(1) Small purchases of output.
An output contract is not taken into account under the private business tests if the purchaser is not required under the contract to make a payment that is substantially certain to be made under paragraph (c)(2)(ii) of this section in any year greater than 0.5 percent of the average annual debt service on an issue that finances the output facility.
(2) Swapping and pooling arrangements.
An agreement that provides for swapping or pooling of output by one or more governmental persons and one or more nongovernmental persons does not result in private business use of the output facility owned by the governmental person to the extent that --
(i) The swapped output is reasonably expected to be approximately equal in value (determined over periods of one year or less); and
(ii) The purpose of the agreement is to enable each of the parties to satisfy different peak load demands, to accommodate temporary outages, to diversify supply, or to enhance reliability in accordance with prudent reliability standards.
(3) Short-term output contracts.
The exceptions for short- term arrangements provided in section 1.141-3(c) and (d)(3) apply to output contracts. For example, a spot sale for use for a period of 90 days on the basis of rates that are generally applicable and uniformly applied generally does not result in private business use, and a spot sale for use for a period of 30 days on the basis of rates that are specially negotiated generally does not result in private business use.
(4) Special 3-year exception for sales of output attributable to excess generating capacity resulting from participation in open access.
The purchase of output of an output facility (not including a water facility) by a nongovernmental person is not treated as private business use if all of the following requirements are met:
(i) The term of the contract is not longer than 3 years, including all renewal options.
(ii) The issuer does not make expenditures to increase the generating capacity of its system during the term of the contract that are, or will be, financed with proceeds of tax-exempt bonds.
(iii) The governmental owner offers non-discriminatory, open access transmission tariffs for use of its transmission system pursuant to rules promulgated by the FERC under sections 205 and 206 of the Federal Power Act (16 U.S.C. 824d and 824e) (or comparable provisions of state law pursuant to a plan approved by the FERC).
(iv) All of the output sold under the contract is attributable to excess capacity resulting from the offer of the non- discriminatory, open access transmission tariffs referred to in paragraph (f)(5)(ii) of this section.
(v) The contract mitigates stranded costs of the governmental owner that are attributable to the offer of the non- discriminatory, open access transmission tariffs referred to in paragraph (f)(5)(ii) of this section.
(vi) Any stranded costs recovered by the governmental owner (including amounts recovered under the contract) with respect to the output facility under rules promulgated by the FERC under the Federal Power Act (or comparable provisions of state law) are applied as promptly as is reasonably practical to redeem tax- exempt bonds that financed that facility in a manner consistent with section 1.141-12.
(5) Special exceptions for transmission facilities --
(i) Mandated wheeling.
Entering into a contract for the use of transmission facilities financed by an issue is not treated as a deliberate action under section 1.141-2(d) if --
(A) The contract is entered into in response to (or in anticipation of) an order by the United States under sections 211 and 212 of the Federal Power Act (16 U.S.C. 824j and 824k) (or a state regulatory authority under comparable provisions of state law pursuant to a plan approved by the FERC); and
(B) The terms of the contract are bona fide and arm’s length, and the consideration paid is consistent with the provisions of section 212(a) of the Federal Power Act.
(ii) Actions taken to implement non-discriminatory, open access.
An action is not treated as a deliberate action under section 1.141- 2(d) if it is taken to implement the offering of non-discriminatory, open access tariffs for the use of transmission facilities financed by an issue in a manner consistent with rules promulgated by the FERC under sections 205 and 206 of the Federal Power Act (16 U.S.C. 824d and 824e) (or by a state regulatory authority under comparable provisions of state law pursuant to a plan approved by the FERC). This paragraph (f)(5)(ii) does not apply, however, to the sale, exchange, or other disposition of transmission facilities to a nongovernmental person.
(iii) Application to reasonable expectations test to certain current refunding bonds.
An action taken or to be taken with respect to transmission facilities refinanced by an issue is not taken into account under the reasonable expectations test of section 1.141-2(d) if --
(A) The action is described in paragraph (f)(5)(i) or (ii) of this section;
(B) The bonds of the issue are current refunding bonds that, directly or indirectly, refund bonds issued before July 9, 1996; and
(C) The weighted average maturity of the refunding bonds is not greater than the remaining weighted average maturity of those prior bonds.
(6) Certain conduit parties disregarded.
A nongovernmental person acting solely as a conduit for the exchange of output among governmentally owned and operated utilities is disregarded in determining whether the private business tests are met with respect to financed facilities owned by a governmental person. Use of property by a power marketer in the trade or business of purchasing and reselling power, however, is taken into account under the private business tests.