watering systems
~ Large wind turbines (100 kW or greater)
~ Solar electric fences or water pumps
~ NEMA Premium electric motors
~ Low pressure irrigation


"New or Innovative Technologies"
~ Anaerobic digestion of manure (biogas) [Still site by site adoption.]
~ Variable frequency dairy vacuum pumps (Not necessarily new or innovative,
however, they still should be considered on a site-by-site basis)
~ On-farm biodiesel, ethanol or other alternative fuel production
~ On-farm palletizing or other advance packaging of biomass materials for
fuel
~ Combined heat and power systems
~ Small wind turbines (less than 100 kW)
~ On-farm gasification or pyrolysis operations
~ Solar drying of products in northern climates
~ Waste-heat recovery by evaporative chilling systems

2. LOAN GUARANTEES, DIRECT LOANS, AND GRANT PROGRAMS ARE AUTHORIZED UNDER
THE LEGISLATION.
~ WHAT TYPE OF FINANCIAL ASSISTANCE IS MOST IN NEED (I.E., GRANTS, DIRECT
LOANS, OR LOAN GUARANTEES)?

Suggestions:
1. Grants, direct loans and or loan guarantees are all useful for specific
technology market stages - e.g., "new, innovative" or "proven".
2. Maximize grant size for early adopter or innovator of a system that is
unproven or has limited-adoption. Grants should be most generous for new,
innovative technologies.
3. Require individual or local/state programs to cover the cost of a third
party assessment/audit and energy plan. 
4. No grant money should be awarded to projects that have an economic
payback less than two years. In these situations direct loans or loan
guarantees should be used. 

Discussion:
As stated before, eligible farmers and small businesses are not necessarily
the ones who can afford to be "guinea pigs", but some are going to be able
and willing to take the risk of being an early adopter or innovator of an
unproven or limited adopted system. These individuals should receive the
maximum grant assistance in addition to loans to help balance some of the
risk of being an early adopter or innovator. 

States should demonstrate their commitment to energy efficiency by covering
the cost of a third party assessment/audit and energy plan. In this way the
USDA would be assuming a leadership position by encouraging States to
actively participate. 

4. SECTION 9006 STATES THAT, IN DETERMINING THE AMOUNT OF GRANT OR LOAN, THE
SECRETARY SHALL TAKE INTO CONSIDERATION AS APPLICABLE: 
   G. OTHER FACTORS AS APPROPRIATE.
~ WHAT OTHER FACTORS, IF ANY, SHOULD THE DEPARTMENT CONSIDER IN DETERMINING
THE AMOUNT OF GRANT OR LOAN?

Suggestions:
1. We agree an element of eligibility should be "financial need" and suggest
the minimum be conforming to the FSA direct loan program eligibility
requirements.
2. We encourage the adoption of the definition of a small rural business
that appears in the Rural Business Enterprise Grant program.
3. Renewable energy projects should have a maximum award of no greater than
$100,000 and energy efficiency projects should have a maximum award of
$25,000.

Discussion:
Section 9006(b)(a) directs the USDA Secretary to determine what qualifies as
"demonstrate(d) financial need". We did not find "financial need" defined
anywhere in the Act. We agree an element of eligibility should be "financial
need".

The baseline requirements of any participant for financial assistance should
be defined by adopting these existing requirements:
a. The FSA direct loan program eligibility requirements 
b. The 2002 Farm Bill stipulation, being used in other programs, that
individuals and entities whose average Adjusted Gross Income (AGI) exceeds
$2.5 million are ineligible unless at least 75 percent of their average AGI
is derived from farming, ranching or forestry operations.
We would accept additional requirements if easily determined such as a
specific ratio of energy expenditure to AGI as a measure of "financial
need".

"Rural small business" does not seem to be defined by the act. We encourage
the use of the definitions from the Rural Business Enterprise Grant (RBEG).
Section 1942.304 of instructions defines a small and emerging private
business enterprise as "Any private business which will employ 50 or fewer
new employees and has less than $1 million in projected gross revenues."
Rural and rural area are defined as "* * that is not within the outer
boundary of any city having a population of 50,000 or more and its immediate
adjacent urbanized and urbanizing areas with a population density of more
than 100 persons per square mile, *"


4. THE ACT STATES THAT THE AMOUNT OF GRANT SHALL NOT EXCEED 25 PERCENT OF
THE COST OF THE ACTIVITY FUNDED UNDER THE PROGRAM.  ADDITIONALLY, THE
COMBINED AMOUNT OF A GRANT AND LOAN MADE OR GUARANTEED SHALL NOT EXCEED 50
PERCENT OF THE COST OF THE ACTIVITY FUNDED.
~ WHAT ARE VARIOUS SOURCES OF PROGRAM MATCHING FUNDS (I.E., OTHER FEDERAL,
STATE, LOCAL, OR PRIVATE PROGRAMS)?

Suggestions:
1. Most residents of the State of Wisconsin have opportunity for some
matching funds from a variety of available programs. In Wisconsin,
availability of matching funds is determined by the nature of the programs
their utility (investor owned, municipally owned or rural cooperative) have
adopted and the business or farm operation. 
2. Most Wisconsin dairy operations and some other agriculture operations are
soon to have financial and technical assistance with rewiring of their
operations. The type of financial assistance will consist of a combination
of grants or loans to upgrade their existing wiring.
3. Projects receiving other financial assistance should NOT be excluded from
eligibility for funding under section 9006. However, the total of all grants
and loans, from federal, state, or local government should not exceed 50% of
the total project cost.

Discussion:
Beneficial synergies exist for packaging assistance from multiple programs
that can maximize the implementation of renewable energy systems and energy
efficiency upgrades. Grants and loans, from all sources (federal, state and
local), should not be greater than 50% of the total project cost. A project
owner should be required to have a substantial financial commitment so that
a "false" market is not created which is dependent on subsidies.

Most residents of the State of Wisconsin have the opportunity for some
matching funds from a variety of available programs. The availability of
matching funds in Wisconsin is determined by the nature of the program
offered by electric providers (investor owned, municipal managed or rural
cooperative) and the nature of the business or farm operation. 

The State of Wisconsin enacted legislation to require investor owned
utilities and municipals to participate in a uniform public benefit program
managed by the state which is known as the "Focus on Energy" program. Focus
on Energy manages a number of public benefit programs that include
encouraging renewable energy, energy efficiency improvements and assistance
with payment of energy bills. The 23 Wisconsin rural electric cooperatives
were invited to participate in the State's Focus on Energy program or
requested to offer a similar package of programs on their own. None chose to
join the State's Focus on Energy program and instead fund their own
programs, if any for these specific interest. Therefore, the available
matching funds depend on the specific utility that provides the potential
participant with electric power. 

Further information on Focus on Energy program offerings:  
Production agriculture energy efficiency incentive program.
http://www.focusonenergy.com/data/common/pageBuilderFiles/1367775110MMfinanc
ial.pdf
Renewable energy investment incentives.
http://www.focusonenergy.com/page.jsp?pageId=673
Renewable energy feasibility and demonstration grants.
http://www.focusonenergy.com/page.jsp?pageId=674

Soon almost all dairy operations and some agriculture operations will have
assistance in the form of grants, loans and technical assistance to rewire
their operations to be safer more efficient operations. DATCP has partnered
with the Wisconsin Public Service Commission and Department of Commerce -
Office of State Electrical Inspector for many years to troubleshoot stray
voltage, utility service problems and safety concerns. It has become obvious
that a majority of rural and agriculture customers are desperately in need
of assistance to upgrade their wiring system to have safer, more energy
efficient electrical systems. The Public Service Commission has worked with
all of the major investor owned utilities and the Wisconsin Rural Electric
Cooperative Association to get fairly uniform rewiring programs offered
across the state. Currently those farms receiving municipal power may not
have access to a rewiring program.

Wisconsin Public Service Corp. developed the pilot farm-rewiring program
that has been used as a model for the other investor owned utilities. The 4
other major investor owned utilities are at various stages of developing
similar programs under the guidance of the WI Public Service Commission. The
Wisconsin Rural Cooperative Association recently announced the Safety First
program that will be very similar to that offered by Wisconsin Public
Service Corp. 

Each program has slight variations. Some are limited to only dairy
operations others are all agriculture. Some offer more grant money or loans
than the others do. Some will allow any certified electrical inspector to
assess wiring others require a state electrical inspector. Overall they all
provide varying levels of grant money for inspection, assessment and
development of a plan with matching low interest loans up to some
pre-determined maximum amount. 
[Further information on model program at
http://www.wisconsinpublicservice.com/farm/rewiring.asp]

Federal program funds should not exclude projects receiving local
assistance. An efficient way to coordinate delivery of services would be for
the USDA program to work with state and local programs to eliminate any
"gaps" in geographic coverage, eligibility, program options, or cost
effectiveness limits. Beneficial synergies exist with packaging assistance
from multiple programs that can maximize the implementation of cost
effective energy efficiency upgrades and renewable energy systems.