7 CFR Part 1710 — General and Pre-Loan Policies and Procedures Common to Electric Loans and Guarantees

PART 1710—GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO ELECTRIC LOANS AND GUARANTEES Authority: 7 U.S.C. 901 et seq., et seq., et seq. Source: 57 FR 1053, Jan. 9, 1992, unless otherwise noted. Subpart A—General § 1710.1 General statement. 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. [87 FR 73436, Nov. 30, 2022] § 1710.2 Definitions and rules of construction. (a) Definitions. Administrator Approved load forecast APRR 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 Borrower Bulk Transmission Facilities Call provision Consolidation Consumer Cybersecurity and grid security improvements (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) Distribution Borrower Distribution Facilities Distributed generation DSC 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 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 DSM activities DSM plan Electric system Eligible Energy Efficiency and Conservation Programs (Eligible EE Program) Equity Final maturity Five percent hardship rate Fund advance period Generation Facilities Hardship rate loan Insured Loan Integrated Resources Plan (IRP) Interest rate cap Interest rate term Load forecast Loan Loan Contract Loan Feasibility Loan Guarantee Loan period MDSC 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 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 Mortgage MTIER 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 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 ODSC 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 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 Off-grid renewable energy system On-grid renewable energy system Ordinary Replacement OTIER 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 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 Power Supply Borrower Prepayment option PRR 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 et seq.). RE Act beneficiary REA Renewable energy system Retirement Unit Rollover maturity date Rural area (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 Subtransmission Facilities System Improvement TIER 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 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 Total Utility Plant Transmission Facilities Urban area Urbanized area Federal Register. (b) Rules of Construction. [57 FR 1053, Jan. 9, 1992] Editorial Note: For Federal Register www.govinfo.gov. § 1710.3 Form and bulletin revisions. 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. [59 FR 66440, Dec. 27, 1994] § 1710.4 Exception authority. 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. § 1710.5 Availability of forms. 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. § 1710.6 Applicability of certain provisions to completed loan applications. (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. (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. [57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 58 FR 66263, Dec. 20, 1993] §§ 1710.7-1710.49 [Reserved] Subpart B—Types of Loans and Loan Guarantees § 1710.50 Insured loans. RUS makes insured loans under section 305 of the RE Act. (a) Municipal rate loans. (b) Hardship rate loans. [58 FR 66263, Dec. 20, 1993] § 1710.51 Direct loans. RUS makes direct loans under section 4 of the RE Act. (a) General. (1) Interest rates. (2) Prepayment. (3) Supplemental financing. (4) Transitional assistance. (b) Loan documents. [66 FR 66294, Dec. 26, 2001] § 1710.52 Loan guarantees. 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. [58 FR 66264, Dec. 20, 1993] § 1710.53 Refinancing. (a) General. (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 (b) Definitions. Advance Agency Conditional commitment letter Eligible entity FFB FFB loan RUS loan (c) Loan purpose. (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 Eligible entity. (2) Eligible loans for refinancing. (e) Allocation of funds under this section. (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. (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. (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. (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. [87 FR 74497, Dec. 6, 2022] §§ 1710.54-1710.99 [Reserved] Subpart C—Loan Purposes and Basic Policies § 1710.100 General. (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. (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. [87 FR 74498, Dec. 6, 2022] § 1710.101 Types of eligible borrowers. (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. [58 FR 66264, Dec. 20, 1993, as amended at 78 FR 73365, Dec. 5, 2013; 85 FR 18418, Apr. 2, 2020; 87 FR 73436, Nov. 30, 2022] § 1710.102 Borrower eligibility for different types of loans. (a) Insured loans under section 305. (b) Direct loans under section 4. (c) One hundred percent loan guarantees under section 306. (d) One hundred percent loan guarantees under section 306A. (e) Ninety percent guarantees of private-sector loans under section 311. [57 FR 2832, Jan. 24, 1992, as amended at 58 FR 66264, Dec. 20, 1993; 66 FR 66294, Dec. 26, 2001; 78 FR 73365, Dec. 5, 2013] § 1710.103 Area coverage. (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. [57 FR 1053, Jan. 9, 1992, as amended at 60 FR 67404, Dec. 29, 1995] § 1710.104 Service to non-RE Act beneficiaries. (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. [57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 58 FR 66264, Dec. 20, 1993] § 1710.105 State and Tribal regulatory approvals. (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. [87 FR 73436, Nov. 30, 2022] § 1710.106 Uses of loan funds. (a) Funds from loans made or guaranteed by RUS may be used to finance: (1) Distribution 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. (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. See (4) Interest. (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. (8) Smart grid infrastructure. (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 § (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. [57 FR 1053, Jan. 9, 1992, as amended at 58 FR 66265, Dec. 20, 1993; 60 FR 3730, Jan. 19, 1995; 62 FR 7922, Feb. 21, 1997; 64 FR 33178, June 22, 1999; 78 FR 73365, Dec. 5, 2013; 84 FR 32610, July 9, 2019; 85 FR 57081, Sept. 15, 2020; 87 FR 74498, Dec. 6, 2022; 87 FR 73436, Nov. 30, 2022] § 1710.107 Amount lent for acquisitions. 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. § 1710.108 Mergers and consolidations. (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. § 1710.109 Reimbursement of general funds and interim financing. (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. [57 FR 1053, Jan. 9, 1992, as amended at 58 FR 66265, Dec. 20, 1993; 61 FR 66870, Dec. 19, 1996; 78 FR 73366, Dec. 5, 2013; 86 FR 36196, July 9, 2021] § 1710.110 Supplemental financing. (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 Distribution borrowers. (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. (3) Subsequent loans. (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 2 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 C 2 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. [57 FR 1053, Jan. 9, 1992, as amended at 58 FR 66265, Dec. 20, 1993; 60 FR 3730, Jan. 19, 1995; 61 FR 66870, Dec. 19, 1996] § 1710.111 Refinancing. (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). § 1710.112 Loan feasibility. (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. [57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 60 FR 3731, Jan. 19, 1995; 63 FR 51793, Sept. 29, 1998; 84 FR 32610, July 9, 2019] § 1710.113 Loan security. (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. [57 FR 1053, Jan. 9, 1992, as amended at 62 FR 7665, Feb. 20, 1997] § 1710.114 TIER, DSC, OTIER and ODSC requirements. (a) General. (b) Coverage ratios. (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. (d) Requirements for maintenance of coverage ratios Prospective requirement. (2) Retrospective requirement. (3) Fixed and variable expenses, (e) Requirements for advance of funds. (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. [60 FR 67404, Dec. 29, 1995, as amended at 61 FR 66871, Dec. 19, 1996; 65 FR 51748, Aug. 25, 2000; 88 FR 12810, Mar. 1, 2023] § 1710.115 Final maturity. (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. [58 FR 66265, Dec. 20, 1993, as amended at 60 FR 3731, Jan. 19, 1995; 68 FR 54236, May 7, 2003; 78 FR 73366, Dec. 5, 2013] § 1710.116 [Reserved] § 1710.117 Environmental review requirements. 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. [81 FR 11026, Mar. 2, 2016] § 1710.118 [Reserved] § 1710.119 Loan processing priorities. (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. [57 FR 1053, Jan. 9, 1992, as amended at 61 FR 66871, Dec. 19, 1996] § 1710.120 Construction standards and contracting. 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. [57 FR 1053, Jan. 9, 1992, as amended at 78 FR 73366, Dec. 5, 2013] § 1710.121 Insurance requirements. Borrowers are required to comply with certain requirements with respect to insurance and fidelity coverage as set forth in 7 CFR part 1788. § 1710.122 Equal opportunity and nondiscrimination. 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. § 1710.123 Debarment and suspension. 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. [79 FR 76002, Dec. 19, 2014] § 1710.124 Uniform Relocation Act. 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. § 1710.125 Restrictions on lobbying. Borrowers are required to comply with certain requirements with respect to restrictions on lobbying activities. See 2 CFR part 418. [79 FR 76002, Dec. 19, 2014] § 1710.126 Federal debt delinquency. (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. § 1710.127 Drug free workplace. Borrowers are required to comply with the Drug Free Workplace Act of 1988 (41 U.S.C. 8101 et. seq. [79 FR 76002, Dec. 19, 2014] §§ 1710.128-1710.149 [Reserved] Subpart D—Basic Requirements for Loan Approval § 1710.150 General. 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. § 1710.151 Required findings for all loans. (a) Area coverage. (b) Feasibility. (c) Security. (d) Interim financing. (e) Facilities for nonrural areas. (f) Facilities to be included in rate base. § 1710.152 Primary support documents. 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. (b) Construction work plan (CWP). (c) Long-range financial forecasts. (d) Environmental review requirements. (e) EE Program work plan (EEWP). [57 FR 1053, Jan. 9, 1992, as amended at 65 FR 14786, Mar. 20, 2000; 78 FR 73366, Dec. 5, 2013; 81 FR 11026, Mar. 2, 2016] § 1710.153 Additional requirements and procedures. 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. § 1710.154 Board of Director Resolutions. 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. (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. [84 FR 32610, July 9, 2019] §§ 1710.155-1710.199 [Reserved] Subpart E—Load Forecasts Source: 65 FR 14786, Mar. 20, 2000, unless otherwise noted. § 1710.200 Purpose. 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. [65 FR 14786, Mar. 20, 2000, as amended at 87 FR 73437, Nov. 30, 2022] § 1710.201 General. (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. § 1710.202 Requirement to prepare a load forecast—power supply borrowers. (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. [84 FR 32610, July 9, 2019, as amended at 87 FR 73437, Nov. 30, 2022] § 1710.203 Requirement to prepare a load forecast—distribution borrowers. (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. [87 FR 73437, Nov. 30, 2022] § 1710.204 [Reserved] § 1710.205 Minimum requirements for all load forecasts. (a) Contents of load forecast. (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. (c) Documentation retention. (d) Consultation with RUS. (e) Correlation and consistency with other RUS loan support documents. (f) Coordination. [84 FR 32610, July 9, 2019, as amended at 87 FR 73437, Nov. 30, 2022] § 1710.206 [Reserved] § 1710.207 RUS criteria for load forecasts by distribution borrowers. 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. [65 FR 14786, Mar. 20, 2000, as amended at 84 FR 32611, July 9, 2019] § 1710.208 RUS criteria for load forecasts by power supply borrowers and by distribution borrowers. 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 [65 FR 14786, Mar. 20, 2000, as amended at 84 FR 32611, July 9, 2019] § 1710.209 [Reserved] § 1710.210 Waiver of requirements or approval criteria. 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. §§ 1710.211-1710.249 [Reserved] Subpart F—Construction Work Plans and Related Studies § 1710.250 General. (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. [84 FR 32611, July 9, 2019, as amended at 89 FR 17274, Mar. 11, 2024] § 1710.251 Construction work plans—distribution borrowers. (a) All distribution borrowers must maintain a current CWP covering all new construction, improvements, replacements, and retirements of distribution and transmission plant, and improvements replacements, and retirements of any generation plant. Construction of new generation capacity need not be included in a CWP but must be specified and supported by specific engineering and cost studies. (See § 1710.253.) (b) A distribution borrower's CWP shall typically cover a construction period of 4 years and includes all facilities to be constructed which are eligible for RUS financing, whether or not RUS financial assistance will be sought or be available for certain facilities. Any RUS financing provided for the facilities will be limited to a 4 year loan period. The construction period covered by a CWP in support of a loan application shall not be shorter than the loan period requested for financing of the facilities. (c) The facilities, equipment and other items included in a distribution borrower's CWP may include: (1) Line extensions required to connect consumers, improve service reliability or improve voltage conditions; (2) Distribution tie lines to improve reliability of service and voltage regulation; (3) Line conversions and changes required to improve existing services or provide additional capacity for new consumers; (4) New substation facilities or additions to existing substations; (5) Transmission and substation facilities required to support the distribution system; (6) Distribution equipment required to serve new consumers or to provide adequate and dependable service to existing consumers, including replacement of existing plant facilities; (7) Outdoor lights; (8) Communications equipment and meters; (9) Headquarters facilities; (10) Improvements, replacements, and retirements of generation facilities; (11) Load management equipment, automatic sectionalizing facilities, and centralized System Control and Data Acquisition equipment. Load management equipment eligible for financing, including the related costs of installation, is limited to capital equipment designed to influence the time and manner of consumer use of electricity, which includes peak clipping and load shifting. To be eligible for financing, such equipment must be owned by the borrower, although it may be located inside or outside a consumer's premises; (12) The cost of engineering, architectural, environmental, and other studies and plans needed to support the construction of facilities, when such cost is capitalized as part of the cost of the facilities; and (13) Other items that are specifically determined by RUS as being eligible for financing prior to inclusion in the CWP. [57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 60 FR 3731, Jan. 19, 1995; 60 FR 67405, Dec. 29, 1995; 84 FR 32612, July 9, 2019; 86 FR 36196, July 9, 2021] § 1710.252 Construction work plans—power supply borrowers. (a) All power supply borrowers must maintain a current CWP covering all new construction, improvements, replacements, and retirements of distribution and transmission plant, and improvements, replacements, and retirements of generation plant. Applications for RUS financial assistance for such facilities must be supported by a current, RUS-approved CWP. Construction of new generation capacity need not be included in a CWP but must be specified and supported by specific engineering and cost studies. (b) Typically a power supply borrower's CWP shall cover a period of 4 years. While comprehensive CWP's are desired, if there are extenuating circumstances RUS may accept a single-purpose transmission or generation CWP in support of a loan application or budget reclassification. The construction period covered by a CWP in support of a loan application shall not be shorter than the loan period requested for financing of the facilities. (c) Facilities, equipment, and other items included in a power supply borrower's CWP may include: (1) Distribution and related facilities as set forth in § 1710.251(c); (2) Transmission facilities required to deliver the power needed to serve the existing and planned new loads of the borrower and its members, and to improve service reliability, including tie lines for improved reliability of service, line conversions, improvements and replacements, new substations and substation improvements and replacements, and Systems Control and Data Acquisition equipment, including communications, dispatching and sectionalizing equipment, and load management equipment; (3) The borrower's proportionate share of transmission facilities required to tie together the operating systems of supporting power pools and to connect with adjacent power suppliers; (4) Improvements and replacements of generation facilities; and (5) The cost of engineering, architectural, environmental and other studies and plans needed to support the construction of facilities, when such cost is capitalized as part of the cost of the facilities. (d) A CWP for transmission facilities shall normally include studies of load flows, voltage regulation, and stability characteristics to demonstrate system performance and needs. [57 FR 1053, Jan. 9, 1992, as amended at 60 FR 3731, Jan. 19, 1995; 60 FR 67405, Dec. 29, 1995; 84 FR 32612, July 9, 2019; 86 FR 36196, July 9, 2021] § 1710.253 Engineering and cost studies—addition of generation capacity. (a) The construction or purchase of additional generation capacity and associated transmission facilities by a power supply or distribution borrower, including the replacement of existing capacity, shall be supported by comprehensive project-specific engineering and cost studies as specified by RUS. The studies shall cover a period from the beginning of the project to at least 10 years after the start of commercial operation of the facilities. (b) The studies must include comprehensive economic present-value analyses of the costs and revenues of the available self-generation, load management, energy conservation, and purchased-power options, including assessments of service reliability and financing requirements and risks. An analysis of purchased power options, including an analysis of available alternate sources of power shall be included. The analysis should include the terms and conditions of any requests for proposals and responses to such requests. (c) Generally, studies of self-generation, load management, and energy conservation options shall include, as appropriate, analyses of: (1) Capital and operating costs; (2) Financing requirements and risks; (3) System reliability; (4) Alternative unit sizes; (5) Alternative types of generation; (6) Fuel alternatives; (7) System stability; (8) Load flows; and (9) System dispatching. (d) At the request of a borrower, RUS, in its sole discretion, may waive specific requirements of this section if such requirements imposed a substantial burden on the borrower and if such waiver will not significantly affect the accomplishment of the objectives of this subpart. [57 FR 1053, Jan. 9, 1992, as amended at 84 FR 32612, July 9, 2019] § 1710.254 [Reserved] § 1710.255 Energy efficiency work plans—energy efficiency borrowers. (a) All energy efficiency borrowers must maintain a current EEWP covering in aggregate all new construction, improvements, replacements, and retirements of energy efficiency related equipment and activities; (b) An energy efficiency borrower's EEWP shall cover a period of between 2 and 4 years, and include all facilities to be constructed or improved which are eligible for RUS financing, whether or not RUS financial assistance will be sought or be available for certain facilities. The construction period covered by an EEWP in support of a loan application shall not be shorter than the loan period requested for financing of the facilities; (c) The borrower's EEWP may only include facilities, equipment and other activities that have been approved by RUS as a part of an Eligible Energy Efficiency and Conservation Program pursuant to subpart H of this part; (d) The borrower's EEWP must be consistent with the documentation provided as part of the current RUS approved EE Program as outlined in § 1710.410(c); and (e) The borrower's EEWP must include an estimated schedule for the implementation of included projects. [78 FR 73366, Dec. 5, 2013, as amended at 84 FR 32612, July 9, 2019] §§ 1710.256-1710.299 [Reserved] Subpart G—Long-Range Financial Forecasts § 1710.300 General. (a) RUS encourages borrowers to maintain a current long-range financial forecast. The forecast should be used by the board of directors and the manager to guide the system towards its financial goals. (b) A borrower must prepare, for RUS review and approval, a long-range financial forecast in support of its loan application. The forecast must demonstrate that the borrower's system is economically viable and that the proposed loan is financially feasible. Loan feasibility will be assessed based on the criteria set forth in § 1710.112. (c) The financial forecast and related projections submitted in support of a loan application shall include: (1) The projected results of future actions planned by the borrower's board of directors; (2) The financial goals established for margins, TIER, DSC, equity, and levels of general funds to be invested in plant; (3) A pro forma balance sheet, statement of operations, and general funds summary projected for each year during the forecast period; (4) A full explanation of the assumptions, supporting data, and analysis used in the forecast, including the methodology used to project loads, rates, revenue, power costs, operating expenses, plant additions, and other factors having a material effect on the balance sheet and on financial ratios such as equity, TIER, and DSC; (5) Current and projected cash flows; (6) Projections of future borrowings and the associated interest and principal expenses required to meet the projected investment requirements of the system; (7) Current and projected kW and kWh energy sales; (8) Current and projected unit prices of significant variables such as retail and wholesale power prices, average labor costs, and interest; (9) Current and projected system operating costs, including, but not limited to, wholesale power costs, depreciation expenses, labor costs, and debt service costs; (10) Current and projected revenues from sales of electric power and energy; (11) Current and projected non-operating income and expense; (12) A discussion of the historical experience of the borrower, and in the case of a power supply borrower its member systems as appropriate, with respect to the borrower's market competitiveness as it relates to the rates charged for electricity, competition from other fuels, and other factors. Additional data and analysis may be required by RUS on a case by case basis to assess the probable future competitiveness of those borrowers that have a history of serious competitive problems; and (13) An analysis of the effects of major factors, such as projected increases in rates charged for electricity, on the ability of the borrower, and in the case of a power supply borrower its member systems, to compete with neighboring utilities and other energy sources. (d) The following plans, studies and assumptions shall be used in developing the financial forecast: (1) The RUS-approved CWP; (2) RUS-approved power requirements data; (3) RUS-approved EE Program work plan; (4) The current rate schedules or new rates; (5) Future plant additions and operating expenses projected at anticipated future cost levels rather than in constant dollars, with the annual rate of inflation for major items specified; and (6) A sensitivity analysis may be required by RUS on a case-by-case basis taking into account such factors as the number and type of large power loads, projections of future borrowings and the associated interest, projected loads, projected revenues, and the probable future competitiveness of the borrower. When RUS determines that a sensitivity analysis is necessary for distribution borrowers, the variables to be tested will be determined by the General Field Representative in consultation with the borrower and the regional office. The regional office will consult with the Power Supply Division in the case of generation projects for distribution borrowers. For power supply borrowers, the variables to be tested will be determined by the borrower and the Power Supply Division. (e) The financial forecast shall use the accrual method, as approved by RUS, for analyzing costs and revenues, and, as applicable, compare the economic results of the various alternatives on a present value basis. [57 FR 1053, Jan. 9, 1992, as amended at 63 FR 53277, Oct. 5, 1998; 78 FR 73366, Dec. 5, 2013; 84 FR 32612, July 9, 2019] § 1710.301 Financial forecasts—distribution borrowers. (a) Financial forecasts prepared by distribution borrowers shall cover at least a ten-year period, unless a shorter period is authorized by other RUS regulations. (b) In addition to the requirements set forth in § 1710.300 of this part, financial forecasts prepared by distribution borrowers in support of a loan application shall: (1) Include expenditures for any maintenance determined to be needed in the current system's operation and maintenance review and evaluation in order to comply with mortgage covenants and prudent utility practice; (2) Fully explain the basis for the power cost projections used. Generally, the power supplier's most recent forecasted rates shall be used; and (3) Use RUS Form 325 or computer-generated equivalent reports. § 1710.302 Financial forecasts—power supply borrowers. (a) The requirements of this section apply only to financial forecasts submitted by power supply borrowers in support of a loan from RUS. The financial forecast prepared by power supply borrowers shall demonstrate the effects that the addition of generation, transmission and any distribution facilities will have on the power supply borrower's sales, costs, and revenues, and on the cost of power to the member distribution systems. (b) The financial forecast shall cover a period of 10 years. RUS may request projections for a longer period of time if RUS deems necessary. (c) Financial forecasts prepared in support of loan applications to finance additional generation capacity shall include a power cost study as set forth in § 1710.303. (d) In addition to the requirements set forth in § 1710.300, financial forecasts prepared by power supply borrowers shall: (1) Identify all plans for generation and transmission capital additions and system operating expenses on a year-by-year basis, beginning with the present and running for 10 years, unless a longer period of time has been requested by RUS. (2) Integrate projections of operation and maintenance expenses associated with existing plant with those of new proposed facilities to determine total costs of system operation as well as the costs of new generation and generation-related facilities; (3) Provide an in-depth analysis of the regional markets for power if loan feasibility depends to any degree on a borrower's ability to sell surplus power while its system loads grow to meet the planned capacity of a proposed plant; (4) If not previously submitted, furnish RUS with all material information on operating agreements, ownership agreements, fuel contracts and any other special agreements that affect annual cost projections, as may be required by RUS on a case by case basis; and (5) Include sensitivity analysis if required by RUS pursuant to § 1710.300(d)(6). (e) The projections shall be coordinated in advance with RUS so that agreement can be reached on major aspects of the economic studies. These include, but are not limited to, projections of future kW and kWh requirements, RE Act beneficiary loads, electricity prices, revenues from system and off-system power sales, the cost of prospective plant additions, interest and depreciation rates, fuel costs, cost escalation factors, the discount rate, and other factors. (f) The projections, analysis, and supporting information must be included in a report that will provide RUS with the information needed to: (1) Understand and compare various power supply plans; (2) Determine that the facilities to be financed will perform satisfactorily; and (3) Determine that the overall system is economically viable and the loan is financially feasible and secure. [57 FR 1053, Jan. 9, 1992, as amended at 63 FR 53278, Oct. 5, 1998; 78 FR 73366, Dec. 5, 2013] § 1710.303 Power cost studies—power supply borrowers. (a) All applications for financing of additional generation capacity and the associated bulk transmission facilities shall be supported by a power cost study to demonstrate that the proposed generation and associated transmission facilities are the most economical and effective means of meeting the borrower's power requirements. This study usually is a separate study but it may be integrated with the financial forecast required by § 1710.302. (b) A power cost study shall include the following basic elements: (1) A study of all reasonably available self-generation, purchased-power, load management, and energy conservation alternatives as set forth in §§ 1710.253 and 1710.254; (2) A present-value analysis of the costs of the alternatives and their effects on total power costs, covering a period of at least 10 years beyond the projected in-service date of the facilities; (3) A description of proposed new power-purchase contracts or revisions to existing contracts, and an analysis of the effects on power costs; (4) Use of sensitivity analyses to determine the vulnerability of the alternatives to a reasonable range of assumptions about fuel costs, failure to achieve projected load growth, changes in operating and financing costs, and other major factors, if the financial forecast is used in support of a loan or loan guarantee that exceeds the smaller of $25 million or 10 percent of the borrower's total utility plant. Individual sensitivity analyses need not be duplicated if they have been included in other materials submitted to RUS; and (5) Assessment of the financial risks of the various alternatives, especially as between capital-intensive and non-capital-intensive alternatives, under the range of assumptions set forth in paragraph (b)(4) of this section. (c) Power cost studies must use current, RUS-approved power requirements data, and all major assumptions are subject to RUS approval. Alternative assumptions about projected power requirements may be used, however, in conjunction with the sensitivity analyses required by paragraph (b)(4) of this section. (Approved by the Office of Management and Budget under control number 0572-0032) §§ 1710.304-1710.349 [Reserved] Subpart H—Energy Efficiency and Conservation Loan Program Source: 78 FR 73366, Dec. 5, 2013, unless otherwise noted. § 1710.400 Purpose. (a) This subpart establishes policies and requirements that apply to loans and loan guarantees to finance Energy Efficiency and Conservation programs (EE Programs) undertaken by an eligible utility system to finance Demand side management, energy efficiency and conservation, or on-grid and off-grid renewable energy system programs that will result in the better management of their system load growth, a more beneficial load profile, or greater optimization of the use of alternative energy resources in their service territory. These programs may be considered an essential utility service. (b)(1) The goals of an eligible Energy Efficiency project eligible for funding under this program and Subpart H include: (i) Increasing energy efficiency at the end user level; (ii) Modifying electric load such that there is a reduction in overall system demand; (iii) Effecting a more efficient use of existing electric distribution, transmission and generation facilities; (iv) Attracting new businesses and creating jobs in rural communities by investing in energy efficiency; and (v) Encouraging the use of renewable energy fuels for either Demand side management or the reduction of conventional fossil fuel use within the service territory. (2) Although not a goal, RUS recognizes that there will be a reduction of greenhouse gases with energy efficiency improvements. [78 FR 73366, Dec. 5, 2013, as amended at 87 FR 73438, Nov. 30, 2022] § 1710.401 RUS policy. EE Programs under this subpart may be financed at the distribution level or by an electric generation and transmission provider. RUS encourages borrowers to coordinate with the relevant member systems regarding their intention to implement a program financed under this subpart. RUS also encourages borrowers to leverage funds available under this subpart with State, local, or other funding sources that may be available to implement such programs. § 1710.402 Scope. This subpart adapts and modifies, but does not supplant, the requirements for all borrowers set forth elsewhere where the purpose of the loan is to finance an approved EE program. In the event there is overlap or conflict between this subpart and the provisions of this part 1710 or other parts of the Code of Federal Regulations, the provisions of this subpart will apply for loans made or guaranteed pursuant to this subpart. § 1710.403 General. EE Programs financed under this subpart may be directed at all forms of energy consumed within a utility's service territory, not just electricity, where the electric utility is in a position to facilitate the optimization of the energy consumption profile within its service territory and do so in a way that enhances the financial or physical performance of the rural electric system and enables the repayment of the energy efficiency loan. § 1710.404 Definitions. For the purpose of this subpart, the following terms shall have the following meanings. In the event there is overlap or conflict between the definitions contained in § 1710.2, the definitions set forth below will apply for loans made or guaranteed pursuant to this subpart. British thermal unit (Btu) Certified energy auditor (1) A certified energy auditor for commercial and industrial energy efficiency improvements shall mean an energy auditor who meets at least one of the following criteria: (i) An individual possessing a current commercial or industrial energy auditor certification from a national, industry-recognized organization; (ii) A Licensed Professional Engineer in the State in which the audit is conducted with at least 1 year experience and who has completed at least two similar type Energy Audits; (iii) An individual with a four-year engineering or architectural degree with at least 3 years experience and who has completed at least five similar type Energy Audits; or (iv) Beginning in calendar year 2015, an energy auditor certification recognized by the Department of Energy through its Better Buildings Workforce Guidelines project. (2) A certified energy auditor for residential energy efficiency improvements shall mean an energy auditor that meets one of the following criteria: (i) The workforce qualification requirements of the Home Performance with Energy Star Program, as outlined in Section 3 of the Home Performance with Energy Star Sponsor Guide; or (ii) An individual possessing a current residential energy auditor or building analyst certification from a national, industry-recognized organization. Cost effective Demand Demand savings Eligible borrower Energy audit Energy efficiency and conservation measures Energy efficiency and conservation program (EE Program) HVAC Load Load factor Peak demand (or maximum demand) Peak demand reduction Power Re-lamping SI Smart Grid Investments Ultimate recipient Utility Energy Services Contract (UESC) Utility system Watt [78 FR 73366, Dec. 5, 2013, as amended at 87 FR 73438, Nov. 30, 2022] § 1710.405 Eligible energy efficiency and conservation programs. (a) General. (1) Be developed and implemented by an Eligible borrower and applied within its service territory; (2) Consist of eligible activities and investments as provided in § 1710.406 (3) Provide for the use of State and local funds where available to supplement RUS loan funds; (4) Incorporate the applicant's policy applicable to the interconnection of distributed resources; (5) Incorporate a business plan that meets the requirements of § 1710.407; (6) Incorporate a quality assurance plan that meets the requirements of § 1710.408; (7) Demonstrate that the program can be expected to be Cost effective; (8) Demonstrate that the program will have a net positive or neutral cumulative impact on the borrower's financial condition over the time period contemplated in the analytical support documents demonstrating that the net present value of program costs incurred by the borrower are positive, pursuant to § 1710.411; (9) Demonstrate energy savings or peak demand reduction for the service territory overall; and (10) Be approved in writing by RUS prior to the investment of funds for which reimbursement will be requested. (b) Financial Structures. (1) Loans made to Ultimate Recipients located in a rural area where — (i) The Ultimate Recipients may be wholesale or retail; (ii) The loans may be secured or unsecured; (iii) The loan receivables are owned by the Eligible Borrower; (iv) The loans are made or serviced directly by the Eligible Borrower or by a financial institution pursuant to a contractual relationship between the Eligible Borrower and the financial institution; (v) Due diligence is performed to confirm the repayment ability of the Ultimate Recipient; (vi) Loans are funded only upon completion of the project financed or to reimburse startup costs that have been incurred; (vii) The rate charged the Ultimate Recipient is less than or equal to the direct Treasury rate established daily by the United States Treasury pursuant to § 1710.51(a)(1) or § 1710.52, as applicable, plus the borrower's interest rate from RUS and 1.5 percent . Exceptions will be made on a case-by-case basis to ensure repayment of the government's loan and must be clearly articulated in the business plan RUS will not accept an exception request if the loan is feasible at 1.5 percent; and (viii) Loans are not used to refinance a preexisting loan. (2) A tariff that is specific to an identified rural Consumer, premise or class of ratepayer; or (3) On bill repayment and other financial recoupment mechanisms as may be approved by RUS. (c) Period of performance Performance standards. (ii) All activities other than those included in paragraph (c)(1)(i) of this section should be designed to achieve the applicable operating performance targets within the time period contemplated by the analytic support documents for the overall EE Program as approved by RUS. (2) Cost effectiveness. § 1710.406 Eligible activities and investments. (a) General. (1) Shall be designed to improve energy efficiency and/or reduce peak demand on the customer side of the meter; (2) Shall be Cost effective in the aggregate after giving effect to all activities and investments contemplated in the approved EE Program; and (3) May apply to all Consumer classes. (b) Eligible activities and investments. (1) Energy efficiency and conservation measures where assets financed at an Ultimate Recipient premises can be characterized as an integral part of the real property that would typically transfer with the title under applicable state law. Where applicable, it is anticipated that the loan obligation would also be expected to transfer with ownership of the metered account serving that property. (2) Renewable Energy Systems, including — (i) On or Off Grid Renewable energy systems; (ii) Fuel cells; (3) Demand side management (DSM) investments including Smart Grid Investments; (4) Energy audits; (5) Utility Energy Services Contracts; (6) Consumer education and outreach programs; (7) Power factor correction equipment on the Ultimate Recipient side of the meter; (8) Re-lamping to more energy efficient lighting; and (9) Fuel Switching as in: (i) The replacement of existing fuel consuming equipment using a particular fuel with more efficient fuel consuming equipment that uses another fuel but which does not increase direct greenhouse gas emissions; or (ii) The installation of non-electric fuel consuming equipment to facilitate management of electric system peak loads. Fuel switching to fossil or biomass fueled electric generating equipment is expressly excluded. (10) Other activities and investments as approved by RUS as part of the EE Program such as, but not limited to, pre-retrofit improvements. (c) Intermediary lending. (d) Performance standards. § 1710.407 Business plan. An Eligible EE Program must have a business plan for implementing the program. The business plan is expected to have a global perspective on the borrower's energy efficiency plan. Therefore, energy efficiency upgrades should be identified in aggregate. The business plan must have the following elements: (a) Executive summary. (b) Organizational background. (c) Marketing plan. (d) Operations plan. (1) A list of the activities and investments to be implemented under the EE Program and the Btu savings goal targeted for each category; (2) An estimate of the dollar amount of investment by the utility for each category of activities and investments listed under paragraph (d)(1) of this section; (3) A staffing plan that identifies whether and how outsourced contractors or subcontractors will be used to deliver the program; (4) A description of the process for documenting and perfecting collateral arrangements for Ultimate Recipient loans, if applicable; and (5) The overall Btu savings to be accomplished over the life of the EE Program. (e) Financial plan. (1) A schedule showing sources and uses of funds for the program; (2) An itemized budget for each activity and investment category listed in the operations plan; (3) An aggregate Cost effectiveness forecast; (4) Where applicable, provision for Ultimate Recipient loan loss reserves. These loan loss reserves will not be funded by RUS. Loan loss reserves are not required when a utility will not be relending RUS funds. (5) Identify expected Ultimate Recipient loan delinquency and default rates and report annually on deviations from the expected rates. (f) Risk analysis. (g) The borrowers are strongly encouraged to follow a bulletin or such other publication as RUS deems appropriate that contains and describes best practices for energy efficiency business plans. RUS will make this bulletin or publication publicly available and revise it from time-to-time as RUS deems it necessary. § 1710.408 Quality assurance plan. An eligible EE program must have a quality assurance plan as part of the program. The quality assurance plan is expected to have a global perspective on the borrower's energy efficiency plan. Therefore, energy efficiency upgrades should be identified in aggregate. Every effort is made to fund only EE programs that are administered in accordance with quality assurance plans meeting standards designed to achieve the purposes of this subpart. However, RUS and its employees assume no legal liability for the accuracy, completeness or usefulness of any information, product, service, or process funded directly or indirectly with financial assistance provided under this subpart. Nothing in the loan documents between RUS and the energy efficiency borrower shall confer upon any other person any right, benefit or remedy of any nature whatsoever. Neither RUS nor its employees makes any warranty, express or implied, including the warranties of merchantability and fitness for a particular purpose, with respect to any information, product, service, or process available from an energy efficiency borrower. The approval by RUS and its employees of an energy efficiency borrower's quality assurance plan is solely for the benefit of RUS. Approval of the quality assurance plan does not constitute an RUS endorsement. The quality assurance plan must have the following elements: (a) Quality assurance assessments shall include the use of qualified energy managers or professional engineers to evaluate program activities and investments; (b) Where applicable, program evaluation activities should use the protocols for determining energy savings as developed by the U.S. Department of Energy in the Uniform Methods Project. (c) Energy audits shall be performed for energy efficiency investments involving the building envelope at an Ultimate Recipient premises; (d) Energy audits must be performed by certified energy auditors; and (e) Follow up audits shall be performed within one year after installation on a sample of investments made to confirm whether efficiency improvement expectations are being met. (f) In cases involving energy efficiency upgrades to a single system (such as a ground source heat pump) the new system must be designed and installed by certified and insured professionals acceptable to the utility. (g) Industry or manufacturer standard performance tests, as applicable, shall be required on any system upgraded as a result of an EE Program. This testing shall indicate the installed system is meeting its designed performance parameters. (h) In some programs the utility may elect to recommend independent contractors who can perform energy efficiency related work for their customers. In these cases, utilities shall monitor the work done by the contractors and confirm that the contractors are performing quality work. Utilities should remove substandard contractors from their recommended lists if the subcontractors fail to perform at a satisfactory level. RUS does not endorse or recommend any particular independent contractors. (i) Contractors not hired by the utility may not act as agents of the utility in performing work financed under this subpart. (j) The borrowers are strongly encouraged to follow a bulletin or other publication that RUS deems appropriate and contains and describes best practices for energy efficiency quality assurance plans. RUS will make this bulletin or publication publicly available and revise it from time-to-time as RUS deems it necessary. [78 FR 73366, Dec. 5, 2013, as amended at 87 FR 73438, Nov. 30, 2022] § 1710.409 Loan provisions. (a) Loan term. (b) Loan feasibility. (c) Reimbursement for completed projects. (2) Except for the initial advance provided for in paragraph (c)(1) of this section, all advances under this subpart shall be used for reimbursement of expenditures relating to a completed activity or investment; and (3) Advances shall be in accordance with RUS procedures. (d) Loan amounts. (2) Financing for administrative costs may not exceed 5 percent of the total loan amount. (3) The Rural Utilities Service reserves the right to place a cap on both the total amount of funds an eligible entity can apply for, as well as a cap on the total amount of funds the Energy Efficiency and Conservation Program can utilize in the appropriations. § 1710.410 Application documents. The required application documentation listed in this section is not all inclusive but is specific to Eligible borrowers requesting a loan under this subpart and in most cases is supplemental to the general requirements for loan applications provided for in this part 1710: (a) A letter from the Borrower's General Manager requesting a loan under this subpart. (b) A copy of the statement establishing the EE Program that reflects an undertaking that funds collected in excess of then current amortization requirements for the related RUS loan will be redeployed for EE Program purposes or used to prepay the RUS loan. (c) Current RUS-approved EE Program documentation that includes: (1) A Business Plan that meets the requirements of § 1710.407; (2) A Quality Assurance Plan that meets the requirements of § 1710.408; (3) Analytical support documentation that meets the requirements of § 1710.411; (4) A copy of RUS' written approval of the EE Program. (d) An EE program work plan that meets the requirements of § 1710.255; (e) A statement of whether an initial working capital advance pursuant to § 1710.409(c)(1) is included in the loan budget together with a schedule of how these funds will be used. (f) A proposed draft Schedule C pursuant to 7 CFR part 1718 that lists assets to be financed under this subpart as excepted property under the RUS mortgage, as applicable. [78 FR 73366, Dec. 5, 2013, as amended at 84 FR 32613, July 9, 2019] § 1710.411 Analytical support documentation. Applications for loans under this subpart may only be made for eligible activities and investments included in an RUS-approved EE Program. In addition to a business plan and operations plan, a request for EE program approval must include analytical support documentation that demonstrates the program meets the requirements of § 1710.303 and assures RUS of the operational and financial integrity of the EE Program. This documentation must include, but is not necessarily limited to, the following: (a) A comparison of the utility's projected annual growth in demand after incorporating the EE Program together with an updated baseline forecast on file with RUS, where each includes an estimate of energy consuming devices used by customers in the service territory and a specific time horizon as determined by the utility for meeting the performance objectives established by them for the EE Program; (b) Demonstration that the required periods of performance under § 1710.405(c) can reasonably be expected to be met; (c) A report of discussions and coordination conducted with the power supplier, where applicable, issues identified as a result, and the outcome of this effort. (d) An estimate of the amount of direct investment in utility-owned generation that will be deferred as a result of the EE Program; (e) A description of efforts to identify state and local sources of funding and, if available, how they are to be integrated in the financing of the EE Program; and (f) Copies of sample documentation used by the utility in administering its EE Program. (g) Such other documents and reports as the Administrator may require. § 1710.412 Borrower accounting methods, management reporting, and audits. Nothing in this subpart changes a Borrower's obligation to comply with RUS's accounting, monitoring and reporting requirements. In addition thereto, the Administrator may also require additional management reports that provide the agency with a means of evaluating the extent to which the goals and objectives identified in the EE Plan are being accomplished. § 1710.413 Compliance with other laws and regulations. Nothing in this subpart changes a Borrower's obligation to comply with all laws and regulations to which it is subject. §§ 1710.414-1710.499 [Reserved] Subpart I—Application Requirements and Procedures for Loans Source: 60 FR 3731, Jan. 19, 1995, unless otherwise noted. § 1710.500 Initial contact. (a) Loan applicants that do not have outstanding loans from RUS should contact the Rural Utilities Service via Email at [email protected], https://www.rd.usda.gov/contact-us/electric-gfr (b) Before submitting an application for an insured loan the borrower shall ascertain from RUS the amount of supplemental financing required, as set forth in § 1710.110. If the borrower is applying for either a municipal rate loan subject to the interest rate cap or a hardship rate loan, the application must provide a preliminary breakdown of residential consumers either by county, Tribal land or by census tract. Final data must be included with the application. See [60 FR 3731, Jan. 19, 1995. Redesignated at 78 FR 73366, Dec. 5, 2013, as amended at 84 FR 32613, July 9, 2019; 87 FR 73438, Nov. 30, 2022; 89 FR 17274, Mar. 11, 2024] § 1710.501 Loan application documents. (a) All borrowers. (1) Loan application letter. (i) The amount of loan and loan type. The sources and amounts of any supplemental or other financing. For an insured loan, a statement of whether the application is for a municipal rate loan, with or without the interest rate cap, or a hardship loan. If the application is for a municipal rate loan, the board resolution must indicate whether the borrower intends to elect the prepayment option. See 7 CFR 1714.4(c); (ii) The Maturity Date/Term of the Loan in number of years (useful life to determine maximum); (iii) A short description of the purpose of the loan, i.e., (iv) Method of Amortization; (v) The Borrower's Unique Entity Identifier; (vi) The Borrower's Organization Number from its State Corporation Commission or similar entity; (vii) The Borrower's Exact Legal Name (please state the legal name and identify the legal document used to state the name or attach such document; (viii) List of current counties and Tribal lands where real property is located; (ix) Attach current property schedule; (x) Identify any new counties and Tribal lands with property since last loan; (xi) Authorized/registered place of business; (xii) Debt Limit; (xiii) Identify any State or Tribal regulatory approvals needed; (xiv) List any subsidiaries; (xv) Identify any material financial or other material change since last loan, including a list of any pending litigation and where there is insurance to cover such; (xvi) Breakdown of loan funds by State and Tribal lands; (xvii) Construction Work Plan (CWP), if not previously submitted through RD Apply or other method; (xviii) Environmental Report (ER), if not previously submitted through RD Apply or other method; (xix) Statement authorizing RUS to release appropriate information and data relating to the loan application to the FFB and any existing supplemental lenders. (2) Special resolutions. (3) RUS Form 740c, Cost Estimates and Loan Budget for Electric Borrowers. (i) Description of funds and materials. (ii) Useful life of facilities financed by the loan. (iii) Reimbursement schedule. (iv) Location of consumers. (4) Financial and statistical report. (i) Any other information required to be submitted by RUS; (ii) A Plan to meet their Financial Ratios; (iii) The Date of the Borrower's last rate change and the amount/percentage of that rate change; (iv) A list of any Subsidiaries along with a brief summary identifying the purpose of each subsidiary and identify the percentage interest in each if less than 100%; (v) If the issues with the Borrower not meeting its financial ratios involves the subsidiary or equity investment losses a business plan and exit strategy shall be provided; (vi) An updated Financial and Operating Report within 60 days of actual loan approval which will be requested by RUS and can be submitted later. (5) Load Forecast Study. (6) Long Range Financial Forecast and assumptions. (7) Rate disparity and consumer income data. See (8) Standard Form 100—Equal Employment Opportunity Employer Report EEO—1. (9) Uniform Relocation Act assurance statement. (10) Lobbying. (11) Federal debt delinquency requirements. (i) Report on Federal debt delinquency. (ii) Certification regarding Federal Government collection options. (A) Report the borrower's delinquent account to a credit bureau; (B) Assess additional interest and penalty charges for the period of time that payment is not made; (C) Assess charges to cover additional administrative costs incurred by the Government to service the borrower's account; (D) Offset amounts owed directly or indirectly to the borrower under other Federal programs; (E) Refer the borrower's debt to the Internal Revenue Service for offset against any amount owed to the borrower as an income tax refund; (F) Refer the borrower's account to a private collection agency to collect the amount due; and (G) Refer the borrower's account to the Department of Justice for collection. (12) RD Form 400-4, Assurance Agreement. This form provides assurance to USDA that recipients of federal financial assistance are in compliance with Title VI of the Civil Rights Act of 1964, 7 CFR part 15 and other agency regulations; (13) Seismic safety certifications. (14) Other forms. (b) New or returning borrowers. (1) A copy of the Borrower's Current Bylaws; (2) Identify the Borrower's Type of Organizational Structure and a copy of their Articles of Incorporation; (3) Provide evidence of where Borrower is registered to do business; (4) Copies of the Borrower's Audited GAAP financials for the past 1-3 years, if available or other financial information, as requested on a case by case basis; (5) A list of any secured outstanding debt including the amount and name of lender; (6) Evidence of Collateral and/or its ability to pledge such collateral; (7) An Attorney Opinion for the Borrower including the counties served, a property schedule, the state of incorporation, any pending litigation, the corporate debt limit, the Borrower's legal name and type of legal organization, and the borrower's legal authority to pledge its collateral or other assets. (8) Copies of the Borrower's Power Supply Contracts and arrangements (including wholesale rate contracts); (9) Competitive position information including its rates and rate disparity between neighboring utilities; (10) Construction Work Plan and/or Engineering Power Cost Study, if not previously submitted; (11) An Environmental Report related to the facilities for which financing is being requested, if not previously submitted. (c) Power Supply Borrowers. (1) Information on its Power Supply arrangements and/or wholesale power contracts including the maturity dates. Please note copies of the contracts may be requested on a case by cases basis; (2) A Profile of the Power Supply Borrowers' fuel supply arrangements; (3) The Borrowers Load Resource Table; (4) Information on its Transmission and Interconnection arrangements. Please note that copies of the contracts related to such arrangements may be requested on a case by case basis; (5) The Power Supply Borrowers' New/Returning membership chart profile and relationships as applicable. (d) Submission of documents. (2) To facilitate loan review, RUS urges borrowers to ensure that their applications contain all of the information required by this section before submitting the application to RUS. Borrowers may consult with RUS field representatives and headquarters staff as necessary for assistance in preparing loan applications. (3) RUS may, in its discretion, return an application to the borrower if the application is not materially complete to the satisfaction of RUS within 10 months of receipt of any of the items listed in paragraph (a) or (b) of this section. RUS will generally advise the borrower in writing at least 2 months prior to returning the application as to the elements of the application that are not complete. (4) If an application is returned, an application for the same loan purposes will be accepted by RUS if satisfactory evidence is provided that all of the information required by this section will be submitted to RUS within a reasonable time. An application for loan purposes included in an application previously returned to the borrower will be treated as an entirely new application. (e) Complete applications. (f) Change in borrower circumstances. (g) Interest rate category. (Approved by the Office of Management and Budget under control numbers 0572-0017, 0572-0032 and 0572-1013) [60 FR 3731, Jan. 19, 1995. Redesignated at 78 FR 73366, Dec. 5, 2013, as amended at 79 FR 76002, Dec. 19, 2014; 81 FR 11026, Mar. 2, 2016; 84 FR 32613, July 9, 2019; 86 FR 36196, July 9, 2021; 87 FR 73438, Nov. 30, 2022; 89 FR 17274, Mar. 11, 2024] §§ 1710.502-1710.503 [Reserved] § 1710.504 Additional requirements. Additional requirements for insured electric loans are set forth in 7 CFR part 1714. [60 FR 3731, Jan. 19, 1995. Redesignated at 78 FR 73366, Dec. 5, 2013] § 1710.505 Supplemental financing documents. (a) The borrower is responsible for ensuring that the loan documents required for supplemental financing pursuant to § 1710.110 are executed in a timely fashion. These documents are subject to RUS approval. (b) Security. Any security offered by the borrower to a supplemental lender is subject to RUS approval. [60 FR 3731, Jan. 19, 1995. Redesignated at 78 FR 73366, Dec. 5, 2013] § 1710.506 Loan approval. (a) A loan is approved when the Administrator signs the administrative findings. (b) If the loan is not approved, RUS will notify the borrower of the reason. [60 FR 3731, Jan. 19, 1995. Redesignated at 78 FR 73366, Dec. 5, 2013] § 1710.507 Loan documents. Following approval of a loan, RUS will forward the loan documents to the borrower for execution, delivery, recording, and filing, as directed by RUS. [60 FR 3731, Jan. 19, 1995. Redesignated at 78 FR 73366, Dec. 5, 2013] Subpart J—Terms of Loans Common to Electric Loans and Guarantees Source: 87 FR 73439, Nov. 30, 2022, unless otherwise noted. § 1710.601 Advance of funds from loans. The borrower shall request advances of funds as needed. Advances are subject to RUS approval and must be requested in writing on RUS Form 595 or an RUS approved equivalent form. Funds will not be advanced until the Administrator has received satisfactory evidence that the borrower has met all applicable conditions precedent to the advance of funds, including evidence that the supplemental financing required under this part concurrent loan guaranteed by RUS is available to the borrower under terms and conditions satisfactory to RUS. § 1710.602 Fund advance period. (a) The fund advance period begins on the date of the loan note and will last no longer than five years, after September 30 of the fifth year after the fiscal year of obligation. The fiscal year of obligation is identified in loan documentation associated with each loan. The Administrator may extend the fund advance period on any loan if the borrower meets the requirements of paragraph (b) of this section. However, under no circumstances shall RUS ever make or approve an advance, regardless of the last day for an advance on the loan note or any extension by the Administrator, later than September 30 of the fifth year after the fiscal year of obligation if such date would result in the RUS obligating or permitting advance of funds contrary to the Anti-Deficiency Act. (b) The Administrator may agree to an extension of the fund advance period for loans if the borrower demonstrates, to the satisfaction of the Administrator, that the loan funds continue to be needed for approved loan purposes ( e.g., (1) To apply for an extension, the borrower must make a request to RUS prior to the last date for advance as noted in the borrower's loan documents and provide, the following: (i) A certified copy of a board resolution requesting an extension of the Government's obligation to advance loan funds; (ii) Evidence that the unadvanced loan funds continue to be needed for approved loan purposes; and (iii) Notice of the estimated date for completion of construction. (2) If the Administrator approves a request for an extension, RUS will notify the borrower in writing of the extension and the terms and conditions thereof. An extension will be effective only if it is requested in writing prior to the last date for advance as provided in the borrower's loan documents. (3) Any request received after the last date for advance shall be rejected. (c) RUS will rescind the balance of any loan funds not advanced to a borrower as of the final date approved for advancing funds. § 1710.603 Sequence of advances. (a) Except as set forth in paragraph (b) of this section, concurrent loan funds will be advanced in the following order: (1) Fifty (50) percent of the RUS insured loan funds. (2) One hundred (100) percent of the supplemental loan funds. (3) The remaining amount of the RUS insured loan funds. (b) At the borrower's request and with RUS approval, all or part of the supplemental loan funds may be advanced before funds in paragraph (a)(1) of this section. § 1710.604 Amortization of principal. (a) Amortization of funds advanced during the first 2 years after the date of the note shall begin no later than 2 years from the date of the note. Except as set forth in paragraph (b) of this section, amortization of funds advanced 2 years or more after the date of the note shall begin with the scheduled loan payment billed in the month following the month of the advance. (b) For advances made 2 years or more after the date of the note, the Administrator may, upon written request from the borrower, authorize deferral of amortization of principal for a period of up to 2 years from the date of the advance if the Administrator determines that failure to authorize such deferral would adversely affect either the Government's financial interest or the achievement of the purposes of the Rural Electrification Act. Such deferral shall not extend the loan maturity period. § 1710.605 Rescission of loans. (a) A borrower may request rescission of a loan with respect to any funds unadvanced by submitting a letter signed by the General Manager, Board President or other individual authorized by the Board of Directors to request such rescission. (b) RUS may rescind loans pursuant to § 1710.602(c). (c) Borrowers who prepay RUS loans at a discounted present value pursuant to subpart F of 7 CFR part 1786 are required to rescind the unadvanced balance of all outstanding electric notes pursuant to 7 CFR 1786.158(j).

Related documents

• 50 CFR Part 600 — Magnuson-Stevens Act Provisions#512148
• 50 CFR Part 622 — Fisheries of the Caribbean, Gulf of America, and South Atlantic#512149
• 50 CFR Part 635 — Atlantic Highly Migratory Species#512150
• 50 CFR Part 648 — Fisheries of the Northeastern United States#512151
• 50 CFR Part 660 — Fisheries off West Coast States#512152