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This part establishes general and pre-loan policies and requirements that apply to both insured and guaranteed loans to finance the construction and improvement of electric facilities in rural areas, including generation, transmission, and distribution facilities.
(a) Definitions. For the purpose of this part, the following terms shall have the following meanings:
Administrator means the Administrator of RUS or his or her designee.
Approved load forecast means a load forecast that RUS has determined is current for RUS purposes and has been approved by RUS pursuant to 7 CFR part 1710, subpart E.
APRR means Average Adjusted Plant Revenue Ratio calculated as a simple average of the adjusted plant revenue ratios for 1978, 1979 and 1980 as follows:
where:
A = Distribution (plant), which equals Part E, Line 14(e) of RUS Form 7;
B = General Plant, which equals Part E, Line 24(e) of RUS Form 7;
C = Operating Revenue and Patronage Capital, which equals Part A, Line 1 of RUS Form 7; and
D = Cost of Power, which equals the sum of Part A, Lines 2, 3, and 4 of RUS Form 7.
Area Coverage means the provision of adequate electric service to the widest practical number of rural users in the borrower's service area during the life of the loan.
Borrower means any organization that has an outstanding loan made or guaranteed by RUS for rural electrification, or that is seeking such financing.
Bulk Transmission Facilities means the transmission facilities connecting power supply facilities to the subtransmission facilities, including both the high and low voltage sides of the transformer used to connect to the subtransmission facilities, as well as related supervisory control and data acquisition systems.
Call provision has the same meaning as “prepayment option”.
Consolidation means the combination of 2 or more borrower or nonborrower organizations, pursuant to state law, into a new successor organization that takes over the assets and assumes the liabilities of those organizations.
Consumer means a retail customer of electricity, as reported on RUS Form 7, Part R, Lines 1-7.
Cybersecurity and grid security improvements means:
(i) Investment in the development, expansion, and modernization of rural utility infrastructure that addresses known and emerging cybersecurity and grid security risks. This definition incorporates both cybersecurity and grid security as one concept. The cybersecurity component of the definition includes measures and investments designed to prevent damage to, otherwise protect, or restore computers and computer systems, industrial control systems/operational technology, electronic communications systems, electronic communications services, wire, and all other forms electronic communication including information contained therein. Rural utilities often utilize cybersecurity measures and investments to ensure service availability, system integrity, user authentication, confidentiality, and nonrepudiation, related to the services.
(ii) The grid security component of this definition, includes measures and investments made to protect a utility's infrastructure reliability and resiliency against both natural impacts and man-made physical attacks or intrusions by individuals or groups intent on damaging, destroying, disrupting, or removing components of utility infrastructure or threatening to damage utility infrastructure. Measures considered for RUS financing include, but are not limited to, fire prevention, physical barriers, remote sensing equipment, monitoring physical assets, security cameras, security vehicles, information and operational technology cybersecurity measures, control systems cybersecurity monitoring technologies, fire prevention devices and sensors and other investments which serve the purpose of protecting assets and maintaining the reliability of rural utility systems.
Demand side management (DSM) means the deliberate planning and/or implementation of activities to influence Consumer use of electricity provided by a distribution borrower to produce beneficial modifications to the system load profile. Beneficial modifications to the system load profile ordinarily improve load factor or otherwise help in utilizing electric system resources to best advantage consistent with acceptable standards of service and lowest system cost. Load profile modifications are characterized as peak clipping, valley filling, load shifting, strategic conservation, strategic load growth, and flexible load profile. (See, for example, publications of the Electric Power Research Institute (EPRI), 3412 Hillview Avenue, Palo Alto, CA 94304, especially “Demand-Side Management Glossary” EPRI TR-101158, Project 1940-25, Final Report, October 1992.) DSM includes energy conservation programs.
Distribution Borrower means a borrower that sells or intends to sell electric power and energy at retail in rural areas.
Distribution Facilities means all electrical lines and related facilities beginning at the consumer's meter base, and continuing back to and including the distribution substation.
Distributed generation is the generation of electricity by a sufficiently small electric generating system as to allow interconnection of the electric generating system near the point of service at distribution voltages including points on the customer side of the meter. A distributed generating system may be operated in parallel or independent of the electric power system. A distributed generating system may be fueled by any source, including but not limited to renewable energy sources. A distributed generation project may include one or more distributed generation systems.
DSC means Debt Service Coverage of the borrower calculated as:
Where:
A = Depreciation and Amortization Expense of the borrower, which equals Part A, Line 13b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Section A, Line 22b of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers;
B = Interest expense on total long-term debt of the borrower, which equals Part A, Line 16b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part A, Section A, Line 24b of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers, except that interest expense shall be increased by
1/3 of the amount, if any, by which restricted rentals of the borrower (Part L, Total Column c) of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part H, Section K, Total Column c of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers) exceed 2 percent of the borrower's equity (RUS Financial and Operating Report Electric Distribution for distribution borrowers, Part C, Line 36 [Total Margins & Equities] less Part C, Line 27 [Regulatory Assets] or RUS Financial and Operating Report Electric Power Supply for power supply borrowers, Part A, Section B, Line 39 [Total Margins & Equities] less Part A, Section B, Line 29 [Regulatory Assets]);
C = Patronage Capital or Margins of the borrower, which equals Part A, Line 29b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part A, Section A, Line 38b of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers; and
D = Debt Service Billed (RUS + other), which equals the sum of all payments of principal and interest required to be made on account of total long-term debt of the borrower during the calendar year from Total of Column D of Part N of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Total of Column D of Part H, Section H of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers, plus
1/3 of the amount, if any, by which restricted rentals of the borrower (Part L, Line 3c of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part H, Section K, Line 4c of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers) exceed 2 percent of the borrower's equity (RUS Financial and Operating Report Electric Distribution for distribution borrowers, Part C, Line 36 [Total Margins & Equities] less Part C, Line 27 [Regulatory Assets] or RUS Financial and Operating Report Electric Power Supply for power supply borrowers, Part A, Section B, Line 39 [Total Margins & Equities] less Part A, Section B, Line 29 [Regulatory Assets]);
DSM activities means activities of the type referred to in § 1710.354(f).
DSM plan means a plan that describes the implementation at the distribution level of the DSM activities identified in the integrated resource plan as having positive net benefits. See § 1710.357.
Electric system means all of the borrower's interests in all electric production, transmission, distribution, conservation, load management, general plant and other related facilities, equipment or property and in any mine, well, pipeline, plant, structure or other facility for the development, production, manufacture, storage, fabrication or processing of fossil, nuclear, or other fuel or in any facility or rights with respect to the supply of water, in each case for use, in whole or in major part, in any of the borrower's generating plants, including any interest or participation of the borrower in any such facilities or any rights to the output or capacity thereof, together with all lands, easements, rights-of-way, other works, property, structures, contract rights and other tangible and intangible assets of the borrower in each case used or useful in such electric system.
Eligible Energy Efficiency and Conservation Programs (Eligible EE Program) means an energy efficiency and conservation program that meets the requirements of subpart H of this part.
Equity means total margins and equities, which equals Part C, Line 33 of RUS Form 7 (distribution borrowers) or Section B, Line 34 of RUS Form 12a (power supply borrowers).
Final maturity means the final date on which all outstanding principal and accrued interest on an electric loan is due and payable.
Five percent hardship rate means an interest rate of 5 percent applicable to a hardship rate loan.
Fund advance period means the period of time during which the Government may advance loan funds to the borrower. See 7 CFR 1714.56.
Generation Facilities means the generating plant and related facilities, including the building containing the plant, all fuel handling facilities, and the stepup substation used to convert the generator voltage to transmission voltage, as well as related energy management (dispatching) systems.
Hardship rate loan means a loan made at the 5 percent hardship rate pursuant to 7 CFR 1714.8.
Insured Loan means a loan made pursuant to Section 305 of the RE Act, and may include a direct loan made under Section 4 of the RE Act.
Integrated Resources Plan (IRP) means a plan resulting from the planning and selection process for new energy resources that evaluates the benefits and costs of the full range of alternatives, including new generating capacity, power purchases, DSM programs, system operating efficiency, and renewable energy systems.
Interest rate cap means a maximum interest rate of 7 percent applicable to certain municipal rate loans as set forth in § 1710.7.
Interest rate term means a period of time selected by the borrower for the purpose of determining the interest rate on an advance of funds. See 7 CFR 1714.6.
Load forecast means the thorough study of a borrower's electric loads and the factors that affect those loads in order to determine, as accurately as practicable, the borrower's future requirements for energy and capacity.
Loan means any loan made or guaranteed by RUS.
Loan Contract means the agreement, as amended, supplemented, or restated from time to time, between a borrower and RUS providing for loans made or guaranteed pursuant to the RE Act.
Loan Feasibility means that the borrower has the capability of repaying the loan in full as scheduled, in accordance with the terms of the mortgage, note, and loan contract.
Loan Guarantee means a loan guarantee made by RUS pursuant to the RE Act.
Loan period means the period of time during which the facilities will be constructed not to exceed the time identified in the Loan note, as approved.
MDSC means Modified Debt Service Coverage of the electric system calculated as:
Where:
A = Depreciation and Amortization Expense of the borrower, which equals Part A, Line 13b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part A, Section A, Line 22b of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers;
B = Interest expense on total long-term debt of the borrower, which equals Part A, Line 16b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part A, Section A, Line 24b of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers, except that interest expense shall be increased by
1/3 of the amount, if any, by which restricted rentals of the borrower (Part L, Line 3c of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part H, Section K, Line 4c of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers) exceed 2 percent of the borrower's equity (RUS Financial and Operating Report Electric Distribution for distribution borrowers, Part C, Line 36 [Total Margins & Equities] less Part C, Line 27 [Regulatory Assets] or RUS Financial and Operating Report Electric Power Supply for power supply borrowers, Part A, Section B, Line 39 [Total Margins & Equities] less Part A, Section B, Line 29 [Regulatory Assets]);
C = Patronage Capital or Margins of the borrower, which equals Part A, Line 29b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part A, Section A, Line 38b of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers; and
D = Generation and Transmission Capital Credits of the borrower, which equals Part A, Line 26b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part A, Section A, Line 35b of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers;
E = Other Capital Credits and Patronage Dividends of the borrower, which equals Part A, Line 27b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part A, Section A, Line 36b of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers; and
F = Total Long-Term Debt Service Billed (RUS + other), which equals the sum of all payments of principal and interest required to be made on account of total long-term debt of the electric system during the calendar year from Part N, Line 12d of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part H, Section H, Line 12d of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers.
Merger means the combining, pursuant to state law, of borrower or nonborrower organizations into an existing survivor organization that takes over the assets and assumes the liabilities of the merged organizations.
Mortgage means any and all instruments creating a lien on or security interest in the borrower's assets in connection with loans or guarantees under the RE Act.
MTIER means Modified Times Interest Earned Ratio of the electric system calculated as:
Where:
A = Patronage Capital or Margins of the borrower, which equals Part A, Line 29b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers;
B = Interest expense on total long-term debt of the borrower, which equals Part A, Line 16b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers, except that interest expense shall be increased by
1/3 of the amount, if any, by which restricted rentals of the borrower (Part L, Line 3c of the RUS Financial and Operating Report Electric Distribution for distribution borrowers) exceed 2 percent of the borrower's equity (RUS Financial and Operating Report Electric Distribution for distribution borrowers, Part C, Line 36 [Total Margins & Equities] less Part C, Line 27 [Regulatory Assets];
C = Generation and Transmission Capital Credits of the borrower, which equals Part A, Line 26b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers; and
D = Other Capital Credits and Patronage Dividends of the borrower, which equals Part A, Line 27b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers.
Municipal rate loan means a loan made at a municipal interest rate pursuant to 7 CFR 1714.5.
ODSC means Operating Debt Service Coverage of the electric system calculated as:
Where:
A = Depreciation and Amortization Expense of the borrower, which equals Part A, Line 13b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers;
B = Interest expense on total long-term debt of the borrower, which equals Part A, Line 16b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers, except that interest expense shall be increased by
1/3 of the amount, if any, by which restricted rentals of the borrower (Part L, Line 3c of the RUS Financial and Operating Report Electric Distribution for distribution borrowers) exceed 2 percent of the borrower's equity (RUS Financial and Operating Report Electric Distribution for distribution borrowers, Part C, Line 36 [Total Margins & Equities] less Part C, Line 27 [Regulatory Assets];
C = Patronage Capital & Operating Margins of the electric system, which equals Part A, Line 21b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers, plus cash received from the retirement of patronage capital by suppliers of electric power and by lenders for credit extended for the Electric System from Part I, Line 2c of the RUS Financial and Operating Report Electric Distribution for distribution borrowers; and
D = Debt Service Billed (RUS + other), which equals the sum of all payments of principal and interest required to be made on account of total long-term debt of the electric system during the calendar year from Part N, Line 12d of the RUS Financial and Operating Report Electric Distribution for distribution borrowers, plus
1/3 of the amount, if any, by which restricted rentals of the Electric System (Part L, Line 3c of the RUS Financial and Operating Report Electric Distribution for distribution borrowers) exceed 2 percent of the borrower's equity (RUS Financial and Operating Report Electric Distribution for distribution borrowers, Part C, Line 36 [Total Margins & Equities] less Part C, Line 27 [Regulatory Assets]).
Off-grid renewable energy system is a renewable energy system not interconnected to an area electric power system (EPS). An off-grid renewable energy system in areas without access to an area EPS may include energy consuming devices and electric wiring to provide for more effective or more efficient use of the electricity produced by the system.
On-grid renewable energy system is a renewable energy system interconnected to an area electric power system (EPS) through a normally open or normally closed device. It can be interconnected to the EPS on either side of a customer's meter.
Ordinary Replacement means replacing one or more units of plant, called “retirement units”, with similar units when made necessary by normal wear and tear, damage beyond repair, or obsolescence of the facilities.
OTIER means Operating Times Interest Earned Ratio of the electric system calculated as:
Where:
A = Interest expense on total long-term debt of the borrower, which equals Part A, Line 16b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers, except that interest expense shall be increased by
1/3 of the amount, if any, by which restricted rentals of the borrower (Part L, Line 3c of the RUS Financial and Operating Report Electric Distribution for distribution borrowers) exceed 2 percent of the borrower's equity (RUS Financial and Operating Report Electric Distribution for distribution borrowers, Part C, Line 36 [Total Margins & Equities] less Part C, Line 27 [Regulatory Assets]); and
B = Patronage Capital & Operating Margins of the electric system, which equals Part A, Line 21b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers, plus cash received from the retirement of patronage capital by suppliers of electric power and by lenders for credit extended for the Electric System from Part I, Line 2c of the RUS Financial and Operating Report Electric Distribution for distribution borrowers.
Power requirements study (PRS) has the same meaning as load forecast.
Power Supply Borrower means a borrower that sells or intends to sell electric power at wholesale to distribution or power supply borrowers pursuant to RUS wholesale power contracts.
Prepayment option means a provision included in the loan documents to allow the borrower to prepay all or a portion of an advance on a municipal rate loan on a date other than a rollover maturity date. See 7 CFR 1714.9.
PRR means Plant Revenue Ratio calculated as:
where:
A = Total Utility Plant, which equals Part C, Line 3 of RUS Form 7;
B = Operating Revenue and Patronage Capital, which equals Part A, Line 1 of RUS Form 7; and
C = Cost of Power, which equals the sum of Part A, Lines 2, 3, and 4 of RUS Form 7.
RE Act means the Rural Electrification Act of 1936, as amended (7 U.S.C. 901 et seq.).
RE Act beneficiary means a person, business, or other entity that is located in a rural area.
REA means the Rural Electrification Administration formerly an agency of the United States Department of Agriculture and predecessor agency to RUS with respect to administering certain electric and telephone loan programs.
Renewable energy system is an energy conversion system fueled from any of the following energy sources: Solar, wind, hydropower, biomass, or geothermal. Any of these energy sources may be converted to heat or electricity, provided heat is a by-product of electricity generation. Non-renewable energy sources may be used by a renewable energy system for incidental and necessary means such as, but not limited to, system start up, flame stabilization, continuity of system processes, or reduction of the moisture content of renewable fuels. Energy from bio-mass may be converted from any organic matter available on a renewable basis, including dedicated energy crops and trees, agricultural food and feed crops, agricultural crop wastes and residues, wood wastes and residues, aquatic plants, animal wastes, municipal wastes, and other waste materials.
Retirement Unit means a substantial unit of property, which when retired, with or without being replaced, is accounted for by removing its book cost from the plant account.
Rollover maturity date means the last day of an interest rate term.
Rural area means—
(i) Any area of the United States, its territories and insular possessions (including any area within the Federated States of Micronesia, the Marshall Islands, and the Republic of Palau) other than a city, town, or unincorporated area that has a population of greater than 20,000 inhabitants;
(ii) Any area within a service area of a borrower for which a borrower has an outstanding loan as of June 18, 2008, made under titles I through V of the Rural Electrification Act of 1936 (7 U.S.C. 901-950bb). For initial loans to a borrower made after June 18, 2008, the “rural” character of an area is determined at the time of the initial loan to furnish or improve service in the area; and
(iii) Which excludes certain populations pursuant to 7 U.S.C. 1991(a)(13)(H) and (I).
RUS means the Rural Utilities Service, an agency of the United States Department of Agriculture established pursuant to Section 232 of the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor to REA with respect to administering certain electric and telephone programs. See 7 CFR 1700.1.
Subtransmission Facilities means the transmission facilities that connect the high voltage side of the distribution substation to the low voltage side of the bulk transmission or generating facilities, as well as related supervisory control and data acquisition facilities.
System Improvement means the change or addition to electric plant facilities to improve the quality of electric service or to increase the quantity of electric power available to RE Act beneficiaries.
TIER means Times Interest Earned Ratio of the borrower calculated as:
Where:
A = Interest expense on total long-term debt of the borrower, which equals Part A, Line 16b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part A, Section A, Line 24b of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers, except that interest expense shall be increased by
1/3 of the amount, if any, by which restricted rentals of the borrower (Part L, Line 3c of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part H, Section K, Line 4c of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers) exceed 2 percent of the borrower's equity (RUS Financial and Operating Report Electric Distribution for distribution borrowers, Part C, Line 36 [Total Margins & Equities] less Part C, Line 27 [Regulatory Assets] or RUS Financial and Operating Report Electric Power Supply for power supply borrowers, Part A, Section B, Line 39 [Total Margins & Equities] less Part A, Section B, Line 29 [Regulatory Assets]); and
B = Patronage Capital or Margins of the borrower, which equals Part A, Line 29b of the RUS Financial and Operating Report Electric Distribution for distribution borrowers or Part A, Section A, Line 38b of the RUS Financial and Operating Report Electric Power Supply for power supply borrowers.
Total Assets means Part C, Line 26 of RUS Form 7 (distribution borrowers) or Section B, Line 27 of RUS Form 12a (power supply borrowers).
Total Utility Plant means Part C, Line 3 of RUS Form 7 (distribution borrowers) or Section B, Line 27 of RUS Form 12a (power supply borrowers).
Transmission Facilities means all electrical lines and related facilities, including certain substations, used to connect the distribution facilities to generation facilities. They include bulk transmission and subtransmission facilities.
Urban area is defined as any area not considered a rural area per the definition contained in this subpart.
Urbanized area means an urbanized area as defined by the Bureau of the Census in notices published periodically in the Federal Register. Generally an urbanized area is characterized as an area that comprises a place and the adjacent densely settled territory that together have a minimum population of 50,000 people.
(b) Rules of Construction. Unless the context otherwise indicates, “includes” and “including” are not limiting, and “or” is not exclusive. The terms defined in paragraph (a) of this part include the plural as well as the singular, and the singular as well as the plural.
References in this part to RUS or REA forms or line numbers in RUS or REA forms are based on RUS or REA Form 7 and Form 12 dated December 1992, unless otherwise indicated. These references will apply to corresponding information in future versions of the forms. The terms “RUS form”, “RUS standard form”, “RUS specification”, and “RUS bulletin” have the same meanings as the terms “REA form”, “REA standard form”, “REA specification”, and “REA bulletin”, respectively, unless otherwise indicated.
Consistent with the RE Act and other applicable laws, the Administrator may waive or reduce any requirement imposed by this part or other RUS regulations on an electric borrower, or a lender whose loan is guaranteed by RUS, if the Administrator determines that imposition of the requirement would adversely affect the Government's financial interest.
Information about the availability of RUS forms and publications cited in this part is available from Administrative Services Division, Rural Utilities Service, United States Department of Agriculture, Washington, DC 20250-1500. These RUS forms and publications may be reproduced.
(a) Certain new or revised policies and requirements set forth in this part, which are listed in this paragraph, shall not apply to a pending loan application that has been determined by RUS to be complete as of January 9, 1992, the date of publication of such policies and requirements in the Federal Register. This exception does not apply to loan applications received after said date, nor to incomplete applications pending as of said date. This exception applies only to the following provisions:
(1) Paragraph 1710.115(b)—with respect to limiting loan maturities to the expected useful life of the facilities financed;
(2) Section 1710.116—with respect to the requirement to develop and follow an equity development plan;
(3) Paragraph 1710.151(f)—with respect to the borrower providing satisfactory evidence that a state regulatory authority will allow the facilities to be included in the rate base or otherwise allow sufficient revenues to repay the loan;
(4) Paragraphs 1710.250(b), 1710.251(a), and 1710.252(a)—with respect to the requirement that improvements, replacements, and retirements of generation plant be included in a Construction Work Plan; and
(5) Paragraph 1710.300(d)(5)—with respect to the requirement that a borrower's financial forecast include a sensitivity analysis of a reasonable range of assumptions for each of the major variables in the forecast.
(b) Certain provisions of this part apply only to loans made on or after February 10, 1992. These provisions are identified in the individual sections of this part.
RUS makes insured loans under section 305 of the RE Act.
(a) Municipal rate loans. The standard interest rate on an insured loan made on or after November 1, 1993, is the municipal rate, which is the rate determined by the Administrator to be equal to the current market yield on outstanding municipal obligations with remaining periods to maturity, up to 35 years, similar to the interest rate term selected by the borrower. In certain cases, an interest rate cap of 7 percent may apply. The interest rate term and rollover maturity date for a municipal rate loan will be determined pursuant to 7 CFR part 1714, and the borrower may elect to include in the loan documents a prepayment option (call provision).
(b) Hardship rate loans. RUS makes hardship rate loans at the 5 percent hardship rate to qualified borrowers meeting the criteria set forth in 7 CFR 1714.8
RUS makes direct loans under section 4 of the RE Act.
(a) General. Except as otherwise modified by this section, RUS will make loans under the direct Treasury rate loan program in the same manner that it makes loans under the municipal rate program. The general and pre-loan policies and procedures for municipal rate electric loans made by RUS may be found in this part and 7 CFR part 1714. Treasury rate electric loans are also governed by such municipal rate policies and procedures, except as follows:
(1) Interest rates. The standard interest rate on direct Treasury rate loans will be established daily by the United States Treasury. The borrower will select interest rate terms for each advance of funds. The minimum interest rate term shall be one year. Interest rate terms will be limited to terms published by the Treasury (i.e. 1, 2, 3, 5, 7, 10, 20, and 30). Interest rate terms to final maturity date, if other than published by Treasury, will be determined by RUS. Interest rates for terms greater than 30 years will be at the 30-year rate. There will be no interest rate cap on Treasury rate loans.
(2) Prepayment. A Treasury rate direct electric loan may be repaid at par on its rollover maturity date if there is one. Such a loan, or portion thereof, may also be prepaid after it has been advanced for not less than two years, at any time prior to its rollover or final maturity date at its “net present value” (NPV) as determined by RUS.
(3) Supplemental financing. Supplemental financing will not be required in connection with Treasury rate direct electric loans.
(4) Transitional assistance. A Treasury rate direct loan is not available to provide transitional assistance to borrowers.
(b) Loan documents. Successful applicants will be required to execute and deliver to RUS a promissory note evidencing the borrower's obligation to repay the loan. The note must be in form and substance satisfactory to RUS. RUS will require a form of note substantially in the form that it currently accepts for direct municipal rate electric loans, with such revisions as may be necessary or appropriate to reflect the different interest setting provisions and the terms of paragraphs (a) (1) and (2) of this section. All notes will be secured in accordance with the terms of 7 CFR part 1718.
RUS provides financing through 100 percent loan guarantees made under sections 306 and 306A of the RE Act. RUS also provides 90 percent loan guarantees under section 311 of the RE Act to enable borrowers to secure financing from certain private lenders. The loan guarantees are made for a term of up to 35 years, and the interest rate is established at a rate agreed to by the borrower and the lender, with RUS concurrence. The guarantee applies to the repayment of both principal and interest.
(a) General. (1) Subject to the availability of funds for such purpose, RUS may use loan funds to refinance prior loans made or guaranteed under the RE Act, as amended, (7 U.S.C. 902(a)). Such refinancing must be in the interest of rural consumers, taxpayers, rural economic development or otherwise in the public interest, as determined by the Administrator.
(2) The Secretary's authority to make loans for refinancing under this section is in addition to any other authority granted to the Secretary to make or modify loans under the RE Act or any other statutory authority.
(3) Nothing in this section changes the policies or standards set forth in 7 CFR part 1717, subpart Y, or the terms and conditions of the agreements entered into between RUS and FFB or the notes issued to RUS or FFB in connection with RUS or FFB loans.
(4) When funds are made available under this section, RUS will issue a public notice in the Federal Register specifying the amount of funds available under this section. The notice will contain additional application procedures specific to the amount and type of funding available and new loan application periods related to the availability of funds. The notice may also include Administration priorities, such as directing benefits to disadvantaged communities and reducing greenhouse gas emissions. The Administrator, in setting funding priorities and application periods, may consider the amount of available funds, RUS resources, RUS priorities and policy goals, and any other factors related to the efficient operation of the agency.
(b) Definitions. For the purpose of this section, the following terms have the following meanings. Terms not defined here are defined in § 1710.2. When the definitions provided in this section conflict with any other definition applicable to RUS Electric Program regulations in this chapter, including § 1710.2, the definition of this section will control only as it relates to refinancing under this section.
Advance means advance or advances of loan funds made by RUS to the borrower pursuant to the terms and conditions in the loan documents.
Agency means the Rural Utilities Service or its successor.
Conditional commitment letter means the notification issued by the Administrator to an eligible entity advising it of the estimated terms, conditions, and amount of the new loan.
Eligible entity means an RUS Electric Program borrower with an unpaid and outstanding FFB loan or RUS loan.
FFB means the Federal Financing Bank.
FFB loan means a loan made by FFB and guaranteed by RUS pursuant to the RE Act for electric purposes.
RUS loan means a loan made by the RUS under the RE Act for electric purposes.
(c) Loan purpose. Proceeds of loans made under this section may be used to:
(1) Prepay all outstanding amounts owed on an FFB or RUS loan or one or more advances made under such loan; and
(2) Pay any applicable prepayment premium, fee, or expense related to the eligible RUS or FFB loan being refinanced.
(d) Eligibility requirements —(1) Eligible entity. Loans under this section may only be made to an eligible entity for the purposes indicated in paragraph (c) of this section.
(2) Eligible loans for refinancing. Only FFB loans and RUS loans as defined in this section are eligible for refinancing under this section.
(e) Allocation of funds under this section. Unless prohibited by congressional appropriation or statute, in allocating the funds available to RUS under its lending authority, the Administrator may determine, on a programmatic or case by case basis, that other RE Act loan purposes take priority over refinancing. The Administrator may, but is not limited to, consider the following factors in making this determination:
(1) The overall availability of funding compared to anticipated loan demand;
(2) The best interests of rural consumers;
(3) The protection of the Government's financial interest in existing loans and collateral; and
(4) Broader policy objectives, including directing benefits to disadvantaged communities, reducing greenhouse gas emissions, and other priorities of the Secretary of Agriculture.
(f) Application process. (1) When funds are available, the RUS will publish a notice identifying the amount and type of funds available for refinancing for the funding period in total and per applicant. The notice will identify the priorities established by the Agency for the use of the available funds. Borrowers seeking to refinance RUS loans or FFB loans will be required to submit, at a minimum, the following information:
(i) Borrower reference number;
(ii) Note designation;
(iii) Rural Electric Telephone (RET) Advance loan account number;
(iv) FFB complete identifier for an FFB loan;
(v) Date(s) of advance;
(vi) Interest rate;
(vii) Principal outstanding;
(viii) Current final maturity date;
(ix) Short narrative explaining how the proposed refinancing would be in the interest of rural consumers, taxpayers, rural economic development or otherwise in the public interest; and
(x) The requested final maturity date for the new loan. The requested final maturity date must be for a period not to exceed the maximum maturity date allowed by statute, regulation, or applicable notice. An eligible entity must submit a certification that the remaining useful life of its electric system is equal to or exceeds the new requested final maturity date and, that the requested final maturity date does not exceed the term of its wholesale power contract with its members or with its generation and transmission supplier (where applicable).
(2) The Agency reserves the right to offer a loan under this section with a maturity date that varies from the requested date. Unless the Administrator makes a specific determination to the contrary, the Electric Program will not approve a new loan that includes a final maturity date that exceeds the remaining useful life of its electric system or any applicable wholesale power contract term.
(3) On a case-by-case basis, as necessary, the Administrator may approve a new loan that includes a final maturity that exceeds the remaining useful life of the applicant's electric system or applicable wholesale power contract term provided the Administrator finds that the requirements contained in § 1710.151 are satisfied, the new loan is feasible under § 1710.151(b), and such action addresses critical environmental or consumer needs.
(g) Loan requirements. (1) All refinancing loans made under this section must be in the interest of rural consumers, taxpayers, rural economic development, or otherwise in the public interest.
(2) All refinancing loans made under this section must be feasible as determined by RUS based on the financial condition of the borrower and the borrower's ability to repay and all loans must be adequately secured, as determined by RUS.
(3) Borrowers will be required to execute new legal documents, including a new note, loan contract, and security documents as necessary.
(4) Refinancing loans made under this section will generally be considered categorical exclusions for the purpose of environmental reviews because environmental reviews have previously been completed for the FFB loans or RUS loans being refinanced.
(h) New loan terms. (1) Interest on advances made on loans made under this section will be at the interest rate available on the date of the advance for the new loan used to refinance the prior outstanding loan and any related premium, fee, or expense.
(2) An eligible entity must propose a maturity date for the new loan not to exceed the maturity prescribed by this section, a funding notice, or thirty-five (35) years, whichever is shortest.
(3) An eligible entity may be given the option of applying the proceeds of an advance made on the new loan to cover any applicable prepayment premium, fee, or other expense.
(4) If the prepayment premiums are to be financed by the new loan, the maximum principal amount of the note will be increased in an amount sufficient to cover such prepayment premiums in full.
(5) Provided such waiver is not inconsistent with applicable law or the terms and conditions of the notes previously issued to RUS or FFB, the Administrator may, on a case-by-case basis, waive or modify the requirements set forth in this paragraph (h), if in the Administrator's judgment, it is necessary to implement the intent of the authorizing statute and is in the best financial interest of the Government.
(a) RUS makes loans and loan guarantees to finance the construction of electric distribution, transmission, and generation facilities, including system improvements and replacements, and cybersecurity and grid security improvements, required to furnish and improve electric service in rural areas, and for demand side management, efficiency, and energy conservation programs, and on-grid and off-grid renewable energy systems. In certain limited circumstances, and at the discretion of the Administrator, RUS may finance selected operating expenses of its borrowers. Loans made or guaranteed by the Administrator will be made in conformance with the RE Act, as amended (7 U.S.C. 901 et seq. ), and this chapter. The Administrator's decision to provide financing for selecting operating expenses may include, but is not limited to the following factors:
(1) The overall availability of funding compared to anticipated loan demand;
(2) The best interests of rural consumers;
(3) The protection of the Government's financial interest in existing loans and collateral; and
(4) Broader policy objectives, including directing benefits to disadvantaged communities, reducing greenhouse gas emissions, and other priorities of the Secretary of Agriculture.
(b) RUS provides technical assistance to borrowers to aid the development or improvement of rural electric service and to protect RUS' loan security. Additional information is available at https://rd.usda.gov/programs-services/electric-programs.
(c) Provided funds are available for such purpose, RUS may refinance, as provided in § 1710.53, RUS Electric Program loans made or guaranteed for the purpose of furnishing and improving electric service in rural areas, and for the purpose of assisting electric borrowers to implement demand side management, energy efficiency and conservation programs, on-grid and off-grid renewable energy systems, and cybersecurity and grid security improvements.
(a) RUS makes loans to corporations, States, Tribes, territories, and subdivisions and agencies thereof; municipalities; people's utility districts; and cooperative, nonprofit, limited-dividend, or mutual associations that provide or propose to provide:
(1) The retail electric service needs of rural areas, or
(2) The power supply needs of distribution borrowers under the terms of power supply arrangement satisfactory to RUS, or
(3) Eligible purposes under the Rural Energy Savings Program, including energy efficiency, renewable energy, energy storage or energy conservation measures and related services, improvements, investments, financing or relending.
(b) In making loans, RUS gives preference to States, Tribes, territories, and subdivisions and agencies thereof; municipalities; people's utility districts; and cooperative, nonprofit, or limited-dividend associations. RUS does not make direct loans to individual consumers.
(c) For the purpose of determining eligibility of a distribution borrower not in default on the repayment of a loan made or guaranteed under the RE Act for a loan, loan guarantee, or lien accommodation, a default by a borrower from which a distribution borrower purchases wholesale power shall not:
(1) Be considered a default by the distribution borrower;
(2) Reduce the eligibility of the distribution borrower for assistance under the RE Act; or
(3) Be the cause, directly or indirectly, of imposing any requirement or restriction on the borrower as a condition of the assistance, except such requirements or restrictions as are necessary to implement a debt restructuring agreed on by the power supply borrower and RUS.
(d) For the purpose of determining the eligibility of a distribution borrower, RUS will consider whether the distribution borrower is current on its obligations to its wholesale power supplier under the RUS wholesale power contract.
(e) Nothing in paragraph (c) of this section relieves any distribution borrower that is a member of a power supply borrower in default on its obligations to RUS or operating under a debt restructuring agreement, of requirements set forth in RUS regulations, including, without limitation, § 1710.112(b)(6), or of any terms and conditions that the Administrator may otherwise impose on any borrower as a condition of obtaining a loan or loan guarantee (including, in appropriate cases, member guarantees).
(f) Except as provided in paragraph (g) of this section, former borrowers that have paid off all outstanding loans may reapply for a loan to serve RE Act beneficiary loads accruing from the time the former borrower's complete loan application is received by RUS. The determination of whether an area is rural will be based on the Census designation of the area at the time of the reapplication for a loan, if the area is not served by electric facilities financed by RUS. If the area is served by electric facilities financed by RUS, it will continue to be considered rural.
(g) Former borrowers that have prepaid all, or portions of outstanding insured and direct loans in accordance with RUS regulations must comply with the provisions of 7 CFR part 1786 before being considered eligible to borrow additional funds from RUS.
(a) Insured loans under section 305. Insured loans are normally reserved for the financing of distribution and subtransmission facilities of both distribution and power supply borrowers, including, under certain circumstances, the implementation of demand side management, energy efficiency and energy conservation programs, and on grid and off grid renewable energy systems. In accordance with § 1710.110, the Administrator may require the borrower to obtain no more than 30 percent of the total debt financing required for a proposed project by means of a supplemental loan from another lender without an RUS guarantee.
(b) Direct loans under section 4. Direct loans are normally reserved for the financing of distribution and subtransmission facilities of both distribution and power supply borrowers, including, under certain circumstances, the implementation of demand side management, energy efficiency and energy conservation programs, and on grid and off grid renewable energy systems.
(c) One hundred percent loan guarantees under section 306. Both distribution and power supply borrowers are eligible for 100 percent loan guarantees under section 306 of the RE Act for any or all of the purposes set forth in § 1710.106, including, under certain circumstances, the implementation of demand side management, energy conservation programs, and on grid and off grid renewable energy systems. (See 7 CFR part 1712). These guarantees are normally used to finance bulk transmission and generation facilities, but they may also be used to finance distribution and subtransmission facilities. If a borrower applies for a section 306 loan guarantee to finance all or a portion of distribution and subtransmission facilities, such request will not affect the borrower's eligibility for an insured loan to finance any remaining portion of said facilities or for any future insured loan to finance other distribution or subtransmission facilities. A section 306 loan guarantee, however, may not be used to guarantee a supplemental loan required by § 1710.110.
(d) One hundred percent loan guarantees under section 306A. Under section 306A of the RE Act, both distribution and power supply borrowers are eligible under certain conditions to use an existing section 306 guarantee to refinance advances made on or before July 2, 1986 from a loan made by the Federal Financing Bank. (See 7 CFR part 1786.)
(e) Ninety percent guarantees of private-sector loans under section 311. Under section 311 of the RE Act, both distribution and power supply borrowers in the state of Alaska are eligible under certain conditions to obtain from RUS a 90 percent guarantee of a private-sector loan to refinance their Federal Financing Bank loans. (See 7 CFR part 1786.)
(a) Borrowers shall make a diligent effort to extend electric service to all unserved persons within their service area who:
(1) Desire electric service; and
(2) Meet all reasonable requirements established by the borrower as a condition of service.
(b) If economically feasible and reasonable considering the cost of providing such service and/or the effects on all consumers' rates, such service shall be provided, to the maximum extent practicable, at the rates and minimum charges established in the borrower's rate schedules, without the payment by such persons, other than seasonal or temporary consumers, of a contribution in aid of construction. A seasonal consumer is one that demands electric service only during certain seasons of the year. A temporary consumer is a seasonal or year-round consumer that demands electric service over a period of less than five years.
(c) Borrowers may assess contributions in aid of construction provided such assessments are consistent with the policy set forth in this section.
(a) To the greatest extent practical, loans are limited to providing and improving electric facilities to serve consumers that are RE Act beneficiaries. When it is determined by the Administrator to be necessary in order to furnish or improve electric service in rural areas, loans may, under certain circumstances, be made to finance electric facilities to serve consumers that are not RE Act beneficiaries.
(b) Loan funds may be approved for facilities to serve non-RE Act beneficiaries only if:
(1) The primary purpose of the loan is to furnish or improve service for RE Act beneficiaries; and
(2) The use of loan funds to serve non-RE Act beneficiaries is necessary and incidental to the primary purpose of the loan.
(a) In States or in Tribal areas where a borrower is required to obtain approval of a project or its financing from a State or Tribal regulatory authority, RUS requires that such approvals be obtained before the following types of loans are approved by RUS:
(1) Loans requiring an Environmental Impact Statement;
(2) Loans to finance generation and transmission facilities, when the loan request for such facilities is $25 million or more; and
(3) Loans for the purpose of assisting borrowers to implement demand side management and energy conservation programs and on and off grid renewable energy systems.
(b) In Tribal areas all borrowers are required to obtain approval of the project from the Tribal government or relevant Tribal regulatory body, before any loan is approved by RUS.
(c) At minimum, in the case of all loans in States or Tribal areas where State regulatory approval is required of the project or its financing, such State or Tribal approvals will be required before loan funds are advanced.
(d) In cases where State regulatory authority or Tribal government or relevant Tribal regulatory body approval has been obtained, but the borrower has failed to proceed with the project in a timely manner according to the schedule contained in the borrower's project design manual, or if there are cost overruns or other developments that threaten loan feasibility or security, RUS may require the borrower to obtain a reaffirmation of the project and its financing from the State or Tribal authority before any additional loan funds are advanced.
(a) Funds from loans made or guaranteed by RUS may be used to finance:
(1) Distribution facilities. (i) The construction of new distribution facilities or systems, the cost of system improvements and removals less salvage value, the cost of ordinary replacements and removals less salvage value, needed to meet load growth requirements, improve the quality of service, or replace existing facilities.
(ii) The purchase, rehabilitation and integration of existing distribution facilities and associated service territory when the acquisition is an incidental and necessary means of providing or improving service to persons in rural areas who are not receiving adequate central station service, and the borrower is unable to finance the acquisition from other sources. See § 1710.107.
(2) Transmission and generation facilities. (i) The construction of new transmission and generation facilities or systems, the cost of system improvements and removals, less salvage value, the cost of ordinary replacements and removals less salvage value, needed to meet load growth, improve the quality of service, or replace existing facilities.
(ii) The purchase of an ownership interest in new or existing transmission or generation facilities to serve RE Act beneficiaries.
(3) Headquarters Offices, Warehouse, and garage facilities. The purchase, remodeling, or construction of headquarters office, other headquarters facilities, warehouse, and garage facilities required for the operation of a borrower's system. See paragraph (b) of this section.
(4) Interest. The payment of interest on indebtedness incurred by a borrower to finance the construction of generation and transmission facilities during the period preceding the date such facilities are placed into service, if requested by the borrower and found necessary by RUS.
(5) Certain costs incurred in demand side management, energy conservation programs and on and off grid renewable energy systems.
(6) Eligible Energy Efficiency and Conservation Programs pursuant to Subpart H of this part.
(7) Cybersecurity and grid security. Eligible cybersecurity and grid security improvements.
(8) Smart grid infrastructure. The purchase, installation, improvements, and investments in assets needed for a robust smart grid infrastructure capability that enables the utility to operate efficiently, improve its reliability, and enhance its ability to recover from disasters, physical or cyber-attacks, carry out energy efficiency and demand side management activities, and implement renewable energy technologies and cybersecurity and grid security strategies.
(i) Smart grid, grid security, or cybersecurity infrastructure financed under this section must relate to one or more electric utility or energy efficiency purpose. Loan proceeds under this section may not be used to solely finance retail broadband services.
(ii) Notwithstanding paragraph (a)(8)(i) of this section, a borrower is permitted to use up to 10 percent of the amount provided under this subpart to construct, improve, or acquire broadband infrastructure related to the project financed, subject to the requirements of 7 CFR part 1980, subpart M.
(b) In cases of financial hardship, as determined by the Administrator, loans may also be made to finance the following items:
(1) General plant equipment, including furniture, office, transportation, data processing and other work equipment; and
(2) Working capital required for the initial operation of a new system.
(c) RUS will not make loans to finance the following:
(1) Electric facilities, equipment, appliances, or wiring located inside the premises of the consumer, except for measures related to grid security, cybersecurity, or assets financed pursuant to an eligible EE Program, and qualifying items included in a loan for demand side management or energy resource conservation programs, or renewable energy systems.
(2) Facilities to serve consumers who are not RE Act beneficiaries unless those facilities are necessary and incidental to providing or improving electric service in rural areas ( See § 1710.104).
(3) Any facilities or other purposes that a State regulatory authority having jurisdiction will not approve for inclusion in the borrower's rate base or will not otherwise allow rates sufficient to repay with interest the debt incurred for the facilities or other purposes.
(d) A distribution borrower may request a loan period of up to 4 years. Except in the case of loans for new generating and associated transmission facilities, a power supply borrower may request a loan period of not more than 4 years for transmission and substation facilities and improvements or replacements of generation facilities. The loan period for new generating facilities and DSM activities will be determined on a case-by-case basis. The Administrator may approve a loan period shorter than the period requested by the borrower, if in the Administrator's sole discretion, a loan made for the longer period would fail to meet RUS requirements for loan feasibility and loan security set forth in §§ 1710.112 and 1710.113, respectively.
(e)(1) If, in the sole discretion of the Administrator, the amount authorized for lending for municipal rate loans, hardship rate loans, and loan guarantees in a fiscal year is substantially less than the total amount eligible for RUS financing, RUS may limit the size, type, or purpose of loans approved during the fiscal year. Depending on the amount of the shortfall between the amount authorized for lending and the loan application inventory on hand for each type of loan, RUS may either reduce the amount on an equal proportion basis for all applicants for that type of loan based on the amount of funds for which the applicant is eligible or may shorten the loan period for which funding will be approved to less than the maximum of 4 years. All applications for the same type of loan approved during a fiscal year will be treated in the same manner, except that RUS will not limit funding to any borrower requesting a RUS loan or loan guarantee of $1 million or less. Should a shortfall or urgent need related to cybersecurity, grid security, or statutory preference become evident during a fiscal year, the Administrator may announce priorities in a public notice for utilizing available funds for the balance of the fiscal year.
(2) If RUS limits the amount of loan funds approved for borrowers, the Administrator shall provide public notice to all electric borrowers as early as possible in the fiscal year of the manner in which funding will be limited. The portion of the loan application that is not funded during that fiscal year may, at the borrower's option, be treated as a second loan application received by RUS at a later date. This date will be determined by RUS in the same manner for all affected loans and will be based on the availability of loan funds. The second loan application shall be considered complete except that the borrower must submit a certification from a duly authorized corporate official stating that funds are still needed for loan purposes specified in the original application and must notify RUS of any changes in its circumstances that materially affects the information contained in the original loan application or the primary support documents. See § 1710.401(f).
(f)(1) For borrowers having one or more loans approved on or after October 1, 1991, advances of funds will be made only for the primary budget purposes included in the loan as shown on RUS Form 740c as amended and approved by RUS, or on a construction work plan or a construction work plan amendment approved by RUS. Each advance will be charged to the oldest outstanding note(s) having unadvanced funds for the primary budget purpose for which the request for advances was made, regardless of whether such notes are associated with loans approved before or after October 1, 1991, unless any conditions on advances under any of these notes have not been met by the borrower.
(2) For borrowers whose most recent loan was approved before October 1, 1991, advances will be made on the oldest outstanding note having unadvanced funds, unless any conditions on advances under such note have not been met by the borrower.
(g) A borrower is permitted to use up to 10 percent of the amount provided under this part to construct, improve, or acquire broadband infrastructure related to the project financed, subject to the requirements of 7 CFR part 1980, subpart M.
The maximum amount that will be lent for an acquisition is limited to the value of the property, as determined by RUS. If the acquisition price exceeds this amount, the borrower shall provide the remainder without RUS financial assistance.
(a) RUS encourages its borrowers to consider merging or consolidating with another electric borrower when such action will contribute to greater operating efficiency and financial soundness.
(b) After a merger or consolidation, RUS will give priority consideration per § 1710.119 to the processing of loans for the surviving system to finance the integration and rehabilitation of electric facilities, if necessary, and the improvement or extension of electric service in rural areas. Such priority consideration will also be given in the case of a borrower that has merged or consolidated with an electric system that has not previously received RUS financial assistance, if such system was serving primarily rural residents at the time of the merger or consolidation and such rural residents will continue to be served by the merged or consolidated system. RUS does not make loans for costs incurred in effectuating mergers or consolidations, such as legal expenses or feasibility study costs.
(a) Borrowers may request that a loan include funds to reimburse general funds and/or replace interim financing used to finance equipment and facilities that were included in an RUS-approved construction work plan, energy efficiency and conservation program work plan, work plan amendment or other RUS-approved plan, and for which loan funds have not been provided by RUS. Such reimbursement and/or replacement of interim financing may include the direct costs of procurement and construction, as well as the related cost of engineering, architectural, environmental and other studies and plans needed to support the project, when such cost is capitalized as part of the cost of the facilities.
(b) If procurement and/or construction of the equipment and facilities was completed prior to the current loan period, reimbursement, including replacement of interim financing, will be limited, except in cases of extreme financial hardship as determined by the Administrator, to the cost of procurement and construction completed during the period immediately preceding the current loan period, as specified in paragraph (c) of this section. As defined in § 1710.2, the loan period begins on the date shown on page 1 of RUS Form 740c, Cost Estimates and Loan Budget for Electric Borrowers.
(c) The period immediately preceding the current loan period for which reimbursement and replacement of interim financing is authorized under paragraph (b) of this section is 48 months. Policies for reimbursement of general funds and interim financing following certain mergers, consolidations, and transfers of systems substantially in their entirety are set forth in 7 CFR 1717.154.
(d) If the reimbursement of general funds and/or replacement of interim financing is for approved expenditures for equipment and facilities whose procurement and/or construction is completed during the current loan period, the time limits of paragraph (c) of this section do not apply.
(a) Except in the case of financial hardship as determined by the Administrator, and following certain mergers, consolidations, and transfers of systems substantially in their entirety as set forth in 7 CFR 1717.154, applicants for a municipal rate loan will be required to obtain a portion of their loan funds from a supplemental source without an RUS guarantee, in the amounts set forth in paragraph (c) of this section. RUS will normally grant a lien accommodation to the supplemental lender. RUS does not require supplemental financing in conjunction with an RUS guaranteed loan. However, if a borrower elects to obtain supplemental financing in conjunction with a guaranteed loan, the granting of RUS's loan guarantee may be conditioned on the borrower's obtaining supplemental financing.
(b) The terms and conditions of supplemental financing and any security offered to the supplemental lender are subject to RUS approval. Generally, supplemental loans must have the same final maturity and be amortized in the same manner as RUS loans made concurrently. Borrowers may elect to repay the loans either in substantially equal periodic installments covering interest and principal, or in periodic installments that include interest and level amortization of principal.
(c) Supplemental financing required for municipal rate loans —(1) Distribution borrowers. (i) Distribution borrowers that had, as of December 31, 1980, an average consumer density of 2 or fewer consumers per mile or an average adjusted plant revenue ratio (APRR), as defined in § 1710.2, of over 9.0 shall obtain supplemental financing equal to 10 percent of their loan request.
(ii) All other distribution borrowers must obtain supplemental financing according to their plant revenue ratio (PRR), as defined in § 1710.2, based on the most recent year-end data available on the date of loan approval, as follows:
PRR
Supplemental loan percentage
9.00 and above
10
8.01-8.99
20
8.00 and below
30
(iii) If a distribution borrower enters into a merger, consolidation, or transfer of system substantially in its entirety, and the provisions of 7 CFR 1717.154(b) do not apply, required supplemental financing will be determined as follows for loans approved by RUS after December 19, 1996. If one of the merging parties met the criteria in paragraph (c)(1)(i) of this section prior to the effective date of the merger consolidation or transfer, the borrower will be required to obtain supplemental financing equal to 10 percent of any loan funds requested for facilities to serve consumers located in the territory formerly served by the “paragraph (c)(1)(i)” borrower. The required amount of supplemental financing for the rest of the loan will be determined according to the provisions of paragraph (c)(1)(ii) of this section.
(2) Power supply borrowers. The supplemental loan proportion required of a power supply borrower is based on the simple arithmetic mean of the supplemental loan proportions required of the borrower's distribution members.
(3) Subsequent loans. (i) If more than 5 percent of an insured loan made prior to November 1, 1993, or of a municipal rate loan is terminated or rescinded, the amount of supplemental financing required in the borrower's next loan after the rescission for which supplemental financing is required, pursuant to paragraph (a) of this section, will be adjusted to average the actual supplemental financing portion on the terminated or rescinded loan with the supplemental financing portion that would have been required on the new loan according to paragraphs (c)(1) and (2) of this section, in accordance with the formulas set forth in paragraphs (c)(3)(ii) and (iii) of this section.
(ii) If a borrower's supplemental financing requirement as set forth in paragraphs (a), (c)(1), and (c)(2) of this section has not changed between the most recent loan and the loan being considered, then the amount of supplemental financing required for the new loan will be computed as follows:
Supplemental financing amount, new loan = [(A + B) × C] − D
where:
A = The total funds ($) actually advanced from the first loan, including both RUS loan funds and funds from the supplemental loan, plus any unadvanced funds still available to the borrower after the rescission.
B = The total amount ($) for facilities of the new loan request, including both RUS loan funds and funds from supplemental loans.
C = The proportion (%) of supplemental financing required on the loans according to paragraphs (a), (c)(1) and (c)(2) of this section.
D = The amount ($) of supplemental funds actually advanced on the first loan, plus any unadvanced supplemental funds still available to the borrower after the rescission.
(iii) If a borrower's supplemental financing requirement as set forth in paragraphs (a), (c)(1), and (c)(2) of this section has changed between the most recent loan and the loan being considered, then the amount of supplemental financing required for the new loan will be the weighted average of the portions otherwise applicable on the two loans and will be computed as follows:
Supplemental financing amount, new loan = (A × C 1 ) + (B × C 2 )−D
where:
A = The total funds ($) actually advanced from the first loan, including both RUS loan funds and funds from the supplemental loan, plus any unadvanced funds still available to the borrower after the rescission.
B = The total amount ($) for facilities of the new loan request, including both RUS funds and funds from supplemental loans.
C 1 = The proportion (%) of supplemental financing required on the old loan according to paragraphs (a), (c)(1) and (c)(2) of this section.
C 2 = The proportion (%) of supplemental financing required on the new loan according to paragraphs (a), (c)(1) and (c)(2) of this section.
D = The amount ($) of supplemental funds actually advanced on the first loan, plus any unadvanced supplemental funds still available to the borrower after the rescission.
(d) Supplemental financing will not be required in connection with hardship rate loans. Borrowers that qualify for hardship rate loans but elect to take municipal rate loans instead, will be required to obtain supplemental financing pursuant to this section, unless at the time of loan approval, there are no funds remaining available for hardship loans, in which case supplemental financing will not be required.
(a) RUS makes loans or loan guarantees to refinance the outstanding indebtedness of borrowers in the following cases:
(1) Loans or loan guarantees to refinance long-term debt owed by borrowers to the Tennessee Valley Authority for credit extended under the terms of the Tennessee Valley Authority Act of 1933, as amended.
(2) Loan guarantees made in accordance with the provisions of section 306A of the RE Act to prepay a loan (or any loan advance thereunder) made by the Federal Financing Bank.
(b) In certain circumstances, RUS may make a loan to replace interim financing obtained for the construction of facilities (See § 1710.109).
(a) RUS will make a loan only if there is reasonable assurance that the loan, together with all outstanding loans and other obligations of the borrower, will be repaid in full as scheduled, in accordance with the mortgage, notes, and loan contracts. The borrower must provide evidence satisfactory to the Administrator that the loan will be repaid in full as scheduled, and that all other obligations of the borrower will be met.
(b) Based on evidence submitted by the borrower and other information, RUS will use the following criteria to evaluate loan feasibility:
(1) Projections of power requirements, rates, revenues, expenses, margins, and other factors for the present system and proposed additions are based on reasonable assumptions and adequate supporting data and analysis, including analysis of a range of assumptions for the significant variables, when required by § 1710.300(d)(5).
(2) Projected revenues from the rates proposed by the borrower are adequate to meet the required TIER and DSC ratios based on the borrower's total costs, including the projected maximum debt service cost of the new loan.
(3) The economics of the borrower's operations and service area are such that consumers can reasonably be expected to pay the proposed rates required to cover all expenses and meet RUS TIER and DSC requirements, and the borrower can reasonably compete with other utilities and other energy sources to prevent substantial load loss while providing satisfactory service to its consumers.
(4) Risks of possible loss of substantial loads from large consumers or from load concentrations in particular industries will not substantially impair loan feasibility.
(5) Risks of loss of portions of the borrower's service territory from annexation or other causes will not substantially impair loan feasibility. If there appears to be a substantial risk, RUS may require additional information from the borrower, such as a summary and analysis of the risk by the borrower; state, county or local planning reports having information on projected growth or expansion plans of local communities; annexation plans of the municipalities in question; and any other relevant information.
(6) In states where rates or investment decisions are subject to approval by state regulatory authorities, there is reasonable expectation that such approvals will be forthcoming to enable repayment of the loan in full according to its terms.
(7) The experience and performance of the system's management is acceptable.
(8) In the case of joint ventures, the borrower has sufficient management control or other contractual safeguards with respect to the construction and operation of the jointly owned facility to ensure that the borrower's interests are protected and the credit risk is minimized.
(9) The borrower has implemented adequate financial and management controls and there are and have been no significant financial or other irregularities.
(10) The borrower's projected capitalization, measured by its equity as a percentage of total assets, is adequate to enable the borrower to meet its financial needs and to provide service consistent with the RE Act. Among the factors to be considered in reviewing the borrower's projected capitalization are the economic strength of the borrower's service territory, the inherent cost of providing service to the territory, the disparity in rates between the borrower and neighboring utilities, the intensity of competition faced by the borrower from neighboring utilities and other power sources, and the relative amount of new capital investment required to serve existing or new loads.
(a) RUS makes loans only if, in the judgment of the Administrator, the security therefor is reasonably adequate and the loan will be repaid according to its terms within the time agreed.
(b) RUS generally requires that borrowers provide it with a first lien on all of the borrower's real and personal property, including intangible personal property and any property acquired after the date of the loan. This lien shall be in the form of a mortgage by the borrower to the Government or a deed of trust between the borrower and a trustee satisfactory to the Administrator, together with such security documents as RUS may deem necessary in a particular case.
(c)(1) When a borrower is unable by reason of preexisting encumbrances, or otherwise, to furnish a first mortgage lien on its entire system the Administrator may accept other forms of security, such as a pledge of revenues, if he or she determines such security is reasonably adequate and the form and nature thereof is otherwise acceptable.
(2) The Administrator, at his or her discretion, may approve the use of an indenture patterned after those indentures commonly used by utilities engaged in private market financing, in lieu of a mortgage as the security instrument for loans to power supply borrowers. The use of an indenture will be by mutual agreement of the borrower and the Administrator. The terms of each indenture and related loan agreement will be negotiated on a case by case basis to best meet the needs of the individual borrower and the Government. The provisions of the indenture and loan contract shall control, notwithstanding any provisions of 7 CFR Chapter XVII which may be in conflict therewith.
(d) In the case of loans that include the financing of electric facilities that are operated as an integral component of a non-RUS financed system (such as generation and transmission facilities co-owned with other electric utilities), the borrower shall, in addition to the mortgage lien on all of the borrower's electric facilities, furnish adequate assurance, in the form of contractual or other security arrangements, that the system will be operated on an efficient and continuous basis. Satisfactory evidence must also be provided that the non-RUS financed system is financially sound and under capable management. Examples of such evidence include financial reports, annual reports, Security and Exchange Commission 10K reports if the system is required to file them, credit reports from Standard and Poor's, Moodys or other recognized sources, reports to state regulatory authorities and the Federal Energy Regulatory Commission, and evidence of a successful track record in related construction projects.
(e) Additional controls on the borrower's financial, investment and managerial activities appear in the loan contract and mortgage required by RUS.
(a) General. Requirements for coverage ratios are set forth in the borrower's mortgage, loan contract, or other contractual agreements with RUS. Nothing in this section, however, shall limit the Administrator's ability to contractually agree to a different ratio provided in this section when doing so would advance or protect the interests of the government.
(b) Coverage ratios. (1) The minimum coverage ratios required of distribution borrowers whether applied on an annual or average basis of the 2 best years out of the 3 most recent calendar years, are a TIER of 1.25, DSC of 1.25. Further, the minimum coverage ratios required of distribution borrowers whether applied on an annual or average basis of the 2 best years out of the 3 most recent calendar years are an OTIER and ODSC of 1.1 or an MTIER and MDSC of 1.1.
(2) The minimum coverage ratios required of power supply borrowers, whether applied on an annual or average basis, are a TIER of 1.05 and DSC of 1.00.
(3) When new loan contracts are executed, the Administrator may, case by case, increase the coverage ratios of distribution and power supply borrowers above the levels cited in paragraphs (b)(1) and (b)(2), respectively, of this section if the Administrator determines that the higher ratios are required to ensure reasonable security for and/or the repayment of loans made or guaranteed by RUS. Also, the Administrator may, case by case, reduce said coverage ratios if the Administrator determines that the lower ratios are required to ensure reasonable security for and/or the repayment of loans made or guaranteed by RUS. Policies for coverage ratios following certain mergers, consolidations, and transfers of systems substantially in their entirety are in 7 CFR 1717.155.
(4) If a distribution borrower has in service or under construction a substantial amount of generation and associated transmission plant financed at a cost of capital substantially higher than the cost of funds under section 305 of the RE Act, then the Administrator may establish, in his or her sole discretion, blended levels for TIER, DSC, OTIER, and ODSC based on the respective shares of total utility plant represented by said generation and associated transmission plant and by distribution and other transmission plant.
(c) Requirements for loan feasibility. To be eligible for a loan, borrowers must demonstrate to RUS that they will, on a pro forma basis, earn the coverage ratios required by paragraph (b) of this section in each of the years included in the borrower's long-range financial forecast prepared in support of its loan application, as set forth in subpart G of this part.
(d) Requirements for maintenance of coverage ratios —(1) Prospective requirement. Borrowers must design and implement rates for utility service to provide sufficient revenue (along with other revenue available to the borrower in the case of TIER and DSC) to pay all fixed and variable expenses, to provide and maintain reasonable working capital and to maintain on an annual basis the coverage ratios required by paragraph (b) of this section. Rates must be designed and implemented to produce at least enough revenue to meet the requirements of this paragraph under the assumption that average weather conditions in the borrower's service territory will prevail in the future, including average system damage and outages due to weather and the related costs. Failure to design and implement rates pursuant to the requirements of this paragraph shall be an event of default upon notice provided in accordance with the terms of the borrower's mortgage or loan contract.
(2) Retrospective requirement. The average coverage ratios achieved by a borrower in the 2 best years out of the 3 most recent calendar years must meet the levels required by paragraph (b) of this section. If a borrower fails to achieve these average levels, it must promptly notify RUS in writing. Within 30 days of such notification or of the borrower being notified in writing by RUS, whichever is earlier, the borrower, in consultation with RUS, must provide a written plan satisfactory to RUS setting forth the actions that will be taken to achieve the required coverage ratios on a timely basis. Failure to develop and implement a plan satisfactory to RUS shall be an event of default upon notice provided in accordance with the terms of the borrower's mortgage or loan contract.
(3) Fixed and variable expenses, as used in this section, include but are not limited to: all taxes, depreciation, maintenance expenses, and the cost of electric power and energy and other operating expenses of the electric system, including all obligations under the wholesale power contract, all lease payments when due, and all principal and interest payments on outstanding indebtedness when due.
(e) Requirements for advance of funds. (1) If a borrower applying for a loan has failed to achieve the coverage ratios required by paragraph (b) of this section during the latest 12 month period immediately preceding approval of the loan, or if any of the borrower's average coverage ratios for the 2 best years out of the most recent 3 calendar years were below the levels required in paragraph (b) of this section, RUS may withhold the advance of loan funds until the borrower has adopted an annual financial plan and operating budget satisfactory to RUS and taken such other action as RUS may require to demonstrate that the required coverage ratios will be maintained in the future and that the loan will be repaid with interest within the time agreed. Such other action may include, for example, increasing system operating efficiency and reducing costs or adopting a rate design that will achieve the required coverage ratios, and either placing such rates into effect or taking action to obtain regulatory authority approval of such rates. If failure to achieve the coverage ratios is due to unusual events beyond the control of the borrower, such as unusual weather, system outage due to a storm or regulatory delay in approving rate increases, then the Administrator may waive the requirement that the borrower take the remedial actions set forth in this paragraph, provided that such waiver will not threaten loan feasibility.
(2) With respect to any outstanding loan approved by RUS if, based on actual or projected financial performance of the borrower, RUS determines that the borrower may not achieve its required coverage ratios in the current or future years, RUS may withhold the advance of loan funds until the borrower has taken remedial action satisfactory to RUS.
(a) RUS is authorized to make loans and loan guarantees with a final maturity of up to 35 years. The borrower may elect a repayment period for a loan not longer than the expected useful life of the facilities, not to exceed 35 years. Most of the electric facilities financed by RUS have a long useful life, often approximating 35 years. Some facilities, such as load management equipment and Supervisory Control and Data Acquisition equipment, have a much shorter useful life due, in part, to obsolescence. Operating loans to finance working capital required for the initial operation of a new system are a separate class of loans and usually have a final maturity of less than 10 years.
(b) Loans made or guaranteed by RUS for facilities owned by the borrower generally must be repaid with interest within a period, up to 35 years, that approximates the expected useful life of the facilities financed. The expected useful life shall be based on the weighted average of the useful lives that the borrower proposes for the facilities financed by the loan, provided that the proposed useful lives are deemed appropriate by RUS. RUS Form 740c, Cost Estimates and Loan Budget for Electric Borrowers, submitted as part of the loan application must include, as a note, either a statement certifying that at least 90 percent of the loan funds are for facilities that have a useful life of 33 years or longer, or a schedule showing the costs and useful life of those facilities with a useful life of less than 33 years. If the useful life determination proposed by the borrower is not deemed appropriate by RUS, RUS will base expected useful life on an independent evaluation, the manufacturer's estimated useful-life or RUS experience with like-property, as applicable. Final maturities for loans for the implementation of programs for demand side management and energy resource conservation and on and off grid renewable energy sources not owned by the borrower will be determined by RUS. Due to the uncertainty of predictions over an extended period of time, RUS may add up to 2 years to the composite average useful life of the facilities in order to determine final maturity.
(c) The term for loans made to finance Eligible EE Programs will be determined in accordance with § 1710.408 of this part.
(d) The Administrator may approve a repayment period longer than the expected useful life of the facilities financed, up to 35 years, if a longer final maturity is required to ensure repayment of the loan and loan security is adequate.
(e) The final maturity of a loan established pursuant to the provisions of this section shall not be extended as a result of extending loan payments under section 12(a) of the RE Act.
Borrowers are required to comply with the environmental review requirements in accordance with 7 CFR part 1970, and other applicable environmental laws, regulations and Executive orders.
(a) Generally loans are processed in chronological order based on the date the complete application is received in the Regional office.
(b) The Administrator may give priority to processing loans that are required to meet the following needs:
(1) To restore electric service following a major storm or other catastrophe;
(2) To bring existing electric facilities into compliance with any environmental requirements imposed by Federal or state law that were not in effect at the time the facilities were originally constructed;
(3) To finance the capital needs of borrowers that are the result of a merger, consolidation, or a transfer of a system substantially in its entirety, provided that the merger, consolidation, or transfer has either been approved by RUS or does not need RUS approval pursuant to the borrower's loan documents (See 7 CFR 1717.154); or
(4) To correct serious safety problems, other than those resulting from borrower mismanagement or negligence.
(c) The Administrator may also change the normal order of processing loan applications when it is necessary to ensure that all loan authority for the fiscal year is utilized.
Borrowers shall follow all RUS requirements regarding construction work plans, energy efficiency and conservation program work plans, construction standards, approved materials, construction and related contracts, inspection procedures, and bidding procedures.
Borrowers are required to comply with certain requirements with respect to insurance and fidelity coverage as set forth in 7 CFR part 1788.
Borrowers are required to comply with certain regulations on nondiscrimination in program services and benefits and on equal employment opportunity as set forth in RUS Bulletins 20-15 and 20-19 or their successors; 7 CFR parts 15 and 15b; and 45 CFR part 90.
Borrowers are required to comply with certain requirements on debarment and suspension as set forth in 2 CFR part 180, as adopted by USDA through 2 CFR part 417.
Borrowers are required to comply with applicable provisions of 49 CFR part 24, which sets forth the requirements of the Uniform Relocation Assistance and Real Property Acquisition Policy Act of 1970 (Pub. L. 91-646; 84 Stat. 1894), as amended by the Uniform Relocation Act Amendments of 1987 (Pub. L. 100-17; 101 Stat. 246-256) and the Intermodal Surface Transportation Efficiency Act of 1991.
Borrowers are required to comply with certain requirements with respect to restrictions on lobbying activities. See 2 CFR part 418.
(a) Prior to approval of a loan or advance of funds, a borrower must report to RUS whether or not it is delinquent on any Federal debt, such as Federal income tax obligations or a loan or loan guarantee from another Federal agency. If delinquent, the reasons for the delinquency must be explained, and RUS will take such explanation into consideration in deciding whether to approve the loan or advance of funds.
(b) Applicants for a loan or loan guarantee must also certify that they have been informed of the collection options the Federal government may use to collect delinquent debt.
Borrowers are required to comply with the Drug Free Workplace Act of 1988 (41 U.S.C. 8101 et. seq. ) and the Act's implementing regulations (2 CFR part 421) when a borrower receives a Federal grant or enters into a procurement contract awarded pursuant to the provisions of the Federal Acquisition Regulation (title 48 CFR) to sell to a Federal agency property or services having a value of $25,000 or more.
The RE Act and prudent lending practice require that the Administrator make certain findings before approving an electric loan or loan guarantee. The borrower shall provide the evidence determined by the Administrator to be necessary to make these findings.
(a) Area coverage. Adequate electric service will be made available to the widest practical number of rural users in the borrower's service area during the life of the loan. See § 1710.103.
(b) Feasibility. The loan is feasible and it will be repaid on time according to the terms of the mortgage, note, and loan contract. At any time after the original determination of feasibility, the Administrator may require the borrower to demonstrate that the loan remains feasible if there have been, or are anticipated to be, material changes in the borrower's costs, loads, rates, rate disparity, revenues, or other relevant factors from the time that feasibility was originally determined. See § 1710.112 and subpart G of this part.
(c) Security. RUS will have a first lien on the borrower's total system or other adequate security, and adequate financial and managerial controls will be included in loan documents. See § 1710.113.
(d) Interim financing. For loans that include funds to replace interim financing, there is satisfactory evidence that the interim financing was used for purposes approved by RUS and that the loan meets all applicable requirements of this part.
(e) Facilities for nonrural areas. Whenever a borrower proposes to use loan funds for the improvement, expansion, construction, or acquisition of electric facilities for non-RE Act beneficiaries, there is satisfactory evidence that such funds are necessary and incidental to furnishing or improving electric service for RE Act beneficiaries. See § 1710.104.
(f) Facilities to be included in rate base. In states having jurisdiction, the borrower has provided satisfactory evidence based on the information available, such as an opinion of counsel, that the state regulatory authority will not exclude from the borrower's rate base any of the facilities included in the loan request, or otherwise prevent the borrower from charging rates sufficient to repay with interest the debt incurred for the facilities. Such evidence may be based on, but not necessarily limited to, the provisions of applicable state laws; the rules and policies of the state authority; precedents in other similar cases; statements made by the state authority; any assurances given to the borrower by the state authority; and other relevant information and experience.
The following primary support documents and studies must be prepared by the borrower for approval by RUS in order to support a loan application:
(a) Load forecast. The load forecast provides the borrower and RUS with an understanding of the borrower's future system loads, the factors influencing those loads, and estimates of future loads. The load forecast provides a basis for projecting annual electricity (kWh) sales and revenues, and for engineering estimates of plant additions required to provide reliable service to meet the forecasted loads. Subpart E of this part contains the information to be included in a load forecast and when an approved load forecast is required.
(b) Construction work plan (CWP). The CWP shall specify and document the capital investments required to serve a borrower's planned new loads, improve service reliability and quality, and service the changing needs of existing loads. The requirements for a CWP are set forth in subpart F of this part.
(c) Long-range financial forecasts. RUS encourages borrowers to maintain on a current basis a long-range financial forecast, which should be used by a borrower's board of directors and manager to guide the system toward its financial goals. The forecast submitted in support of a loan application shall show the projected results of future actions planned by the board of directors. The requirements for a long-range financial forecast are set forth in subpart G of this part.
(d) Environmental review requirements. A borrower must comply with the environmental review requirements in accordance with 7 CFR part 1970.
(e) EE Program work plan (EEWP). In the case of a loan application to finance an Eligible Energy Efficient Program, an EE Program work plan shall be prepared in lieu of a traditional CWP required pursuant to paragraph (b) of this section. The requirements for an EEWP are set forth in § 1710.255 and in subpart H of this part.
Additional requirements and procedures for obtaining RUS financial assistance are set forth in 7 CFR part 1712 for loan guarantees, and in 7 CFR part 1714 for insured loans.
Specific actions that require a Board of Director Resolution from a borrower:
(a) Board approval of loan documents;
(b) Major change in the terms of a loan, i.e. maturity;
(c) Initial access to RD Apply (or successor RUS online application systems);
(d) Requests for approval by a Board, acting as the regulatory authority, for any departure from the RUS Uniform System of Accounts with the exception of those deferrals specifically identified in § 1767.13(d); and
(e) eAuthentication requirements.
This subpart contains RUS policies for the preparation, review, approval and use of load forecasts. A load forecast is a thorough study of a borrower's electric loads and the factors that affect those loads in order to estimate, as accurately as practicable, the borrower's future requirements for energy and capacity. The load forecast of a power supply borrower includes and integrates the load forecasts of its member systems. An approved load forecast, if required by this subpart, is one of the primary documents that a borrower is required to submit to support a loan application.
(a) The policies, procedures and requirements in this subpart are intended to implement provisions of the loan documents between RUS and the electric borrowers and are also necessary to support approval by RUS of requests for financial assistance.
(b) Notwithstanding any other provisions of this subpart, RUS may require any power supply or distribution borrower to prepare a new or updated load forecast for RUS approval or to maintain an approved load forecast on an ongoing basis, if such documentation is necessary for RUS to determine loan feasibility, or to ensure compliance under the loan documents.
(a) A power supply borrower with a total utility plant of $500 million or more must maintain and provide a current (prepared within the last 2 years) load forecast in support of any request for RUS financial assistance.
(b) A power supply borrower that is a member of another power supply borrower that has a total utility plant of $500 million or more must provide an approved load forecast in support of any request for RUS financial assistance. The member power supply borrower may comply with this requirement by participation in and inclusion of its load forecasting information in the load forecast of its power supply borrower.
(c) A power supply borrower that has total utility plant of less than $500 million and that is not a member of another power supply borrower with a total utility plant of $500 million or more must provide a load forecast that meets the requirements of this subpart in support of an application for any RUS loan or loan guarantee which exceeds $50 million.
(a) A distribution borrower that is a member of a power supply borrower, with a total utility plant of $500 million or more must provide a current (prepared within the last 2 years) load forecast in support of any request for RUS financial assistance. The distribution borrower may comply with this requirement by participation in and inclusion of its load forecasting information in the approved load forecast of its power supply borrower.
(b) A distribution borrower that is a member of a power supply borrower which is itself a member of another power supply borrower that has a total utility plant of $500 million or more must provide a current (prepared within the last 2 years) load forecast in support of any request for RUS financial assistance. The distribution borrower may comply with this requirement by participation in and inclusion of its load forecasting information in the load forecast of its power supply borrower.
(c) A distribution borrower that is a member of a power supply borrower with a total utility plant of less than $500 million must provide a current (prepared within the last 2 years) load forecast that meets the requirements of this subpart in support of an application for any RUS loan or loan guarantee that exceeds $3 million or 5 percent of total utility plant, whichever is greater. The distribution borrower may comply with this requirement by participation in and inclusion of its load forecasting information in the load forecast of its power supply borrower.
(d) A distribution borrower with a total utility plant of less than $500 million and that is unaffiliated with a power supply borrower must provide a current (prepared within the last 2 years) load forecast that meets the requirements of this subpart in support of an application for any RUS loan or loan guarantee which exceeds $3 million or 5 percent of total utility plant, whichever is greater.
(e) A distribution borrower with a total utility plant of $500 million or more must provide a current (prepared within the last 2 years) load forecast in support of any request for RUS financing assistance. The distribution borrower may comply with this requirement by participation in and inclusion of its load forecasting information in the load forecast of its power supply borrower.
(a) Contents of load forecast. All load forecasts submitted by borrowers for approval must include:
(1) Scope of the load forecast. The narrative shall address the overall approach, time periods, and expected internal and external uses of the forecast. Examples of internal uses include providing information for developing or monitoring demand side management programs, supply resource planning, load flow studies, wholesale power marketing, retail marketing, cost of service studies, rate policy and development, financial planning, and evaluating the potential effects on electric revenues caused by competition from alternative energy sources or other electric suppliers. Examples of external uses include meeting State and Federal regulatory requirements, obtaining financial ratings, and participation in reliability council, power pool, regional transmission group, power supplier or member system forecasting and planning activities.
(2) Resources used to develop the load forecast. The discussion shall identify and discuss the borrower personnel, consultants, data processing, methods, and other resources used in the preparation of the load forecast. The borrower shall identify the borrower's members and, as applicable, member personnel that will serve as project leaders or liaisons with the authority to make decisions and commit resources within the scope of the current and future load forecasts.
(3) A comprehensive description of the database used in the study. The narrative shall describe the procedures used to collect, develop, verify, validate, update, and maintain the data. A data dictionary thoroughly defining the database shall be included. The borrower shall make all or parts of the database available or otherwise accessible to RUS in electronic format if requested.
(4) A narrative for each new load forecast or update of a load forecast. The narrative shall discuss the methods and procedures used in the analysis and modeling of the borrower's electric system loads. The narrative shall also describe the borrower's system, service territory, and consumers.
(5) A narrative discussing the borrower's past, existing, and forecast of future electric system loads. The narrative must identify and explain substantive assumptions and other pertinent information used to support the estimates presented in the load forecast.
(6) A narrative discussing load forecast uncertainty or alternative futures that may determine the borrower's actual loads. The narrative shall describe examples of uncertainties such as economic scenarios, weather conditions, and others that borrowers may decide to address in their analysis including:
(i) Most-probable assumptions, with normal weather;
(ii) Pessimistic assumptions, with normal weather;
(iii) Optimistic assumptions, with normal weather;
(iv) Most-probable assumptions, with severe weather;
(v) Most-probable assumptions, with mild weather;
(vi) Impacts of wholesale or retail competition; or
(vii) New environmental requirements.
(7) A summary of the forecast's results on an annual basis. Include alternative futures, as applicable: This summary shall be designed to accommodate the transfer of load forecast information to a borrower's other planning or loan support documents. Computer-generated forms or electronic submissions of data are acceptable. Graphs, tables, spreadsheets or other exhibits shall be included throughout the forecast as appropriate.
(8) A narrative discussing the coordination activities conducted between a power supply borrower and its members, as applicable, and between the borrower and RUS.
(9) Borrowers with a residential demand of 50 percent or more of total kWh should include in the Load Forecast a Residential Consumer Survey that is performed at least every 5 years to obtain data on appliance and equipment saturation and electricity demand. Any such borrower that is experiencing or anticipates changes in usage patterns shall consider surveys on a more frequent schedule. Power supply borrowers shall coordinate such surveys with their members.
(10) Residential consumer surveys may be based on the aggregation of member-based samples or on a system-wide sample, provided that the latter provides relevant regional breakdowns as appropriate.
(11) A load forecast for a power supply borrower and its members must cover all member systems, including those that are not borrowers. Each borrower is individually responsible for forecasting all its RE Act beneficiary and non-RE Act beneficiary loads.
(12) A narrative description of the borrower's load forecast including future load projections, forecast assumptions, and the methods and procedures used to develop the forecast.
(13) Projections of usage by consumer class, number of consumers by class, annual system peak demand, and season of peak demand for the number of years agreed upon by RUS and the borrower.
(14) A summary of the year-by-year results of the load forecast in a format that allows efficient transfer of the information to other borrower planning or loan support documents.
(15) The load impacts of a borrower's demand side management and energy efficiency and conservation program activities, if applicable.
(16) Graphic representations of the variables specifically identified by management as influencing a borrower's loads.
(17) A database that tracks all relevant variables that might influence a borrower's loads.
(b) Formats. RUS does not require a specific format for the narrative, documentation, data, and other information in the load forecast, provided that all required information is included and available. All data must be in a tabular form that can be transferred electronically to RUS computer software applications. RUS will evaluate borrower load forecasts for readability, understanding, filing, and electronic access. If a borrower's load forecast is submitted in a format that is not readily usable by RUS or is incomplete, RUS will require the borrower to submit the load forecast in a format acceptable to RUS.
(c) Documentation retention. The borrower must retain its latest load forecasts and supporting documentation.
(d) Consultation with RUS. The borrower must designate and make appropriate staff and consultants available for consultation with RUS to facilitate RUS review of the load forecast when requested by RUS.
(e) Correlation and consistency with other RUS loan support documents. If a borrower relies on an approved load forecast or an update of an approved load forecast as loan support, the borrower must demonstrate that the approved load forecast and the other primary support documentation for the loan were reconciled. For example, both the load forecast and the financial forecast require input assumptions for wholesale power costs, distribution costs, other systems costs, average revenue per kWh, and inflation. Also, a borrower's engineering planning documents, such as the construction work plan, incorporate consumer and usage per consumer projections from the load forecast to develop system design criteria. The assumptions and data common to all the documents must be consistent.
(f) Coordination. A load forecast of a power supply borrower must consider the load forecasts of all its member systems.
Load forecasts submitted by distribution borrowers that are unaffiliated with a power supply borrower, or by distribution borrowers that are members of a power supply borrower that has a total utility plant less than $500 million and that is not itself a member of another power supply borrower with a total utility plant of $500 million or more must satisfy the following minimum criteria:
(a) The borrower considered all known relevant factors that influence the consumption of electricity and the known number of consumers served at the time the study was developed;
(b) The borrower considered and identified all loads on its system of RE Act beneficiaries and non-RE Act beneficiaries;
(c) The borrower developed an adequate supporting data base and considered a range of relevant assumptions; and
(d) The borrower provided RUS with adequate documentation and assistance to allow for a thorough and independent review.
All load forecasts submitted by power supply borrowers and by distribution borrowers must satisfy the following criteria:
(a) The borrower objectively analyzed all known relevant factors that influence the consumption of electricity and the known number of customers served at the time the study was developed;
(b) The borrower considered and identified all loads on its system of RE Act beneficiaries and non-RE Act beneficiaries;
(c) The borrower developed an adequate supporting database and analyzed a reasonable range of relevant assumptions and alternative futures;
(d) The borrower adopted methods and procedures in general use by the electric utility industry to develop its load forecast;
(e) The borrower used valid and verifiable analytical techniques and models;
(f) The borrower provided RUS with adequate documentation and assistance to allow for a thorough and independent review; and
For good cause shown by the borrower, the Administrator may waive any of the requirements applicable to borrowers in this subpart if the Administrator determines that waiving the requirement will not significantly affect accomplishment of RUS' objectives and if the requirement imposes a substantial burden on the borrower. The borrower's general manager must request the waiver in writing.
(a) An ongoing, integrated planning system is needed by borrowers to determine their short-term and long-term needs for plant additions, improvements, replacements, and retirements. The primary components of the system consist of long-range engineering plans, construction work plans (CWPs), CWP amendments, and special engineering and cost studies. Long range engineering plans identify plant investments required over a period of 10-20 years or more. CWPs specify and document plant requirements for the short-term, usually 4 years, and special engineering and cost studies are used to support CWPs and to identify and document requirements for specific items or purposes, such as load management equipment, System Control and Data Acquisition equipment, sectionalizing investments, and additions of generation capacity and associated transmission plant.
(b) A long range engineering plan specifies and supports the major system additions, improvements, replacements, and retirements needed for an orderly transition from the existing system to the system required 10 or more years in the future. The planned future system should be based on the most technically and economically sound means of serving the borrower's long-range loads in a reliable and environmentally acceptable manner, and it should ensure that planned facilities will not become obsolete prematurely.
(c) A CWP shall include investment cost estimates and supporting engineering and cost studies to demonstrate the need for each proposed facility or activity and the reasonableness of the investment projections and the engineering assumptions used in sizing the facilities. The CWP must be consistent with the borrower's long range engineering plan and both documents must be consistent with the borrower's RUS-approved power requirements study.
(d) Applications for a loan or loan guarantee from RUS (new loans or budget reclassifications) must be supported by a current CWP approved by RUS. RUS approval of these plans relates only to the facilities, equipment, and other purposes to be financed by RUS, and means that the plans provide an adequate basis from a planning and engineering standpoint to support RUS financing. RUS approval of the plans does not mean that RUS approves of the facilities, equipment, or other purposes for which the borrower is not seeking RUS financing. If RUS disagrees with a borrower's estimate of the cost of one or more facilities for which RUS financing is sought, RUS may adjust the estimate after consulting with the borrower and explaining the reasons for the adjustment.
(e) Except as provided in paragraph (f) of this section, to be eligible for RUS financing, the facilities, including equipment and other items, included in a CWP must be approved by RUS and receive Environmental Clearance before the start of construction. This requirement also applies to any amendments to a CWP required to add facilities to a CWP or to make significant physical changes in the facilities already included in a CWP. Provision for funding of “minor projects” under an RUS loan guarantee is permitted on the same basis as that discussed for insured loan funds in 7 CFR part 1721, Post-Loan Policies and Procedures for Insured Electric Loans.
(f) In the case of damage caused by storms, natural catastrophes, sabotage, willful attacks, accidents, or acts of force majeure, a borrower may proceed with emergency repair work before a CWP or CWP amendment is prepared by the borrower and approved by RUS, without losing eligibility for RUS financing of the repairs. The borrower must notify RUS in writing after the incident, of its preliminary estimates of damages and repair costs. Not later than 120 days after the incident, the borrower must submit to RUS for approval, a CWP or CWP amendment detailing the repairs.
(g) A CWP may be amended or augmented when the borrower can demonstrate the need for the changes.
(h) A borrower's CWP or special engineering studies must be supported by the appropriate level of environmental review documentation, in accordance with 7 CFR part 1970.
(i) All engineering activities required by this subpart must be performed by qualified engineers, who may be staff employees of the borrower or outside consultants. All engineering services must be reviewed by a licensed professional engineer.
(j) Upon written request from a borrower, RUS may waive in writing certain requirements with respect to long-range engineering plans and CWPs if RUS determines that such requirements impose a substantial burden on the borrower and that waiving the requirements will not significantly affect the accomplishment of the objectives of this subpart. For example, if a borrower's load is forecast to remain constant or decline during the planning period, RUS may waive those portions of the plans that relate to load growth.
GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO ELECTRIC LOANS AND GUARANTEES (U.S.C.). Retrieved via LawPlayer, https://lawplayer.com/us/act/cfr-title-7-part-1710
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