7 CFR 1717.350Subpart H- Federal Pre-emption in Rate Making in Connection with RUS Electric Borrowers in Bankruptcy

Rural Utilities Service, USDA

§ 1717.351

a timely fashion, RUS may proceed to
exercise any and all rights and remedies available pursuant under the RUS
documents or otherwise.
(d) The jurisdiction of the state regulatory authority over the rates of the
borrower shall continue to be preempted hereunder until the Administrator shall in writing approve the resumption of jurisdiction by the state
regulatory authority and publish in the
FEDERAL REGISTER a notice to such effect. The Administrator shall approve
resumption only after determining
that such jurisdiction shall be exercised in a manner consistent with Federal interests.

§ 1717.309 Additional statutory preemption.
This subpart addresses pre-emption
of state law and state regulatory authority in only those specific circumstances herein described. Nothing
in this subpart waives, limits, or otherwise affects the explicit pre-emption or
pre-emption, which is implicit and
shall occur pursuant to the RE Act as
a matter of law, of state law or action
of a state regulatory authority where
such state law or such action compromises Federal interests, including
the ability of any borrower, including
power supply borrowers, to repay loans
made or guaranteed by RUS.

[55 FR 38646, Sept. 19, 1990; 55 FR 53100, Dec.
26, 1990]

§§ 1717.310–1717.349

§ 1717.307

Distribution members’ rates.

A state regulatory authority which
has been pre-empted as provided in this
subpart may continue to exercise jurisdiction, pursuant to applicable provisions of state law, over all other business affairs of the power supply borrower and over the rates of its distribution members: Provided, however, that
the state regulatory authority shall
treat any RUS approved rate for the
power supply borrower as fair and reasonable and shall not in any manner,
directly or indirectly, prevent or impede the distribution member from recovering the costs of paying the RUS
approved rates to the power supply borrower.
§ 1717.308 RUS approval of nonconforming rates.
Borrowers may request and RUS may
approve rates which do not conform
with the requirements of the RUS
wholesale power contract and other
RUS documents if RUS determines, in
its sole discretion, that such approval
is in the interests of RUS. If RUS approval is granted prior to pre-emption
hereunder, and if the state regulatory
authority shall have approved such
rates, then, so long as RUS’s approval
of the nonconforming rates remains in
effect, the jurisdiction of the state regulatory authority over the rates of the
borrower shall not be pre-empted hereunder.

[Reserved]

Subpart H—Federal Pre-emption
in Rate Making in Connection
With RUS Electric Borrowers in
Bankruptcy
SOURCE: 55 FR 38653, Sept. 19, 1990, unless
otherwise noted.

§ 1717.350 Purpose.
This subpart contains regulations of
the Rural Utilities Service (RUS) implementing provisions of section 4 of
the RE Act (7 U.S.C. 904) which authorizes the Administrator to establish
terms and conditions of loans, and provisions of the RUS documents which
provide for the establishment of rates
for electric service to be charged by
RUS electric borrowers. This subpart
contains the general regulations of
RUS for the pre-emption of the regulation by a State Regulatory Authority
under State law of an RUS borrower’s
rates and for the exercise by RUS, pursuant to the RUS documents, of exclusive jurisdiction over rates of a borrower by or against whom a case under
the Bankruptcy Code of 1978, as amended, has commenced.
§ 1717.351 Policy.
(a) RUS makes and guarantees loans
to borrowers to bring electric service
to persons in rural areas. To accomplish this objective, RUS normally requires, as a condition to making or
guaranteeing any loans to an electric
borrower, that the borrower execute

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§ 1717.352

7 CFR Ch. XVII (1–1–03 Edition)

and deliver the RUS documents in the
form prescribed by RUS. The RUS
mortgage secures repayment of the
loans made or guaranteed by RUS and
other loans which, pursuant to the RE
Act, RUS has permitted to be secured
pursuant to the RUS mortgage. The
Administrator relies upon the RUS
mortgage together with other RUS
documents to find and certify, as required by section 4 of the RE Act (7
U.S.C. 904), that the security for the
loan is reasonably adequate and the
loan will be repaid within the time
agreed.
(b) RUS requires borrowers to take
such actions as may be necessary to establish rates for electric service which
are sufficient to pay the principal of
and interest on the loans made or guaranteed by RUS in a timely manner and
to meet the requirements of the RUS
documents.
(c) With respect to borrowers whose
rates are not regulated by a State Regulatory Authority, RUS requires that
such borrowers establish rates and to
obtain RUS approval of such rates as
required by the RUS documents.
(d) To protect Federal interests, including without limitation the ability
of the borrower to repay RUS loans,
RUS’s policy is to exercise, pursuant to
the RUS documents, exclusive jurisdiction over the rates for electric service
charged by a borrower by or against
whom a case under the Bankruptcy
Code of 1978, as amended, has commenced.
§ 1717.352 Definitions and rules of construction.
(a) Definitions. For the purpose of this
subpart, the following terms shall have
the following meanings:
Administrator means the Administrator of RUS.
Bankruptcy code of 1978, as amended,
means the Bankruptcy Reform Act of
1978, as amended (11 U.S.C. 101 et seq.).
Borrower means any organization
which has an outstanding loan made or
guaranteed by RUS for rural electrification.
RE Act means Rural Electrification
Act of 1936, as amended (7 U.S.C. 901 et
seq.).
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.
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.
RUS documents means the RUS loan
contract, RUS mortgage and, if the
Borrower is engaged in the wholesale
sale of electric power and energy to
members pursuant to RUS Wholesale
Power Contracts, the RUS Wholesale
Power Contract.
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.
RUS mortgage means the mortgage
and security agreement, as from time
to time supplemented, amended and restated, made by and among the borrower, RUS, and, if a party thereto,
third party lenders, or any other form
of mortgage or security instrument or
indenture of mortgage and deed of
trust, securing the payment of outstanding loans made or guaranteed by
RUS and other lenders.
RUS wholesale power contract means
the contract for the wholesale sale of
electric power and energy between a
power supply borrower and its member
as approved by RUS.
Secured loans shall mean outstanding
loans secured pursuant to the RUS
mortgage.
State regulatory authority means any
state board or local governing body
having jurisdiction under state law to
regulate, or in any way, approve the
electric rates charged by a borrower.
(b) Rules of construction. Unless the
context shall otherwise indicate, the
terms defined in § 1717.352(a) hereof include the plural as well as the singular,
and the singular as well as the plural.
The words ‘‘herein,’’ and ‘‘hereunder’’,
and words of similar import, refer to
this subpart as a whole. ‘‘Includes’’ and

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Rural Utilities Service, USDA

§ 1717.600

‘‘including’’ are not limiting and ‘‘or’’
is not exclusive.

exercised in a manner consistent with
Federal interests.

[55 FR 38653, Sept. 19, 1990, as amended at 59
FR 66440, Dec. 27, 1994]

§ 1717.356 Additional statutory preemption.
This subpart addresses pre-emption
of State law and State Regulatory Authority upon the filing of a petition by
or against the borrower commencing a
case under the Bankruptcy Code of
1978, as amended. Nothing in this subpart waives, limits, or otherwise affects the explicit pre-emption or preemption, which is implicit and shall
occur pursuant to the RE Act as a matter of law, of State law or action of a
State Regulatory Authority where
such State law or such action compromises Federal interests, including
the ability of any borrower to repay
loans made or guaranteed by RUS.

§ 1717.353 Requirements of RUS documents.
Each borrower shall establish and adjust rates for electric service as set
forth in the RUS documents to assure
that the borrower will be able to make
required payments on secured loans
and to otherwise meet the terms of the
RUS documents.
§ 1717.354 Pre-emption.
State Regulatory Authority jurisdiction over an RUS borrower’s rates shall
be pre-empted by the RE Act and RUS
shall have exclusive jurisdiction over
the borrower’s rates:
(a) On October 19, 1990, with respect
to any borrower by or against whom a
case under the Bankruptcy Code of
1978, as amended, was commenced prior
to and remains outstanding on October
19, 1990; and
(b) With respect to all other borrowers, upon the filing of a petition by
or against the borrower commencing a
case under the Bankruptcy Code of
1978, as amended.
§ 1717.355 RUS required rates.
(a) Upon the pre-emption of State
Regulatory Authority as provided in
this subpart, RUS will exercise exclusive jurisdiction over the rates of the
borrower pursuant to the terms of the
RUS documents.
(b) So long as the State Regulatory
Authority shall be pre-empted hereunder, RUS shall be considered the
governmental regulatory body with jurisdiction over rates for all purposes,
including for the purposes of the RUS
documents and for the purposes of section 1129(a)(6) of the Bankruptcy Code
of 1978, as amended (11 U.S.C.
1129(a)(6)).
(c) RUS shall, pursuant to the terms
of the RUS documents, exercise exclusive jurisdiction over the rates of the
borrower until the Administrator shall
in writing approve the resumption of
jurisdiction by the State Regulatory
Authority. The Administrator shall approve resumption only after determining that such jurisdiction shall be

Subparts I–L [Reserved]
Subpart M—Operational Controls
SOURCE: 60 FR 67405, Dec. 29, 1995, unless
otherwise noted.

§ 1717.600 General.
(a) General. The loan contract and
mortgage between the Rural Utilities
Service (RUS) and electric borrowers
imposes certain restrictions and controls on the borrowers and gives RUS
(and other co-mortgagees in the case of
the mortgage) the right to approve or
disapprove
certain
actions
contemplated by the borrowers. Certain of
these controls and approval rights are
referred to informally as ‘‘operational
controls’’ because they pertain to decisions or actions with respect to the operation of the borrowers’ electric systems. The approval authority granted
to RUS by the loan contract or mortgage regarding each decision or action
subject to controls is often stated in
broad, unlimited terms. This subpart
lists the main operational controls affecting borrowers and establishes for
each area of control the circumstances
under which RUS approval of a decision or action by a borrower is either
required or not required. In some cases,
only the general principles or general
circumstances pertaining to RUS approval or control are presented in this
subpart, while the details regarding the

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