[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1710]
[Page 108-148]
TITLE 7--AGRICULTURE
CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
PART 1710_GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO ELECTRIC
LOANS AND GUARANTEES
Subpart A_General
Sec.
1710.1 General statement.
1710.2 Definitions and rules of construction.
1710.3 Form and bulletin revisions.
1710.4 Exception authority.
1710.5 Availability of forms.
[[Page 109]]
1710.6 Applicability of certain provisions to completed loan
applications.
1710.7-1710.49 [Reserved]
Subpart B_Types of Loans and Loan Guarantees
1710.50 Insured loans.
1710.51 Direct loans.
1710.52 Loan guarantees.
1710.53-1710.99 [Reserved]
Subpart C_Loan Purposes and Basic Policies.
1710.100 General.
1710.101 Types of eligible borrowers.
1710.102 Borrower eligibility for different types of loans.
1710.103 Area coverage.
1710.104 Service to non-RE Act beneficiaries.
1710.105 State regulatory approvals.
1710.106 Uses of loan funds.
1710.107 Amount lent for acquisitions.
1710.108 Mergers and consolidations.
1710.109 Reimbursement of general funds and interim financing.
1710.110 Supplemental financing.
1710.111 Refinancing.
1710.112 Loan feasibility.
1710.113 Loan security.
1710.114 TIER, DSC, OTIER and ODSC requirements.
1710.115 Final maturity.
1710.116 [Reserved]
1710.117 Environmental considerations.
1710.118 [Reserved]
1710.119 Loan processing priorities.
1710.120 Construction standards and contracting.
1710.121 Insurance requirements.
1710.122 Equal opportunity and nondiscrimination.
1710.123 Debarment and suspension.
1710.124 Uniform Relocation Act.
1710.125 Restrictions on lobbying.
1710.126 Federal debt delinquency.
1710.127 Drug free workplace.
1710.128-1710.149 [Reserved]
Subpart D_Basic Requirements for Loan Approval
1710.150 General.
1710.151 Required findings for all loans.
1710.152 Primary support documents.
1710.153 Additional requirements and procedures.
1710.154-1710.199 [Reserved]
Subpart E_Load Forecasts
1710.200 Purpose.
1710.201 General.
1710.202 Requirement to prepare a load forecast-power supply borrowers.
1710.203 Requirement to prepare a load forecast-distribution borrowers.
1710.204 Filing requirements for borrowers that must maintain a current
RUS approved load forecast on an ongoing basis.
1710.205 Minimum requirements for all borrower load forecasts.
1710.206 Requirements for load forecasts prepared pursuant to RUS
approved load forecast work plans.
1710.207 RUS approval criteria for approval of load forecasts by
distribution borrowers not required to maintain a current load
forecast on an ongoing basis.
1710.208 RUS approval criteria for load forecasts submitted by all power
supply borrowers and by distribution borrowers required to
maintain a current load forecast on an ongoing basis.
1710.209 Requirements for load forecast work plans.
1710.210 Waiver of requirements or approval criteria.
1710.211-1710.249 [Reserved]
Subpart F_Construction Work Plans and Related Studies
1710.250 General.
1710.251 Construction work plans--distribution borrowers.
1710.252 Construction work plans--power supply borrowers.
1710.253 Engineering and cost studies--addition of generation capacity.
1710.254 Alternative sources of power.
1710.255-1710.299 [Reserved]
Subpart G_Long-Range Financial Forecasts
1710.300 General.
1710.301 Financial forecasts--distribution borrowers.
1710.302 Financial forecasts--power supply borrowers.
1710.303 Power cost studies--power supply borrowers.
1710.304-1710.349 [Reserved]
Subpart H [Reserved]
Subpart I_Application Requirements and Procedures for Insured and
Guaranteed Loans
1710.400 Initial contact.
1710.401 Loan application documents.
1710.402-1710.403 [Reserved]
1710.404 Additional requirements.
1710.405 Supplemental financing documents.
1710.406 Loan approval.
1710.407 Loan documents.
Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.
[[Page 110]]
Source: 57 FR 1053, Jan. 9, 1992, unless otherwise noted.
Subpart A_General
Sec. 1710.1 General statement.
(a) 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.
(b) Additional pre-loan policies, procedures, and requirements that
apply specifically to guaranteed and/or insured loans are set forth
elsewhere:
(1) For guaranteed loans in 7 CFR part 1712 and RUS Bulletins 20-22,
60-10, 86-3, 105-5, and 111-3, or the successors to these bulletins; and
(2) For insured loans in 7 CFR part 1714 and in RUS Bulletins 60-10,
86-3, 105-5, and 111-3, or the successors to these bulletins.
(c) This part supersedes those portions of the following RUS
Bulletins and supplements that are in conflict.
20-5 Extensions of Payments of Principal and Interest
20-20 Deferment of Principal Repayments for Investment in Supplemental
Lending Institutions
20-22 Guarantee of Loans for Bulk Power Supply Facilities
20-23 Section 12 Extensions for Energy Resources Conservation Loans
60-10 Construction Work Plans, Electric Distribution Systems
86-3 Headquarters Facilities for Electric Borrowers
105-5 Financial Forecast-Electric Distribution Systems
111-3 Power Supply Surveys
120-1 Development, Approval, and Use of Power Requirements Studies
(d) When parts 1710, 1712, and 1714 are published in final form, the
bulletins cited in paragraph (b) of this section will be rescinded, in
whole or in part, or revised.
[57 FR 1053, Jan. 9, 1992, as amended at 58 FR 66262, Dec. 20, 1993]
Sec. 1710.2 Definitions and rules of construction.
(a) Definitions. For the purpose of this part, the following terms
shall have the following meanings:
Administrator means the Administrator of RUS or his or her designee.
Approved load forecast means a load forecast that RUS has determined
is current for RUS purposes and has been approved by RUS pursuant to 7
CFR part 1710, subpart E.
Approved load forecast work plan means a load forecast work plan
that RUS has determined is current for RUS' purposes and has been
approved pursuant to 7 CFR part 1710, subpart E.
APRR means Average Adjusted Plant Revenue Ratio calculated as a
simple average of the adjusted plant revenue ratios for 1978, 1979 and
1980 as follows:
[GRAPHIC] [TIFF OMITTED] TC16SE91.000
where:
A=Distribution (plant), which equals Part E, Line 14(e) of RUS Form 7;
B=General Plant, which equals Part E, Line 24(e) of RUS Form 7;
C=Operating Revenue and Patronage Capital, which equals Part A, Line 1
of RUS Form 7; and
D=Cost of Power, which equals the sum of Part A, Lines 2, 3, and 4 of
RUS Form 7.
Area Coverage means the provision of adequate electric service to
the widest practical number of rural users in the borrower's service
area during the life of the loan.
Borrower means any organization that has an outstanding loan made or
guaranteed by RUS for rural electrification, or that is seeking such
financing.
Bulk Transmission Facilities means the transmission facilities
connecting power supply facilities to the subtransmission facilities,
including both the high and low voltage sides of the transformer used to
connect to the subtransmission facilities, as well as related
supervisory control and data acquisition systems.
Call provision has the same meaning as ``prepayment option''.
Consolidation means the combination of 2 or more borrower or
nonborrower organizations, pursuant to state law, into a new successor
organization that takes over the assets and assumes the liabilities of
those organizations.
Consumer means a retail customer of electricity, as reported on RUS
Form 7, Part R, Lines 1-7.
[[Page 111]]
Demand side management (DSM) means the deliberate planning and/or
implementation of activities to influence consumer use of electricity
provided by a distribution borrower to produce beneficial modifications
to the system load profile. Beneficial modifications to the system load
profile ordinarily improve load factor or otherwise help in utilizing
electric system resources to best advantage consistent with acceptable
standards of service and lowest system cost. Load profile modifications
are characterized as peak clipping, valley filling, load shifting,
strategic conservation, strategic load growth, and flexible load
profile. (See, for example, publications of the Electric Power Research
Institute (EPRI), 3412 Hillview Avenue, Palo Alto, CA 94304, especially
``Demand-Side Management Glossary'' EPRI TR-101158, Project 1940-25,
Final Report, October 1992.) DSM includes energy conservation programs.
It does not include sources of electrical energy such as renewable
energy systems, fuel cells, or traditionally fueled generation, such as
fossil or nuclear fueled generators.
Distribution Borrower means a borrower that sells or intends to sell
electric power and energy at retail in rural areas.
Distribution Facilities means all electrical lines and related
facilities beginning at the consumer's meter base, and continuing back
to and including the distribution substation.
Distributed generation is the generation of electricity by a
sufficiently small electric generating system as to allow
interconnection of the electric generating system near the point of
service at distribution voltages including points on the customer side
of the meter. A distributed generating system may be operated in
parallel or independent of the electric power system. A distributed
generating system may be fueled by any source, including but not limited
to renewable energy sources. A distributed generation project may
include one or more distributed generation systems.
DSC means Debt Service Coverage of the borrower calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.000
Where:
All amounts are for the same calendar year and are based on the RUS
system of accounts and RUS Forms 7 and 12. References to line numbers in
the RUS Forms 7 and 12 refer to the June 1994 version of RUS Form 7 and
the December 1993 version of RUS Form 12, and will apply to
corresponding information in future versions of the forms;
A=Depreciation and Amortization Expense of the borrower, which equals
Part A, Line 12 of RUS Form 7 (distribution borrowers) or Section A,
Line 20 of RUS Form 12a (power supply borrowers);
B=Interest expense on total long-term debt of the borrower, which equals
Part A, Line 15 of RUS Form 7 or Section A, Line 22 of RUS Form 12a,
except that interest expense shall be increased by \1/3\ of the amount,
if any, by which restricted rentals of the borrower (Part M, Line 3 of
RUS Form 7 or Section K, Line 4 of RUS Form 12h) exceed 2 percent of the
borrower's equity (RUS Form 7, Part C, Line 36 [Total Margins &
Equities] less Line 26 [Regulatory Assets] or RUS Form 12a, Section B,
Line 38 [Total Margins & Equities] less Line 28 [Regulatory Assets]);
C=Patronage Capital or Margins of the borrower, which equals Part A,
Line 28 of RUS Form 7 or Section A, Line 35 of RUS Form 12a; 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, plus \1/
3\ of the amount, if any, by which restricted rentals of the borrower
(Part M, Line 3 of RUS Form 7 or Section K, Line 4 of RUS Form 12h)
exceed 2 percent of the borrower's equity (RUS Form 7, Part C, Line 36
[Total Margins & Equities] less Line 26 [Regulatory Assets] or RUS Form
12a, Section B, Line 38 [Total Margins & Equities] less Line 28
[Regulatory Assets]);
DSM activities means activities of the type referred to in Sec.
1710.354(f).
DSM plan means a plan that describes the implementation at the
distribution level of the DSM activities identified in the integrated
resource plan as having positive net benefits. See Sec. 1710.357.
Electric system means all of the borrower's interests in all
electric production, transmission, distribution, conservation, load
management, general plant and other related facilities,
[[Page 112]]
equipment or property and in any mine, well, pipeline, plant, structure
or other facility for the development, production, manufacture, storage,
fabrication or processing of fossil, nuclear, or other fuel or in any
facility or rights with respect to the supply of water, in each case for
use, in whole or in major part, in any of the borrower's generating
plants, including any interest or participation of the borrower in any
such facilities or any rights to the output or capacity thereof,
together with all lands, easements, rights-of-way, other works,
property, structures, contract rights and other tangible and intangible
assets of the borrower in each case used or useful in such electric
system.
Equity means total margins and equities, which equals Part C, Line
33 of RUS Form 7 (distribution borrowers) or Section B, Line 34 of RUS
Form 12a (power supply borrowers).
Final maturity means the final date on which all outstanding
principal and accrued interest on an electric loan is due and payable.
Five percent hardship rate means an interest rate of 5 percent
applicable to a hardship rate loan.
Fund advance period means the period of time during which the
Government may advance loan funds to the borrower. See 7 CFR 1714.56.
Generation Facilities means the generating plant and related
facilities, including the building containing the plant, all fuel
handling facilities, and the stepup substation used to convert the
generator voltage to transmission voltage, as well as related energy
management (dispatching) systems.
Hardship rate loan means a loan made at the 5 percent hardship rate
pursuant to 7 CFR 1714.8.
Insured Loan means a loan made pursuant to Section 305 of the RE
Act, and may include a direct loan made under Section 4 of the RE Act.
Integrated Resources Plan (IRP) means a plan resulting from the
planning and selection process for new energy resources that evaluates
the benefits and costs of the full range of alternatives, including new
generating capacity, power purchases, DSM programs, system operating
efficiency, and renewable energy systems.
Interest rate cap means a maximum interest rate of 7 percent
applicable to certain municipal rate loans as set forth in Sec. 1710.7.
Interest rate term means a period of time selected by the borrower
for the purpose of determining the interest rate on an advance of funds.
See 7 CFR 1714.6.
Load forecast means the thorough study of a borrower's electric
loads and the factors that affect those loads in order to determine, as
accurately as practicable, the borrower's future requirements for energy
and capacity.
Load forecast work plan means the plan that contains the resources,
methods, schedules, and milestones to be used in the preparation and
maintenance of a load forecast.
Loan means any loan made or guaranteed by RUS.
Loan Contract means the agreement, as amended, supplemented, or
restated from time to time, between a borrower and RUS providing for
loans made or guaranteed pursuant to the RE Act.
Loan Feasibility means that the borrower has the capability of
repaying the loan in full as scheduled, in accordance with the terms of
the mortgage, note, and loan contract.
Loan Guarantee means a loan guarantee made by RUS pursuant to the RE
Act.
Loan period means the period of time during which the facilities
included in a loan application will be constructed. It commences with
the date shown on page 1, in the block headed ``Cost Estimates as of,''
of RUS Form 740c, Cost Estimates and Loan Budget for Electric Borrowers,
which is the same as the date on the Financial and Statistical Report
submitted with the loan application. The loan period may be up to 4
years for distribution borrowers and, except in the case of a loan for
new generating and associated transmission facilities, up to 4 years for
the transmission facilities and improvements or replacements of
generation facilities for power supply borrowers. The loan period for
new generating facilities is determined on a case by case basis.
Merger means the combining, pursuant to state law, of borrower or
nonborrower organizations into an existing
[[Page 113]]
survivor organization that takes over the assets and assumes the
liabilities of the merged organizations.
Mortgage means any and all instruments creating a lien on or
security interest in the borrower's assets in connection with loans or
guarantees under the RE Act.
Municipal rate loan means a loan made at a municipal interest rate
pursuant to 7 CFR 1714.5.
ODSC means Operating Debt Service Coverage of the electric system
calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.001
Where:
All amounts are for the same calendar year and are based on the RUS
system of accounts and RUS Form 7. References to line numbers in the RUS
Form 7 refer to the June 1994 version of the form, and will apply to
corresponding information in future versions of the form;
A=Depreciation and Amortization Expense of the electric system, which
usually equals Part A, Line 12 of RUS Form 7;
B=Interest expense on total long-term debt of the electric system, which
usually equals Part A, Line 15 of RUS Form 7, except that such interest
expense shall be increased by \1/3\ of the amount, if any, by which
restricted rentals of the electric system (usually Part M, Line 3 of RUS
Form 7) exceed 2 percent of the borrower's equity (RUS Form 7, Part C,
Line 36 [Total Margins & Equities] less Line 26 [Regulatory Assets]);
C=Patronage Capital & Operating Margins of the electric system, which
usually equals Part A, Line 20 of RUS Form 7, plus cash received from
the retirement of patronage capital by suppliers of electric power and
by lenders for credit extended for the Electric System; 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,
plus \1/3\ of the amount, if any, by which restricted rentals of the
Electric System (usually Part M, Line 3 of RUS Form 7) exceed 2 percent
of the borrower's equity (RUS Form 7, Part C, Line 36 [Total Margins &
Equities] less Line 26 [Regulatory Assets]).
Off-grid renewable energy system is a renewable energy system not
interconnected to an area electric power system (EPS). An off-grid
renewable energy system in areas without access to an area EPS may
include energy consuming devices and electric wiring to provide for more
effective or more efficient use of the electricity produced by the
system.
On-grid renewable energy system is a renewable energy system
interconnected to an area electric power system (EPS) through a normally
open or normally closed device. It can be interconnected to the EPS on
either side of a customer's meter.
Ordinary Replacement means replacing one or more units of plant,
called ``retirement units'', with similar units when made necessary by
normal wear and tear, damage beyond repair, or obsolescence of the
facilities.
OTIER means Operating Times Interest Earned Ratio of the electric
system calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.002
Where:
All amounts are for the same calendar year and are based on the RUS
system of accounts and RUS Form 7. References to line numbers in the RUS
Form 7 refer to the June 1994 version of the form, and will apply to
corresponding information in future versions of the form;
A=Interest expense on total long-term debt of the electric system, which
usually equals Part A, Line 15 of RUS Form 7, except that such interest
expense shall be increased by \1/3\ of the amount, if any, by which
restricted rentals of the electric system (usually Part M, Line 3 of RUS
Form 7) exceed 2 percent of the borrower's equity (RUS Form 7, Part C,
Line 36 [Total Margins & Equities] less Line 26 [Regulatory Assets]);
and
B=Patronage Capital & Operating Margins of the electric system, which
usually equals Part A, Line 20 of RUS Form 7, plus cash received from
the retirement of patronage capital by suppliers of electric power and
by lenders for credit extended for the Electric System.
Power requirements study (PRS) has the same meaning as load
forecast.
Power Supply Borrower means a borrower that sells or intends to sell
electric power at wholesale to distribution or power supply borrowers
pursuant to RUS wholesale power contracts.
Prepayment option means a provision included in the loan documents
to allow the borrower to prepay all or a
[[Page 114]]
portion of an advance on a municipal rate loan on a date other than a
rollover maturity date. See 7 CFR 1714.9.
PRR means Plant Revenue Ratio calculated as:
[GRAPHIC] [TIFF OMITTED] TC16SE91.001
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.
PRS work plan has the same meaning as load forecast work plan.
RE Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et seq.).
RE Act beneficiary means a person, business, or other entity that is
located in a rural area.
REA means the Rural Electrification Administration formerly an
agency of the United States Department of Agriculture and predecessor
agency to RUS with respect to administering certain electric and
telephone loan programs.
Renewable energy system is an energy conversion system fueled from
any of the following energy sources: Solar, wind, hydropower, biomass,
or geothermal. Any of these energy sources may be converted to heat or
electricity, provided heat is a by-product of electricity generation.
Non-renewable energy sources may be used by a renewable energy system
for incidental and necessary means such as, but not limited to, system
start up, flame stabilization, continuity of system processes, or
reduction of the moisture content of renewable fuels. Energy from bio-
mass may be converted from any organic matter available on a renewable
basis, including dedicated energy crops and trees, agricultural food and
feed crops, agricultural crop wastes and residues, wood wastes and
residues, aquatic plants, animal wastes, municipal wastes, and other
waste materials.
Retirement Unit means a substantial unit of property, which when
retired, with or without being replaced, is accounted for by removing
its book cost from the plant account.
Rollover maturity date means the last day of an interest rate term.
Rural area means 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) not
included within the boundaries of any urban area, as defined by the
Bureau of the Census. For purposes of the ``rural area'' definition, the
character of an area is determined at the time of the initial loan to
furnish or improve service in the area.
(i) For initial RUS loans made prior to November 1, 1993, the RE Act
defined ``rural area'' to mean any area of the United States not
included within the boundaries of any city, village, or borough having a
population exceeding 1500. An area determined to be a ``rural area'' for
the purposes of an initial loan made prior to November 1, 1993, shall
continue to be considered a ``rural area.''
(ii) For initial RUS loans made on or after November 1, 1993, this
definition shall apply. In determining the character of the area, RUS
will rely on the Bureau of the Census designation.
RUS means the Rural Utilities Service, an agency of the United
States Department of Agriculture established pursuant to Section 232 of
the Federal Crop Insurance Reform and Department of Agriculture
Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor
to REA with respect to administering certain electric and telephone
programs. See 7 CFR 1700.1.
Subtransmission Facilities means the transmission facilities that
connect the high voltage side of the distribution substation to the low
voltage side of the bulk transmission or generating facilities, as well
as related supervisory control and data acquisition facilities.
System Improvement means the change or addition to electric plant
facilities to improve the quality of electric service or to increase the
quantity of electric power available to RE Act beneficiaries.
TIER means Times Interest Earned Ratio of the borrower calculated
as:
[[Page 115]]
[GRAPHIC] [TIFF OMITTED] TR29DE95.003
Where:
All amounts are for the same calendar year and are based on the RUS
system of accounts and RUS Forms 7 and 12. References to line numbers in
the RUS Forms 7 and 12 refer to the June 1994 version of RUS Form 7 and
the December 1993 version of RUS Form 12, and will apply to
corresponding information in future versions of the forms;
A=Interest expense on total long-term debt of the borrower, which equals
Part A, Line 15 of RUS Form 7 or Section A, Line 22 of RUS Form 12a,
except that interest expense shall be increased by \1/3\ of the amount,
if any, by which restricted rentals of the borrower (Part M, Line 3 of
RUS Form 7 or Section K, Line 4 of RUS Form 12h) exceed 2 percent of the
borrower's equity (RUS Form 7, Part C, Line 36 [Total Margins &
Equities] less Line 26 [Regulatory Assets] or RUS Form 12a, Section B,
Line 38 [Total Margins & Equities] less Line 28 [Regulatory Assets]);
and
B=Patronage Capital or Margins of the borrower, which equals Part A,
Line 28 of RUS Form 7 or Section A, Line 35 of RUS Form 12a.
Total Assets means Part C, Line 26 of RUS Form 7 (distribution
borrowers) or Section B, Line 27 of RUS Form 12a (power supply
borrowers).
Total Utility Plant means Part C, Line 3 of RUS Form 7 (distribution
borrowers) or Section B, Line 27 of RUS Form 12a (power supply
borrowers).
Transmission Facilities means all electrical lines and related
facilities, including certain substations, used to connect the
distribution facilities to generation facilities. They include bulk
transmission and subtransmission facilities.
Urban area is defined by the Bureau of the Census as an area
comprising all territory, population, and housing units in urbanized
areas and in places of 2500 or more persons outside urbanized areas.
More specifically, ``urban'' consists of territory, persons, and housing
units in:
(i) Places of 2500 or more persons incorporated as cities, villages,
boroughs (except in Alaska and New York), and towns (except in the six
New England States, New York, and Wisconsin), but excluding the rural
portions of ``extended cities.''
(ii) Census designated places of 2500 or more persons.
(iii) Other territory, incorporated or unincorporated, included in
urbanized areas.
Urbanized area means an urbanized area as defined by the Bureau of
the Census in notices published periodically in the Federal
Register.Generally an urbanized area is characterized as an area that
comprises a place and the adjacent densely settled territory that
together have a minimum population of 50,000 people.
(b) Rules of Construction. Unless the context otherwise indicates,
``includes'' and ``including'' are not limiting, and ``or'' is not
exclusive. The terms defined in paragraph (a) of this part include the
plural as well as the singular, and the singular as well as the plural.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 58 FR
66263, Dec. 20, 1993; 59 FR 495, Jan. 4, 1994; 59 FR 66440, Dec. 27,
1994; 60 FR 3730, Jan. 19, 1995; 60 FR 67400, Dec. 29, 1995; 65 FR
14786, Mar. 20, 2000; 68 FR 37953, June 26, 2003]
Sec. 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]
Sec. 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.
[[Page 116]]
Sec. 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.
Sec. 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.This exception does not apply to
loan applications received after said date, nor to incomplete
applications pending as of said date. This exception applies only to the
following provisions:
(1) Paragraph 1710.115(b)--with respect to limiting loan maturities
to the expected useful life of the facilities financed;
(2) Section 1710.116--with respect to the requirement to develop and
follow an equity development plan;
(3) Paragraph 1710.151(f)--with respect to the borrower providing
satisfactory evidence that a state regulatory authority will allow the
facilities to be included in the rate base or otherwise allow sufficient
revenues to repay the loan;
(4) Paragraphs 1710.250(b), 1710.251(a), and 1710.252(a)--with
respect to the requirement that improvements, replacements, and
retirements of generation plant be included in a Construction Work Plan;
and
(5) Paragraph 1710.300(d)(5)--with respect to the requirement that a
borrower's financial forecast include a sensitivity analysis of a
reasonable range of assumptions for each of the major variables in the
forecast.
(b) Certain provisions of this part apply only to loans made on or
after February 10, 1992. These provisions are identified in the
individual sections of this part.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 58 FR
66263, Dec. 20, 1993]
Sec. Sec. 1710.7-1710.49 [Reserved]
Subpart B_Types of Loans and Loan Guarantees
Sec. 1710.50 Insured loans.
RUS makes insured loans under section 305 of the RE Act.
(a) Municipal rate loans. The standard interest rate on an insured
loan made on or after November 1, 1993, is the municipal rate, which is
the rate determined by the Administrator to be equal to the current
market yield on outstanding municipal obligations with remaining periods
to maturity, up to 35 years, similar to the interest rate term selected
by the borrower. In certain cases, an interest rate cap of 7 percent may
apply. The interest rate term and rollover maturity date for a municipal
rate loan will be determined pursuant to 7 CFR part 1714, and the
borrower may elect to include in the loan documents a prepayment option
(call provision).
(b) Hardship rate loans. RUS makes hardship rate loans at the 5
percent hardship rate to qualified borrowers meeting the criteria set
forth in 7 CFR 1714.8
[58 FR 66263, Dec. 20, 1993]
Sec. 1710.51 Direct loans.
RUS makes direct loans under section 4 of the RE Act.
(a) General. Except as otherwise modified by this section, RUS will
make loans under the direct Treasury rate loan program in the same
manner that it makes loans under the municipal rate program. The general
and pre-loan policies and procedures for municipal rate electric loans
made by RUS may be found in this part and 7 CFR part 1714. Treasury rate
electric loans are also governed by such municipal rate policies and
procedures, except as follows:
(1) Interest rates. The standard interest rate on direct Treasury
rate loans will be established daily by the United
[[Page 117]]
States Treasury. The borrower will select interest rate terms for each
advance of funds. The minimum interest rate term shall be one year.
Interest rate terms will be limited to terms published by the Treasury
(i.e. 1, 2, 3, 5, 7, 10, 20, and 30). Interest rate terms to final
maturity date, if other than published by Treasury, will be determined
by RUS. Interest rates for terms greater than 30 years will be at the
30-year rate. There will be no interest rate cap on Treasury rate loans.
(2) Prepayment. A Treasury rate direct electric loan may be repaid
at par on its rollover maturity date if there is one. Such a loan, or
portion thereof, may also be prepaid after it has been advanced for not
less than two years, at any time prior to its rollover or final maturity
date at its ``net present value'' (NPV) as determined by RUS.
(3) Supplemental financing. Supplemental financing will not be
required in connection with Treasury rate direct electric loans.
(4) Transitional assistance. A Treasury rate direct loan is not
available to provide transitional assistance to borrowers.
(b) Loan documents. Successful applicants will be required to
execute and deliver to RUS a promissory note evidencing the borrower's
obligation to repay the loan. The note must be in form and substance
satisfactory to RUS. RUS will require a form of note substantially in
the form that it currently accepts for direct municipal rate electric
loans, with such revisions as may be necessary or appropriate to reflect
the different interest setting provisions and the terms of paragraphs
(a) (1) and (2) of this section. All notes will be secured in accordance
with the terms of 7 CFR part 1718.
[66 FR 66294, Dec. 26, 2001]
Sec. 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]
Sec. Sec. 1710.53-1710.99 [Reserved]
Subpart C_Loan Purposes and Basic Policies
Sec. 1710.100 General.
RUS makes loans and loan guarantees to finance the construction of
electric distribution, transmission and generation facilities, including
system improvements and replacements required to furnish and improve
electric service in rural areas, and for demand side management, energy
conservation programs, and on grid and off grid renewable energy
systems. In some circumstances, RUS may finance selected operating
expenses of its borrowers. Loans made or guaranteed by the Administrator
of RUS will be made in conformance with the Rural Electrification Act of
1936, as amended (7 U.S.C. 901 et seq.), and 7 CFR chapter XVII. RUS
provides certain technical assistance to borrowers when necessary to aid
the development of rural electric service and to protect loan security.
[58 FR 66264, Dec. 20, 1993]
Sec. 1710.101 Types of eligible borrowers.
(a) RUS makes loans to corporations, states, 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 arrangements satisfactory to RUS.
(b) In making loans, RUS gives preference to states, territories,
and subdivisions and agencies thereof; municipalities; people's utility
districts; and cooperative, nonprofit, or limited-dividend associations.
RUS does not make loans to individual consumers.
(c) For the purpose of determining eligibility of a distribution
borrower
[[Page 118]]
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, Sec. 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.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992. Revised and
redesignated at 58 FR 66264, Dec. 20, 1993]
Sec. 1710.102 Borrower eligibility for different types of loans.
(a) Insured loans under section 305. Insured loans are normally
reserved for the financing of distribution and subtransmission
facilities of both distribution and power supply borrowers, including,
under certain circumstances, the implementation of demand side
management, energy conservation programs, and on grid and off grid
renewable energy systems. In accordance with Sec. 1710.110, the
Administrator may require the borrower to obtain no more than 30 percent
of the total debt financing required for a proposed project by means of
a supplemental loan from another lender without an RUS guarantee.
(b) Direct loans under section 4. Direct loans are normally reserved
for the financing of distribution and subtransmission facilities of both
distribution and power supply borrowers, including, under certain
circumstances, the implementation of demand side management, energy
conservation programs, and on grid and off grid renewable energy
systems.
(c) One hundred percent loan guarantees under section 306. Both
distribution and power supply borrowers are eligible for 100 percent
loan guarantees under section 306 of the RE Act for any or all of the
purposes set forth in Sec. 1710.106, including, under certain
circumstances, the implementation of demand side management, energy
conservation programs, and on grid and off grid renewable energy
systems. (See 7 CFR part 1712). These guarantees are normally used to
finance bulk transmission and generation facilities, but they may also
be used to finance distribution and subtransmission facilities. If a
borrower applies for a section 306 loan guarantee to finance all or a
portion of distribution and subtransmission facilities, such request
will not affect the borrower's eligibility for an insured loan to
finance any remaining
[[Page 119]]
portion of said facilities or for any future insured loan to finance
other distribution or subtransmission facilities. A section 306 loan
guarantee, however, may not be used to guarantee a supplemental loan
required by Sec. 1710.110.
(d) One hundred percent loan guarantees under section 306A. Under
section 306A of the RE Act, both distribution and power supply borrowers
are eligible under certain conditions to use an existing section 306
guarantee to refinance advances made on or before July 2, 1986 from a
loan made by the Federal Financing Bank. (See 7 CFR part 1786.)
(e) Ninety percent guarantees of private-sector loans under section
311. Under section 311 of the RE Act, both distribution and power supply
borrowers in the state of Alaska are eligible under certain conditions
to obtain from RUS a 90 percent guarantee of a private-sector loan to
refinance their Federal Financing Bank loans. (See 7 CFR part 1786.)
[57 FR 2832, Jan. 24, 1992, as amended at 58 FR 66264, Dec. 20, 1993; 66
FR 66294, Dec. 26, 2001]
Sec. 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]
Sec. 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]
Sec. 1710.105 State regulatory approvals.
(a) In States where a borrower is required to obtain approval of a
project or its financing from a state regulatory authority, RUS may
require that such approvals be obtained, if feasible for the borrower to
do so, 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) At minimum, in the case of all loans in states where state
regulatory approval is required of the project or its financing, such
state approvals will be required before loan funds are advanced.
(c) In cases where state regulatory authority approval has been
obtained,
[[Page 120]]
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
authority before any additional loan funds are advanced.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 58 FR
66265, Dec. 20, 1993]
Sec. 1710.106 Uses of loan funds.
(a) Funds from loans made or guaranteed by RUS may be used to
finance:
(1) Distribution facilities. (i) The construction of new
distribution facilities or systems, the cost of system improvements and
removals less salvage value, the cost of ordinary replacements and
removals less salvage value, needed to meet load growth requirements,
improve the quality of service, or replace existing facilities.
(ii) The purchase, rehabilitation and integration of existing
distribution facilities and associated service territory when the
acquisition is an incidental and necessary means of providing or
improving service to persons in rural areas who are not receiving
adequate central station service, and the borrower is unable to finance
the acquisition from other sources. See Sec. 1710.107.
(2) Transmission and generation facilities. (i) The construction of
new transmission and generation facilities or systems, the cost of
system improvements and removals, less salvage value, the cost of
ordinary replacements and removals less salvage value, needed to meet
load growth, improve the quality of service, or replace existing
facilities.
(ii) The purchase of an ownership interest in new or existing
transmission or generation facilities to serve RE Act beneficiaries.
(3) Warehouse and garage facilities. The purchase, remodeling, or
construction of warehouse and garage facilities required for the
operation of a borrower's system. See paragraph (b) of this section.
(4) Interest. The payment of interest on indebtedness incurred by a
borrower to finance the construction of generation and transmission
facilities during the period preceding the date such facilities are
placed into service, if requested by the borrower and found necessary by
RUS.
(5) Certain costs incurred in demand side management, energy
conservation programs and on and off grid renewable energy systems.
(b) In cases of financial hardship, as determined by the
Administrator, loans may also be made to finance the following items:
(1) The headquarters office and other headquarters facilities in
addition to those cited in paragraph (a)(4) of this section;
(2) General plant equipment, including furniture, office,
transportation, data processing and other work equipment; and
(3) 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 qualifying items included in
a loan for demand side management or energy resource conservation
programs, or on or off grid 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 Sec. 1710.104);
(3) Any facilities or other purposes that a state regulatory
authority having jurisdiction will not approve for inclusion in the
borrower's rate base, or will not otherwise allow rates sufficient to
repay with interest the debt incurred for the facilities or other
purposes; and
(4) Any facilities or other specific purposes that were included in
a loan made or guaranteed by RUS that the borrower has prepaid or that
has been rescinded.
(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
[[Page 121]]
period for new generating facilities is determined on a case by case
basis. The loan period for DSM activities will be determined in
accordance with Sec. 1710.355. 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 Sec. Sec. 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 of all
loans of that type 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 an RUS loan or loan guarantee of $1 million or less.
(2) If RUS limits the amount of loan funds approved for borrowers,
the Administrator shall notify all electric borrowers early 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 7 CFR 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.
[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]
Sec. 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.
Sec. 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 Sec. 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
[[Page 122]]
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.
Sec. 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, 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 Sec. 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)(1) 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 as follows:
(i) The number of months agreed to by RUS and the borrower for
complete loan applications received by RUS before February 10, 1992;
(ii) 36 months for complete loan applications received from February
10, 1992 through February 10, 1993; or
(iii) 24 months for complete loan applications received after
February 10, 1993.
(2) 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]
Sec. 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
[[Page 123]]
equal periodic installments covering interest and principal, or in
periodic installments that include interest and level amortization of
principal.
(c) Supplemental financing required for municipal rate loans--(1)
Distribution borrowers. (i) Distribution borrowers that had, as of
December 31, 1980, an average consumer density of 2 or fewer consumers
per mile or an average adjusted plant revenue ratio (APRR), as defined
in Sec. 1710.2, of over 9.0 shall obtain supplemental financing equal
to 10 percent of their loan request.
(ii) All other distribution borrowers must obtain supplemental
financing according to their plant revenue ratio (PRR), as defined in
Sec. 1710.2, based on the most recent year-end data available on the
date of loan approval, as follows:
------------------------------------------------------------------------
Supplemental loan
PRR percentage
------------------------------------------------------------------------
9.00 and above....................................... 10
8.01-8.99............................................ 20
8.00 and below....................................... 30
------------------------------------------------------------------------
(iii) If a distribution borrower enters into a merger,
consolidation, or transfer of system substantially in its entirety, and
the provisions of 7 CFR 1717.154(b) do not apply, required supplemental
financing will be determined as follows for loans approved by RUS after
December 19, 1996. If one of the merging parties met the criteria in
paragraph (c)(1)(i) of this section prior to the effective date of the
merger consolidation or transfer, the borrower will be required to
obtain supplemental financing equal to 10 percent of any loan funds
requested for facilities to serve consumers located in the territory
formerly served by the ``paragraph (c)(1)(i)'' borrower. The required
amount of supplemental financing for the rest of the loan will be
determined according to the provisions of paragraph (c)(1)(ii) of this
section.
(2) Power supply borrowers. The supplemental loan proportion
required of a power supply borrower is based on the simple arithmetic
mean of the supplemental loan proportions required of the borrower's
distribution members.
(3) Subsequent loans. (i) If more than 5 percent of an insured loan
made prior to November 1, 1993, or of a municipal rate loan is
terminated or rescinded, the amount of supplemental financing required
in the borrower's next loan after the rescission for which supplemental
financing is required, pursuant to paragraph (a) of this section, will
be adjusted to average the actual supplemental financing portion on the
terminated or rescinded loan with the supplemental financing portion
that would have been required on the new loan according to paragraphs
(c)(1) and (2) of this section, in accordance with the formulas set
forth in paragraphs (c)(3)(ii) and (iii) of this section.
(ii) If a borrower's supplemental financing requirement as set forth
in paragraphs (a), (c)(1), and (c)(2) of this section has not changed
between the most recent loan and the loan being considered, then the
amount of supplemental financing required for the new loan will be
computed as follows:
Supplemental financing amount, new loan = [(A + B) x 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 =
(AxC<INF>1</INF>)+(BxC<INF>2</INF>)-D
where:
A = The total funds ($) actually advanced from the first loan, including
both RUS
[[Page 124]]
loan funds and funds from the supplemental loan, plus any unadvanced
funds still available to the borrower after the rescission.
B = The total amount ($) for facilities of the new loan request,
including both RUS funds and funds from supplemental loans.
C<INF>1</INF> = The proportion (%) of supplemental financing required on
the old loan according to paragraphs (a), (c)(1) and (c)(2) of this
section.
C<INF>2</INF> = The proportion (%) of supplemental financing required on
the new loan according to paragraphs (a), (c)(1) and (c)(2) of this
section.
D = The amount ($) of supplemental funds actually advanced on the first
loan, plus any unadvanced supplemental funds still available to the
borrower after the rescission.
(d) Supplemental financing will not be required in connection with
hardship rate loans. Borrowers that qualify for hardship rate loans but
elect to take municipal rate loans instead, will be required to obtain
supplemental financing pursuant to this section, unless at the time of
loan approval, there are no funds remaining available for hardship
loans, in which case supplemental financing will not be required.
[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]
Sec. 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 fpr 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 Sec.
1710.109).
Sec. 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 Sec. 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
[[Page 125]]
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.
(c) RUS considers a loan to be feasible only if the borrower's
electric system is year 2000 compliant, or if the borrower provides RUS
with evidence, satisfactory to RUS, that it is taking measures necessary
to ensure that its electric system will be year 2000 compliant on or
before December 31, 1999. Year 2000 compliant means that product
performance and function are not affected by dates before, during, and a
reasonable time after the year 2000.
[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]
Sec. 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
[[Page 126]]
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]
Sec. 1710.114 TIER, DSC, OTIER and ODSC requirements.
(a) General. Requirements for coverage ratios are set forth in the
borrower's mortgage, loan contract, or other contractual agreements with
RUS. The requirements set forth in this section apply to borrowers that
receive a loan approved by RUS on or after February 10, 1992. Nothing in
this section, however, shall reduce the coverage ratio requirements of a
borrower that has contractually agreed with RUS to a higher requirement.
(b) Coverage ratios. (1) Distribution borrowers. The minimum
coverage ratios required of distribution borrowers whether applied on an
annual or average basis, are a TIER of 1.25, DSC of 1.25, OTIER of 1.1,
and ODSC of 1.1. OTIER and ODSC shall apply to distribution borrowers
that receive a loan approved on or after January 29, 1996.
(2) The minimum coverage ratios required of power supply borrowers,
whether applied on an annual or average basis, are a TIER of 1.05 and
DSC of 1.00.
(3) When new loan contracts are executed, the Administrator may,
case by case, increase the coverage ratios of distribution and power
supply borrowers above the levels cited in paragraphs (b)(1) and (b)(2),
respectively, of this section if the Administrator determines that the
higher ratios are required to ensure reasonable security for and/or the
repayment of loans made or guaranteed by RUS. Also, the Administrator
may, case by case, reduce said coverage ratios if the Administrator
determines that the lower ratios are required to ensure reasonable
security for and/or the repayment of loans made or guaranteed by RUS.
Policies for coverage ratios following certain mergers, consolidations,
and transfers of systems substantially in their entirety are in 7 CFR
1717.155.
(4) If a distribution borrower has in service or under construction
a substantial amount of generation and associated transmission plant
financed at a cost of capital substantially higher than the cost of
funds under section 305 of the RE Act, then the Administrator may
establish, in his or her sole discretion, blended levels for TIER, DSC,
OTIER, and ODSC based on the respective shares of total utility plant
represented by said generation and associated transmission plant and by
distribution and other transmission plant.
(c) Requirements for loan feasibility. To be eligible for a loan,
borrowers must demonstrate to RUS that they will, on a pro forma basis,
earn the coverage ratios required by paragraph (b) of this section in
each of the years included in the borrower's long-range financial
forecast prepared in support of its loan application, as set forth in
subpart G of this part.
(d) Requirements for maintenance of coverage ratios--(1) Prospective
requirement. Borrowers must design and implement rates for utility
service to provide sufficient revenue (along with other revenue
available to the borrower in the case of TIER and DSC) to pay all fixed
and variable expenses, to provide and maintain reasonable working
capital and to maintain on an annual basis the coverage ratios required
by paragraph (b) of this section. Rates must be designed and implemented
to produce at least enough revenue to meet the requirements of this
paragraph under the assumption that average weather conditions in the
borrower's service territory will prevail in the future, including
average system damage and outages due to weather and the related costs.
Failure to design and implement rates pursuant to the requirements of
this paragraph shall be an event of default upon notice provided in
accordance with the terms of
[[Page 127]]
the borrower's mortgage or loan contract.
(2) Retrospective requirement. The average coverage ratios achieved
by a borrower in the 2 best years out of the 3 most recent calendar
years must meet the levels required by paragraph (b) of this section. If
a borrower fails to achieve these average levels, it must promptly
notify RUS in writing. Within 30 days of such notification or of the
borrower being notified in writing by RUS, whichever is earlier, the
borrower, in consultation with RUS, must provide a written plan
satisfactory to RUS setting forth the actions that will be taken to
achieve the required coverage ratios on a timely basis. Failure to
develop and implement a plan satisfactory to RUS shall be an event of
default upon notice provided in accordance with the terms of the
borrower's mortgage or loan contract.
(3) Fixed and variable expenses, as used in this section, include
but are not limited to: all taxes, depreciation, maintenance expenses,
and the cost of electric power and energy and other operating expenses
of the electric system, including all obligations under the wholesale
power contract, all lease payments when due, and all principal and
interest payments on outstanding indebtedness when due.
(e) Requirements for advance of funds. (1) If a borrower applying
for a loan has failed to achieve the coverage ratios required by
paragraph (b) of this section during the latest 12 month period
immediately preceding approval of the loan, or if any of the borrower's
average coverage ratios for the 2 best years out of the most recent 3
calendar years were below the levels required in paragraph (b) of this
section, RUS may withhold the advance of loan funds until the borrower
has adopted an annual financial plan and operating budget satisfactory
to RUS and taken such other action as RUS may require to demonstrate
that the required coverage ratios will be maintained in the future and
that the loan will be repaid with interest within the time agreed. Such
other action may include, for example, increasing system operating
efficiency and reducing costs or adopting a rate design that will
achieve the required coverage ratios, and either placing such rates into
effect or taking action to obtain regulatory authority approval of such
rates. If failure to achieve the coverage ratios is due to unusual
events beyond the control of the borrower, such as unusual weather,
system outage due to a storm or regulatory delay in approving rate
increases, then the Administrator may waive the requirement that the
borrower take the remedial actions set forth in this paragraph, provided
that such waiver will not threaten loan feasibility.
(2) With respect to any outstanding loan approved by RUS on or after
February 10, 1992, 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]
Sec. 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
[[Page 128]]
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) [Reserved]
(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]
Sec. 1710.116 [Reserved]
Sec. 1710.117 Environmental considerations.
Borrowers are required to comply with 7 CFR part 1794, which sets
forth applicable requirements of the National Environmental Policy Act
(NEPA), as amended (42 U.S.C. 4321 et seq.); the Council on
Environmental Quality Regulations for Implementing the Procedural
Provisions of NEPA (40 CFR parts 1500-1508); and certain other statutes,
regulations and orders. Borrowers must also comply with any other
applicable Federal or state environmental laws and regulations.
Sec. 1710.118 [Reserved]
Sec. 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]
Sec. 1710.120 Construction standards and contracting.
Borrowers shall follow all RUS requirements regarding construction
work plans, construction standards, approved materials, construction and
related contracts, inspection procedures, and bidding procedures.
Sec. 1710.121 Insurance requirements.
Borrowers are required to comply with certain requirements with
respect
[[Page 129]]
to insurance and fidelity coverage as set forth in 7 CFR part 1788.
Sec. 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.
Sec. 1710.123 Debarment and suspension.
Borrowers are required to comply with certain requirements on
debarment and suspension as set forth in 7 CFR part 3017.
Sec. 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.
Sec. 1710.125 Restrictions on lobbying.
Borrowers are required to comply with certain requirements with
respect to restrictions on lobbying activities. See 7 CFR part 3018.
Sec. 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.
Sec. 1710.127 Drug free workplace.
Borrowers are required to comply with the Drug Free Workplace Act of
1988 (Pub. L. 100-690, title V, subtitle D) and the Act's implementing
regulations (7 CFR part 3017) when a borrower receives a Federal grant
or enters into a procurement contract awarded pursuant to the provisions
of the Federal Acquisition Regulation (title 48 CFR) to sell to a
Federal agency property or services having a value of $25,000 or more.
Sec. Sec. 1710.128-1710.149 [Reserved]
Subpart D_Basic Requirements for Loan Approval
Sec. 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.
Sec. 1710.151 Required findings for all loans.
(a) Area coverage. Adequate electric service will be made available
to the widest practical number of rural users in the borrower's service
area during the life of the loan. See Sec. 1710.103.
(b) Feasibility. The loan is feasible and it will be repaid on time
according to the terms of the mortgage, note, and loan contract. At any
time after the original determination of feasibility, the Administrator
may require the borrower to demonstrate that the loan remains feasible
if there have been, or are anticipated to be, material changes in the
borrower's costs, loads, rates, rate disparity, revenues, or other
relevant factors from the time that feasibility was originally
determined. See Sec. 1710.112 and subpart G of this part.
(c) Security. RUS will have a first lien on the borrower's total
system or other adequate security, and adequate financial and managerial
controls will be included in loan documents. See Sec. 1710.113.
(d) Interim financing. For loans that include funds to replace
interim financing, there is satisfactory evidence
[[Page 130]]
that the interim financing was used for purposes approved by RUS and
that the loan meets all applicable requirements of this part.
(e) Facilities for nonrural areas. Whenever a borrower proposes to
use loan funds for the improvement, expansion, construction, or
acquisition of electric facilities for non-RE Act beneficiaries, there
is satisfactory evidence that such funds are necessary and incidental to
furnishing or improving electric service for RE Act beneficiaries. See
Sec. 1710.104.
(f) Facilities to be included in rate base. In states having
jurisdiction, the borrower has provided satisfactory evidence based on
the information available, such as an opinion of counsel, that the state
regulatory authority will not exclude from the borrower's rate base any
of the facilities included in the loan request, or otherwise prevent the
borrower from charging rates sufficient to repay with interest the debt
incurred for the facilities. Such evidence may be based on, but not
necessarily limited to, the provisions of applicable state laws; the
rules and policies of the state authority; precedents in other similar
cases; statements made by the state authority; any assurances given to
the borrower by the state authority; and other relevant information and
experience.
Sec. 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. The load forecast provides the borrower and RUS
with an understanding of the borrower's future system loads, the factors
influencing those loads, and estimates of future loads. The load
forecast provides a basis for projecting annual electricity (kWh) sales
and revenues, and for engineering estimates of plant additions required
to provide reliable service to meet the forecasted loads. Subpart E of
this part contains the information to be included in a load forecast and
when an approved load forecast is required.
(b) Construction work plan (CWP). The CWP shall specify and document
the capital investments required to serve a borrower's planned new
loads, improve service reliability and quality, and service the changing
needs of existing loads. The requirements for a CWP are set forth in
subpart F of this part.
(c) Long-range financial forecasts. RUS encourages borrowers to
maintain on a current basis a long-range financial forecast, which
should be used by a borrower's board of directors and manager to guide
the system toward its financial goals. The forecast submitted in support
of a loan application shall show the projected results of future actions
planned by the board of directors. The requirements for a long-range
financial forecast are set forth in subpart G of this part.
(d) Borrower's environmental report (BER). This document is used to
determine what effect the construction of the facilities included in the
construction work plan will have on the environment. In developing a BER
a borrower shall follow the policy and procedural requirements set forth
in 7 CFR part 1794. After reviewing the BER, RUS will determine whether
additional environmental studies will be required.
[57 FR 1053, Jan. 9, 1992, as amended at 65 FR 14786, Mar. 20, 2000]
Sec. 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.
Sec. Sec. 1710.154-1710.199 [Reserved]
Subpart E_Load Forecasts
Source: 65 FR 14786, Mar. 20, 2000, unless otherwise noted.
Sec. 1710.200 Purpose.
This subpart contains RUS policies for the preparation, review,
approval and use of load forecasts and load forecast work plans. 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
[[Page 131]]
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.
Sec. 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.
Sec. 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 an approved load forecast that meets the
requirements of this subpart on an ongoing basis and provide an approved
load forecast in support of any request for RUS financial assistance.
The borrower must also maintain an approved load forecast work plan. The
borrower's approved load forecast must be prepared pursuant to the
approved load forecast work plan.
(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
maintain an approved load forecast that meets the requirements of this
subpart on an ongoing basis and 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 approved load
forecast of its power supply borrower. The approved load forecasts must
be prepared pursuant to the RUS approved load forecast work plan.
(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
an approved 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. The borrower is not required to maintain on an
ongoing basis either an approved load forecast or an approved load
forecast work plan.
Sec. 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
maintain an approved load forecast that meets the requirements of this
subpart on an ongoing basis and provide an approved 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. The distribution borrower's load
forecast must be prepared pursuant to the approved load forecast work
plan 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 maintain an
approved load forecast that meets the requirements of this subpart on an
ongoing basis and provide an approved 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. The distribution borrower's approved load forecast must
be prepared pursuant to the approved load forecast work plan of the
power supply borrower with total utility plant in excess of $500
million.
(c) A distribution borrower that is a member of a power supply
borrower
[[Page 132]]
with a total utility plant of less than $500 million must provide an
approved 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 approved load forecast of its power supply borrower. The borrower is
not required to maintain on an ongoing basis either an approved load
forecast or an approved load forecast work plan.
(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 an approved 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. The borrower is not required to maintain on an ongoing basis
either an approved load forecast or an approved load forecast work plan.
(e) A distribution borrower with a total utility plant of $500
million or more must maintain an approved load forecast that meets the
requirements of this subpart on an ongoing basis and provide an approved
load forecast in support of any request for RUS financing assistance.
The borrower must also maintain an approved load forecast work plan. 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.
Sec. 1710.204 Filing requirements for borrowers that must maintain an
approved load forecast on an ongoing basis.
(a) Filing of load forecasts and updates. A power supply or
distribution borrower required to maintain an approved load forecast on
an ongoing basis under Sec. 1710.202 or Sec. 1710.203 may elect either
of the following two methods of compliance:
(1) Submitting a new load forecast to RUS for review and approval at
least every 36 months, and then submitting updates to the load forecast
to RUS for review and approval in each intervening year; or
(2) Submitting a new load forecast to RUS for review and approval
not less frequently than every 24 months.
(b) Extensions. RUS may extend any time period required under this
section for up to 3 months at the written request of the borrower's
general manager. A request to extend a time period beyond 3 months must
be accompanied by a written request from the borrower's general manager,
an amendment to the borrower's approved load forecast work plan
incorporating the extension, a board resolution approving the extension
request and any amendment to the approved load forecast work plan, and
any other relevant supporting information. RUS may extend the time
periods contained in this section for up to 24 months.
Sec. 1710.205 Minimum approval requirements for all load forecasts.
(a) Documents required for RUS approval of a borrower's load
forecast. The borrower must provide the following documents to obtain
RUS approval for a load forecast:
(1) The load forecast and supporting documentation;
(2) A memorandum from the borrower's general manager to the board of
directors recommending that the board approve the load forecast and its
uses; and
(3) A board resolution from the borrower's board of directors
approving the load forecast and its uses.
(b) Contents of Load Forecast. All load forecasts submitted by
borrowers for approval must include:
(1) A narrative describing the borrower's system, service territory,
and consumers;
(2) 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;
(3) 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;
[[Page 133]]
(4) 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;
(5) The load impacts of a borrower's demand side management
activities, if applicable;
(6) Graphic representations of the variables specifically identified
by management as influencing a borrower's loads; and
(7) A database that tracks all relevant variables that might
influence a borrower's loads.
(c) Formats. RUS does not require a specific format for the
narrative, documentation, data, and other information in the load
forecast, provided that all required information is included and
available. All data must be in a tabular form that can be transferred
electronically to RUS computer software applications. RUS will evaluate
borrower load forecasts for readability, understanding, filing, and
electronic access. If a borrower's load forecast is submitted in a
format that is not readily usable by RUS or is incomplete, RUS will
require the borrower to submit the load forecast in a format acceptable
to RUS.
(d) Document retention. The borrower must retain its latest approved
load forecasts, and supporting documentation until RUS approval of its
next load forecast. Any approved load forecast work plan must be
retained as part of the approved load forecast.
(e) Consultation with RUS. The borrower must designate and make
appropriate staff and consultants available for consultation with RUS to
facilitate RUS review of the load forecast work plan and the load
forecast when requested by RUS.
(f) Correlation and consistency with other RUS loan support
documents. If a borrower relies on an approved load forecast or an
update of an approved load forecast as loan support, the borrower must
demonstrate that the approved load forecast and the other primary
support documentation for the loan were reconciled. For example, both
the load forecast and the financial forecast require input assumptions
for wholesale power costs, distribution costs, other systems costs,
average revenue per kWh, and inflation. Also, a borrower's engineering
planning documents, such as the construction work plan, incorporate
consumer and usage per consumer projections from the load forecast to
develop system design criteria. The assumptions and data common to all
the documents must be consistent.
(g) Coordination. Power supply borrowers and their members that are
subject to the requirement to maintain an approved load forecast on an
ongoing basis are required to coordinate preparation of their respective
load forecasts, updates of load forecasts, and approved load forecast
work plan. A load forecast of a power supply borrower must consider the
load forecasts of all its member systems.
Sec. 1710.206 Approval requirements for load forecasts prepared
pursuant to approved load forecast work plans.
(a) Contents of load forecasts prepared under an approved load
forecast work plan. In addition to the minimum requirements for load
forecasts under Sec. 1710.205, load forecasts developed and submitted
by borrowers required to have an approved load forecast work plan shall
include the following:
(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
[[Page 134]]
and other resources used in the preparation of the load forecast. The
borrower shall identify the borrower's member 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 work plans.
(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 discussing the methods and procedures used in the analysis and
modeling of the borrower's electric system loads as provided for in the
load forecast work plan.
(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. Examples of
economic scenarios, weather conditions, and other uncertainties that
borrowers may decide to address in their analysis include:
(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.
(b) Compliance with an approved load forecast work plan. A borrower
required to maintain an approved load forecast work plan must also be
able to demonstrate that both it and its RUS borrower members are in
compliance with its approved load forecast work plan for the next load
forecast or update of a load forecast.
Sec. 1710.207 RUS criteria for approval of load forecasts by
distribution borrowers not required to maintain an approved
load forecast on an ongoing basis.
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.
[[Page 135]]
Sec. 1710.208 RUS criteria for approval of all load forecasts by power
supply borrowers and by distribution borrowers required to
maintain an approved load forecast on an ongoing basis.
All load forecasts submitted by power supply borrowers and by
distribution borrowers required to maintain an approved load forecast
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
(g) In the case of a power supply borrower required to maintain an
approved load forecast on an ongoing basis, the borrower adequately
coordinated the preparation of the load forecast work plan and load
forecast with its member systems.
Sec. 1710.209 Approval requirements for load forecast work plans.
(a) In addition to the approved load forecast required under
Sec. Sec. 1710.202 and 1710.203, any power supply borrower with a total
utility plant of $500 million or more and any distribution borrower with
a total utility plant of $500 million or more must maintain an approved
load forecast work plan. RUS borrowers that are members of a power
supply borrower with a total utility plant of $500 million or more must
cooperate in the preparation of and submittal of the load forecast work
plan of their power supply borrower.
(b) An approved load forecast work plan establishes the process for
the preparation and maintenance of a comprehensive database for the
development of the borrower's load forecast, and load forecast updates.
The approved load forecast work plan is intended to develop and maintain
a process that will result in load forecasts that will meet the
borrowers' own needs and the requirements of this subpart. An approved
work plan represents a commitment by a power supply borrower and its
members, or by a large unaffiliated distribution borrower, that all
parties concerned will prepare their load forecasts in a timely manner
pursuant to the approved load forecast work plan and they will modify
the approved load forecast work plan as needed with RUS approval to
address changing circumstances or enhance the usefulness of the approved
load forecast work plan.
(c) An approved load forecast work plan for a power supply borrower
and its members must cover all member systems, including those that are
not borrowers. However, only members that are borrowers, including the
power supply borrower, are required to follow the approved load forecast
work plan in preparing their respective load forecasts. Each borrower is
individually responsible for forecasting all its RE Act beneficiary and
non-RE Act beneficiary loads.
(d) An approved load forecast work plan must outline the
coordination and preparation requirements for both the power supply
borrower and its members.
(e) An approved load forecast work plan must cover a period of 2 or
3 years depending on the applicable compliance filing schedule elected
under Sec. 1710.204.
(f) An approved load forecast work plan must describe the borrower's
process and methods to be used in producing the load forecast and
maintaining current load forecasts on an ongoing basis.
(g) Approved load forecast work plans for borrowers with residential
demand of 50 percent or more of total kWh
[[Page 136]]
must provide for a residential consumer survey 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.
Residential consumer surveys may be based on the aggregation of member-
based samples or on a system-wide sample, provided that the latter
provides for relevant regional breakdowns as appropriate.
(h) Approved load forecast work plans must provide for RUS review of
the load forecasts as the load forecast is being developed.
(i) A power supply borrower's work plan must have the concurrence of
the majority of the members that are borrowers.
(j) The borrower's board of directors must approve the load forecast
work plan.
(k) A borrower may amend its approved load forecast work plan
subject to RUS approval. If RUS concludes that the existing approved
load forecast work plan will not result in a satisfactory load forecast,
RUS may require a new or revised load forecast work plan.
Sec. 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.
Sec. Sec. 1710.211-1710.249 [Reserved]
Subpart F_Construction Work Plans and Related Studies
Sec. 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 years or more. CWPs specify and document plant requirements
for the short-term, usually 2 to 3 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) Generally, all borrowers are required to maintain up-to-date
long range engineering plans approved by their boards of directors.
Current CWPs approved by the borrower's board must also be developed and
maintained for distribution and transmission facilities and for
improvements and replacements of generation facilities. All such
distribution, transmission or generation facilities must be included in
the respective CWPs regardless of the source of financing.
(c) 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.
(d) 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
[[Page 137]]
range engineering plan and both documents must be consistent with the
borrower's RUS-approved power requirements study.
(e) Applications for a loan or loan guarantee from RUS (new loans or
budget reclassifications) must be supported by a current CWP approved by
both the borrower's board of directors and 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.
(f) Except as provided in paragraph (g) 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 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.
(g) In the case of damage caused by storms and other natural
catastrophes, a borrower may proceed with emergency repair work before a
CWP or CWP amendment is prepared by the borrower and approved by RUS,
without loosing eligibility for RUS financing of the repairs. The
borrower must notify the RUS regional office in writing, not later than
45 days after the natural catastrophe, of its preliminary estimates of
damages and repair costs. Not later than 120 days after the natural
catastrophe, the borrower must submit to RUS for approval, a CWP or CWP
amendment detailing the repairs.
(h) A CWP may be amended or augmented when the borrower can
demonstrate the need for the changes.
(i) A borrower's CWP or special engineering studies must be
supported by a Borrower's Environmental Report, and when necessary by an
Environmental Analysis or Environmental Impact Statement, as set forth
in 7 CFR 1794 or required by other Federal or state regulations or laws.
(j) All engineering activities required by this subpart must be
performed by qualified engineers, who may be staff employees of the
borrower or outside consultants.
(k) 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.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 60 FR
67405, Dec. 29, 1995; 64 FR 33178, June 22, 1999]
Sec. 1710.251 Construction work plans--distribution borrowers.
(a) All distribution borrowers must maintain a current CWP approved
by their board of directors 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 Sec. 1710.253.)
(b) A distribution borrower's CWP shall cover a construction period
of between 2 and 4 years, and include 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.
[[Page 138]]
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) Residential security 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; and
(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.
[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]
Sec. 1710.252 Construction work plans--power supply borrowers.
(a) All power supply borrowers must maintain a current CWP approved
by the borrower's board of directors 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) Normally a power supply borrower's CWP shall cover a period of 3
to 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 Sec.
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
[[Page 139]]
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]
Sec. 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. Requirements for analyzing purchased-power options are set
forth in Sec. 1710.254.
(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.
Sec. 1710.254 Alternative sources of power.
(a) General. (1) RUS will make loans to finance the construction of
generation facilities by distribution or power supply borrowers and
transmission facilities by power supply borrowers only under the
following conditions if said borrowers do not already own and operate
such types of facilities:
(i) Where no adequate and dependable source of power is available to
meet the consumers' needs; or
(ii) Where the rates offered by other power sources would result in
a higher cost of power to the consumers than the cost from facilities
financed by RUS, and the amount of the power cost savings that would
result from the RUS-financed facilities bears a significant relationship
to the amount of the proposed loan.
(2) If a borrower already owns and operates the types of facilities
included in a loan request, then a loan for the purposes contained in
paragraph (a)(1) of this section, as well as for the construction of
transmission facilities by a distribution borrower, will be considered
and evaluated by RUS in terms of whether the proposed facilities
constitute an effective and economical means of meeting the power
requirements of the consumers. A borrower shall contact RUS as soon as
practicable in order for RUS to review information submitted by the
borrower and advise the borrower, in writing, whether there is a need
for the borrower to investigate and seek alternative sources of power.
RUS will determine, based on information provided by the borrower or
otherwise available, whether there is a need to investigate alternative
sources of power or whether RUS will require information or other
methods of determining the need for the generation capacity. RUS will
base its determination on whether RUS is able to conclude that the
project is needed, the borrower would incur delays and costs in pursuing
an RFP,
[[Page 140]]
or that an RFP is not likely to produce new alternatives to the project.
(b) Loan requests for the addition of generation capacity, including
replacement of existing capacity, will be accepted by RUS when the
applicant has completed the requirements established by RUS, in a manner
satisfactory to RUS. The investigations of alternative sources of power
must be coordinated in advance with RUS. This section applies to RUS
financed generation capacity whether owned solely by the borrower, owned
on an undivided ownership basis with other utilities or substantially
controlled by the borrower.
(c) The applicant may be required to seek and utilize capacity
available from RUS borrowers and other organizations before developing
plans for additional generation capacity. RUS may require, on a case by
case basis, that the applicant, among other things:
(1) Solicit power and energy purchase proposals from all reasonable
potential sources of power, such as other electric cooperatives,
investor-owned utilities, municipal utility organizations, and Federal
and state power authorities.
(2) Solicit proposals from independent power producers, including
co-generators, to determine the terms and conditions under which these
producers can supply the additional power and energy needs of the
applicant, without RUS financial assistance. Such solicitations should
be placed in at least three national newspapers or trade publications,
and they meet all planning, coordination or other requirements imposed
by state authorities, as well as the environmental requirements of RUS.
(d) When solicitations are received in accordance with paragraph (c)
of this section, the applicant will evaluate all alternative proposals
on an economic, present-value basis, giving consideration to cost-
effectiveness, reliability of service, the short-term and long-term
financial viability of the supplier, and the financial risk to the
borrower and its creditors. The applicant will keep RUS fully informed
on these evaluations and provide supporting information and analysis as
requested by RUS.
(e) After evaluation of all proposals received in accordance with
paragraph (c) of this section, and having informed RUS of the results,
the applicant may be required to negotiate final proposals with the
entities submitting the best acceptable offers. Contracts requiring RUS
approval will either be approved in advance by the Administrator or
contain a provision that the contract is not valid until approved, in
writing, by the Administrator. The Administrator will approve the
contracts in a timely manner provided that the borrower has met all
applicable requirements, including, among other matters, evidence that
the alternative source of power selected is an economical and effective
alternative.
(f) RUS may make independent inquiries with potential power
suppliers as to the availability of power to meet borrowers' needs.
Information developed by RUS will be shared with borrowers at their
request.
(g) Further details of RUS requirements for financing of generation
and bulk transmission facilities are set forth in 7 CFR part 1712.
(h) At the request of a borrower, RUS, in its sole discretion, may
waive specific requirements of paragraphs (b) through (e) of this
section if such waiver is required to prevent unreasonable delays in
obtaining generation capacity that could result in system reliability
problems.
(Approved by the Office of Management and Budget under control number
0572-0032)
[57 FR 1053, Jan. 9, 1992, as amended at 65 FR 31247, May 17, 2000]
Sec. Sec. 1710.255-1710.299 [Reserved]
Subpart G_Long-Range Financial Forecasts
Sec. 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, approved by its board
[[Page 141]]
of directors, 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 Sec. 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) The current rate schedules or new rates already approved by the
board of directors;
(4) 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
(5) 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]
[[Page 142]]
Sec. 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 Sec. 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.
Sec. 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 Sec. 1710.303.
(d) In addition to the requirements set forth in Sec. 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
Sec. 1710.300(d)(5).
(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]
Sec. 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
[[Page 143]]
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 Sec. 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 Sec. Sec. 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)
Sec. Sec. 1710.304-1710.349 [Reserved]
Subpart H [Reserved]
Subpart I_Application Requirements and Procedures for Loans
Source: 60 FR 3731, Jan. 19, 1995, unless otherwise noted.
Sec. 1710.400 Initial contact.
(a) Loan applicants that do not have outstanding loans from RUS
should write to the Rural Utilities Service Administration, United
States Department of Agriculture, Washington, DC 20250-1500. A field or
headquarters staff representative may be assigned by RUS to visit the
applicant and discuss its financial needs and eligibility. Borrowers
that have outstanding loans should contact their assigned RUS general
field representative (GFR) or, in the case of a power supply borrower,
the Director, Power Supply Division. Borrowers may consult with RUS
field representatives and headquarters staff, as necessary.
(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 Sec. 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 or by census tract. Final data
must be included with the application. See Sec. 1710.401(a)(8).
Sec. 1710.401 Loan application documents.
(a) All borrowers. All applications for electric loans shall include
the documents listed in this paragraph. The first page of the
application shall be a list of the documents included in the
application. The borrower may use RUS Form 726, Checklist for Electric
Loan Application, or a computer generated equivalent as this list.
(1) Transmittal letter. A letter signed by the borrower's manager
indicating
[[Page 144]]
the actual corporate name and taxpayer identification number of the
borrower and addressing the following items:
(i) The need for flood hazard insurance;
(ii) Breakdown of requested loan funds by state;
(iii) A listing of the counties served by the borrower;
(iv) A listing of threatened actions by third parties that could
adversely affect the borrower's financial condition, including
annexations or other actions affecting service territory, loads, or
rates; and
(v) A listing of pending regulatory proceedings pertaining to the
borrower.
(2) Board resolution. This document is the formal request by the
borrower's board of directors for a loan from RUS. The board resolution
shall include:
(i) The requested loan type, loan amount, loan term, final maturity
and method of amortization (Sec. 1710.110(b));
(ii) The sources and amounts of any supplemental or other financing;
(iii) Authorization for RUS to release appropriate information to
supplemental or other lender(s), and authorization for these lenders to
release appropriate information to RUS; and
(iv) 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).
(3) RUS Form 740c, Cost Estimates and Loan Budget for Electric
Borrowers. This form together with its attachments lists the
construction, equipment, facilities and other cost estimates from the
construction work plan or engineering and cost studies, and the sources
of financing for each component. The date on page 1 of the form is the
beginning date of the loan period and shall be the same as the date on
the Financial and Statistical Report submitted with the application
(paragraph (a)(5) of this section). Form 740c also includes the
following information, exhibits, and attachments:
(i) Description of funds and materials. This description details the
availability of materials and equipment, any unadvanced funds from prior
loans, and any general funds the borrower designates, to determine the
amount of such materials and funds to be applied against the capital
requirements estimated for the loan period.
(ii) Useful life of facilities financed by the loan. Form 740c 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. This
statement or schedule will be used to determine the final maturity of
the loan. See Sec. 1710.115.
(iii) Reimbursement schedule. This schedule lists the date, amount,
and identification number of each inventory of work orders and special
equipment summary that form the basis for the borrower's request for
reimbursement of general funds on the RUS Form 740c. See Sec. 1710.109.
If the borrower is not requesting reimbursement, this schedule need not
be submitted.
(iv) Location of consumers. If the application is for a municipal
rate loan subject to the interest rate cap, or for a loan at the
hardship rate, and the average number of consumers per mile of the total
electric system exceeds 17, Form 740c must include, as a note, a
breakdown of funds included in the proposed loan to furnish or improve
service to consumers located in an urban area. See 7 CFR 1714.7(c) and
1714.8(d). This breakdown must indicate the method used by the borrower
for allocating loan funds between urban and non urban consumers.
(4) RUS Form 740g, Application for Headquarters Facilities. This
form lists the individual cost estimates from the construction work plan
or other engineering study that support the need for RUS financing for
any warehouse and service type facilities included, and funding
requested for such facilities shown on RUS Form 740c. If no loan funds
are requested for headquarters facilities, Form 740g need not be
submitted.
(5) Financial and statistical report. Distribution borrowers shall
submit these data on RUS Form 7; power supply borrowers shall use RUS
Form 12. The
[[Page 145]]
form shall contain the most recent data available, which shall not be
more than 60 days old when received by RUS.
(6) Pending litigation statement. A statement from the borrower's
counsel listing any pending litigation, including levels of related
insurance coverage and the potential effect on the borrower. This
statement and the statements from counsel required by paragraphs (a)(7)
and (15) of this section may be combined into a single document.
(7) Mortgage information. A new mortgage will be required if this is
a borrower's first application for a loan under the RE Act. A restated
mortgage, or a mortgage supplement will be required if there has been a
material change to the real property owned by the borrower since the
most recent RUS loan, loan guarantee, or lien accommodation, if the
requested loan would cause the borrower to exceed its previously
authorized debt limit, or if RUS otherwise determines it necessary. If
there has been no material change to the real property owned by the
borrower since the most recent RUS loan or loan guarantee, the borrower
must submit an opinion of its counsel to that effect. If a new or
restated mortgage or a mortgage supplement is required, the borrower
must provide the following:
(i) Property schedule. For a new or restated mortgage or for a
mortgage supplement, the following information shall be submitted in a
form satisfactory to RUS:
(A) A listing of the counties where the borrower's existing electric
facilities and new facilities are or will be located;
(B) A listing and description of all real property owned by the
borrower; and
(C) An opinion of the borrower's counsel certifying that the
property schedule is complete and adequate for inclusion in a security
instrument to be executed by the borrower to secure an RUS loan.
(ii) Maximum debt limit. For a new mortgage, or if the proposed loan
would result in the borrower's existing mortgage debt limit being
exceeded, a resolution of the borrower's board of directors, and any
other authorizations or certifications required by State law, certifying
that a new debt limit has been legally established that is adequate to
accommodate existing indebtedness and the proposed new financing,
including any concurrent loans.
(8) Rate disparity and consumer income data. If the borrower is
applying under the rate disparity and consumer income tests for either a
municipal rate loan subject to the interest rate cap or a hardship rate
loan, the application must provide a breakdown of residential consumers
either by county or by census tract. In addition, if the borrower serves
in 2 or more states, the application must include a breakdown of all
ultimate consumers by state. This breakdown may be a copy of Form EIA
861 submitted by the Borrower to the Department of Energy or in a
similar form. See 7 CFR 1714.7(b) and 1714.8(a). To expedite the
processing of loan applications, RUS strongly encourages distribution
borrowers to provide this information to the GFR prior to submitting the
application.
(9) Standard Form 100--Equal Employment Opportunity Employer Report
EEO--1. This form, required by the Department of Labor, sets forth
employment data for borrowers with 100 or more employees. A copy of this
form, as submitted to the Department of Labor, is to be included in the
application for an insured loan if the borrower has more than 100
employees. See Sec. 1710.122.
(10) Form AD-1047, Certification Regarding Debarment, Suspension,
and Other Responsibility Matters--Primary Covered Transactions. This
statement certifies that the borrower will comply with certain
regulations on debarment and suspension required by Executive Order
12549, Debarment and Suspension (3 CFR, 1986 Comp., p. 189). See 7 CFR
part 3017 and Sec. 1710.123.
(11) Uniform Relocation Act assurance statement. This assurance,
which need not be resubmitted if previously submitted, provides that the
borrower shall comply with 49 CFR part 24, which implements the Uniform
Relocation Assistance and Real Property Acquisition Policy Act of 1970,
as amended by the Uniform Relocation Act Amendments of 1987 and 1991.
See Sec. 1710.124.
[[Page 146]]
(12) Lobbying. The following information on lobbying is required
pursuant to 7 CFR part 3018 and Sec. 1710.125. Borrowers applying for
both insured and guaranteed financing should consult RUS before
submitting this information.
(i) Certification regarding lobbying. This statement certifies that
the borrower shall comply with certain requirements with respect to
restrictions on lobbying activities.
(ii) Standard Form LLL--Disclosure of Lobbying Activities. This
disclosure form is required from those borrowers engaged in lobbying
activities.
(13) Federal debt delinquency requirements. See 1710.126. The
following documents are required:
(i) Report on Federal debt delinquency. This report indicates
whether or not a borrower is delinquent on any Federal debt.
(ii) Certification Regarding Federal Government Collection Options.
This statement certifies that a borrower has been informed of the
collection options the Federal Government may use to collect delinquent
debt. The Federal Government is authorized by law to take any or all of
the following actions in the event that a borrower's loan payments
become delinquent or the borrower defaults on its loans:
(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.
(14) Articles of incorporation and bylaws. The following are
required if either document has been amended since the last loan
application was submitted to RUS, or if this is a borrower's first
application for a loan under the RE Act:
(i) The borrower's articles of incorporation currently in effect, as
filed with the appropriate state office, setting forth the borrower's
corporate purpose; and
(ii) The bylaws currently in effect, as adopted by the borrower's
board of directors, setting forth the manner by which the borrower's
organization will be governed and regulated.
(15) State regulatory approvals. In states in which regulatory
authorities have jurisdiction over the borrower's rates, the borrower
must provide satisfactory evidence, pursuant to Sec. Sec. 1710.105 and
1710.151(f), based on the information available, such as an opinion of
counsel or of another qualified source, that the state regulatory
authority will not exclude from the borrower's rate base any of the
facilities included in the loan request, or otherwise prevent the
borrower from charging rates sufficient to repay with interest the debt
incurred for the facilities.
(16) Seismic safety certifications. This certification shall be
included, if required under 7 CFR part 1792.
(17) Rates. (i) A distribution borrower shall explain any recent or
planned changes in retail rates, the status of any pending rate cases
before a state regulatory authority, or other pertinent rate
information.
(ii) A power supply borrower shall submit a schedule of its
wholesale rates currently in effect. Any changes in this schedule are
subject to RUS approval.
(18) Additional supporting data. Additional supporting data may be
required by RUS depending on the individual application or conditions.
Examples of such additional supporting data include information about
acquisitions, headquarters facilities, generation or transmission
facilities, large power loads or special loads.
(b) Distribution borrowers. In addition to the items in paragraph
(a) of this section, applications for loans submitted by distribution
borrowers shall include the borrower's area coverage and line extension
policies. If there have been any amendments to area
[[Page 147]]
coverage or line extension policies since the last loan application
submitted to RUS, or if this is a borrower's first application for a
loan under the RE Act, the borrower shall submit the board of directors'
approved policies on area coverage and line extensions. See Sec. Sec.
1710.103 and 1710.151(a).
(c) Primary support documents. In addition to the loan application,
consisting of the documents required by paragraphs (a) and (b) of this
section, all borrowers must also provide RUS with the following primary
support documents pursuant to Sec. 1710.152:
(1) Along with the loan application, the borrower shall submit to
RUS a Long-Range Financial Forecast (LRFF), that meets the requirements
of subpart G of this part. The forecast shall include any sensitivity
analysis or analysis of alternative scenarios required by subpart G of
this part, and shall be accompanied by a certified board resolution
adopting, and indicating the board of directors' approval of, the LRFF,
and directing management to take whatever steps may be necessary,
including the filing for rate increases, to achieve the TIER goals set
forth in the LRFF.
(2) Prior to RUS's acceptance of the loan application, the borrower
shall submit to RUS and receive approval of:
(i) Power Requirements Study (PRS) that meets the requirements of
subpart E of this part, and is accompanied by a certified board
resolution adopting, and indicating the board of directors' approval of,
the PRS.
(ii) Construction Work Plan (CWP) and/or related engineering and
cost studies that meets the requirements of subpart F of this part, and
is accompanied by a certified board resolution adopting, and indicating
the board of directors' approval of, the CWP and/or engineering and cost
studies.
(iii) Borrower's Environmental Report (BER), or other environmental
information as required by 7 CFR part 1794.
(iv) Demand Side Management Plan and/or Integrated Resource Plan, if
required by subpart H of this part.
(d) Submission of documents. (1) Generally, all information required
by paragraphs (a), (b), and (c)(1) of this section is submitted to RUS
in a single application package. The information required by paragraph
(c)(2) of this section is generally submitted to, and approved by RUS
before the application is submitted.
(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. An application is complete when all
information required by RUS to approve a loan is materially complete in
form and substance satisfactory to RUS.
(f) Change in borrower circumstances. A borrower shall, after
submitting a loan application, promptly notify RUS of any changes in its
circumstances that materially affect the information contained in the
loan application or in the primary support documents.
(g) Interest rate category. For pending loans, RUS will promptly
notify the borrower if its eligibility for an interest rate category
changes pursuant to new information from the Department of Energy or the
Bureau of the Census. See 7 CFR part 1714.
(Approved by the Office of Management and Budget under control numbers
0572-0017, 0572-0032 and 0572-1013)
[[Page 148]]
Sec. Sec. 1710.402-1710.403 [Reserved]
Sec. 1710.404 Additional requirements.
Additional requirements for insured electric loans are set forth in
7 CFR part 1714.
Sec. 1710.405 Supplemental financing documents.
(a) The borrower is responsible for ensuring that the loan documents
required for supplemental financing pursuant to Sec. 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.
Sec. 1710.406 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.
Sec. 1710.407 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.