General

§ 1703.312

7 CFR Ch. XVII (1–1–04 Edition)

its total investments, including the
proposed investment, will not exceed
the investment limitations specified in
7 CFR part 1717, Subpart N, Investments, Loans and Guarantees by Electric Borrowers, or 7 CFR Part 1744,
Post Loan Policies and Procedures
Common to Guaranteed and Insured
Loans. The documentation must provide a list of each rural development
project the borrower has invested in to
date,
including
the
investment
amounts;
(7) Submit to the Administrator written identification of the direct loan(s)
and/or insured loan(s) for which payments are to be deferred;
(8) Submit to the Administrator a
written narrative which contains information regarding the proposed rural
development or job creation project
such as the manner in which the
project will promote community, business, or economic development in rural
areas, the nature of the project, its location, the primary beneficiaries, and,
if applicable, the number and type of
jobs to be created; and
(9) Submit to the Administrator a
letter of approval from the state regulatory authority, if applicable, granting its approval for the borrower to
defer direct loan payment(s) and/or insured loan payment(s) and invest the
amount in a rural development project.
(b) The Administrator reserves the
right to determine that special circumstances require additional data
from borrowers before acting on a
deferment. The Administrator also reserves the right to require, as a condition of approving a loan payment
deferment pursuant to this subpart,
that the borrower execute and deliver
any amendments or supplements to its
loan documents that may be necessary
or appropriate to achieve the purposes
outlined in § 1703.300.
(c) The Administrator will decide
whether the borrower is eligible for the
deferment and will notify the borrower
of the decision.

rowers
receiving
loan
payment
deferments as necessary to ensure that
the investments in the rural development project are in accordance with
this subpart and the representations
and purposes stated in the borrower’s
completed application. If an audit discloses that the amount deferred was
not used for the purposes stated in the
completed application, the borrower
shall be required to promptly repay the
amount deferred and the benefits of the
deferment to the borrower will be recaptured by RUS. The borrower is responsible for ensuring that disbursements and expenditures of funds covering the investment in the rural development project are properly supported with certifications, invoices,
contracts, bills of sale, cancelled
checks, or any other forms of evidence
determined appropriate by the Administrator and that such supporting material is available at the borrower’s
premises for review by the RUS field
accountant, borrower’s certified public
accountant, the Office of Inspector
General, the General Accounting Office
and any other accountant conducting
an audit of the borrower’s financial
statements for this rural development
program.
§ 1703.313 Compliance with other regulations.
(a) Investments in a rural economic
development project made by an electric borrower under this subpart are
subject to the provisions of 7 CFR part
1717, Subpart N, Investments, Loans
and Guarantees by Electric Borrowers.
(b) Investments in a rural economic
development project made by a telephone borrower under this subpart are
subject to the provisions of 7 CFR Part
1744, Post Loan Policies and Procedures Common to Guaranteed and Insured Loans.

PART 1710—GENERAL AND PRELOAN POLICIES AND PROCEDURES COMMON TO ELECTRIC
LOANS AND GUARANTEES

§ 1703.312 RUS review requirements.
Borrowers shall ensure that funds are
invested in the rural development
project as approved by RUS. The Administrator reserves the right to review the books and copy records of bor-

Subpart A—General
Sec.
1710.1
1710.2

General statement.
Definitions and rules of construction.

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Rural Utilities Service, USDA

Pt. 1710
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]

1710.3 Form and bulletin revisions.
1710.4 Exception authority.
1710.5 Availability of forms.
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 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 D—Basic Requirements for Loan
Approval

Subpart I—Application Requirements and
Procedures for Insured and Guaranteed Loans

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]

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.

Subpart E—Load Forecasts
1710.200

Purpose.

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§ 1710.1

7 CFR Ch. XVII (1–1–04 Edition)

AUTHORITY: 7 U.S.C. 901 et seq., 1921 et seq.,
6941 et seq.

§ 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:

SOURCE: 57 FR 1053, Jan. 9, 1992, unless otherwise noted.

Subpart A—General
§ 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.

APRR =

A+B
C−D

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.

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

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

(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]

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92

Rural Utilities Service, USDA

§ 1710.2
DSC means Debt Service Coverage of
the borrower calculated as:

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.
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 ‘‘DemandSide 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.
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.
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.

DSC =

A + B+C
D

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 § 1710.354(f).
DSM plan means a plan that describes the implementation at the distribution level of the DSM activities
identified in the integrated resource
plan as having positive net benefits.
See § 1710.357.

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§ 1710.2

7 CFR Ch. XVII (1–1–04 Edition)

Electric system means all of the borrower’s interests in all electric production, transmission, distribution, conservation, load management, general
plant and other related facilities,
equipment or property and in any
mine, well, pipeline, plant, structure or
other facility for the development, production, manufacture, storage, fabrication or processing of fossil, nuclear, or
other fuel or in any facility or rights
with respect to the supply of water, in
each case for use, in whole or in major
part, in any of the borrower’s generating plants, including any interest or
participation of the borrower in any
such facilities or any rights to the output or capacity thereof, together with
all lands, easements, rights-of-way,
other works, property, structures, contract rights and other tangible and intangible assets of the borrower in each
case used or useful in such electric system.
Equity means total margins and equities, which equals Part C, Line 33 of
RUS Form 7 (distribution borrowers) or
Section B, Line 34 of RUS Form 12a
(power supply borrowers).
Final maturity means the final date
on which all outstanding principal and
accrued interest on an electric loan is
due and payable.
Five percent hardship rate means an
interest rate of 5 percent applicable to
a hardship rate loan.
Fund advance period means the period
of time during which the Government
may advance loan funds to the borrower. See 7 CFR 1714.56.
Generation Facilities means the generating plant and related facilities, including the building containing the
plant, all fuel handling facilities, and
the stepup substation used to convert
the generator voltage to transmission
voltage, as well as related energy management (dispatching) systems.
Hardship rate loan means a loan made
at the 5 percent hardship rate pursuant
to 7 CFR 1714.8.
Insured Loan means a loan made pursuant to Section 305 of the RE Act, and
may include a direct loan made under
Section 4 of the RE Act.
Integrated Resources Plan (IRP) means
a plan resulting from the planning and
selection process for new energy resources that evaluates the benefits and

costs of the full range of alternatives,
including new generating capacity,
power purchases, DSM programs, system operating efficiency, and renewable energy systems.
Interest rate cap means a maximum
interest rate of 7 percent applicable to
certain municipal rate loans as set
forth in § 1710.7.
Interest rate term means a period of
time selected by the borrower for the
purpose of determining the interest
rate on an advance of funds. See 7 CFR
1714.6.
Load forecast means the thorough
study of a borrower’s electric loads and
the factors that affect those loads in
order to determine, as accurately as
practicable, the borrower’s future requirements for energy and capacity.
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.

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Rural Utilities Service, USDA

§ 1710.2
gins & Equities] less Line 26 [Regulatory
Assets]).

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
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:

A + B+C
D

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 Mar-

OTIER =

A+B
A

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.

95

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Where:

ER29DE95.001

ODSC =

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:

§ 1710.2

7 CFR Ch. XVII (1–1–04 Edition)

Power Supply Borrower means a borrower that sells or intends to sell electric power at wholesale to distribution
or power supply borrowers pursuant to
RUS wholesale power contracts.
Prepayment option means a provision
included in the loan documents to
allow the borrower to prepay all or a
portion of an advance on a municipal
rate loan on a date other than a rollover maturity date. See 7 CFR 1714.9.
PRR means Plant Revenue Ratio calculated as:

PRR =

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

A
B−C

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,

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Rural Utilities Service, USDA

§ 1710.4
(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.

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:

TIER =

A+B
A

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.

[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]

§ 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.

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:

[59 FR 66440, Dec. 27, 1994]

§ 1710.4 Exception authority.
Consistent with the RE Act and other
applicable laws, the Administrator
may waive or reduce any requirement
imposed by this part or other RUS regulations on an electric borrower, or a
lender whose loan is guaranteed by

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97

§ 1710.5

7 CFR Ch. XVII (1–1–04 Edition)

RUS, if the Administrator determines
that imposition of the requirement
would adversely affect the Government’s financial interest.
§ 1710.5

(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.

Availability of forms.

[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5,
1992, as amended at 58 FR 66263, Dec. 20, 1993]

Information about the availability of
RUS forms and publications cited in
this part is available from Administrative Services Division, Rural Utilities
Service, United States Department of
Agriculture, Washington, DC 20250–1500.
These RUS forms and publications may
be reproduced.

§§ 1710.7–1710.49

[Reserved]

Subpart B—Types of Loans and
Loan Guarantees
§ 1710.50

Insured loans.

RUS makes insured loans under section 305 of the RE Act.
(a) Municipal rate loans. 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

§ 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.

[58 FR 66263, Dec. 20, 1993]

§ 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 preloan 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:

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Rural Utilities Service, USDA

§ 1710.101

(1) Interest rates. The standard interest rate on direct Treasury rate loans
will be established daily by the United
States Treasury. The borrower will select interest rate terms for each advance of funds. The minimum interest
rate term shall be one year. Interest
rate terms will be limited to terms
published by the Treasury (i.e. 1, 2, 3, 5,
7, 10, 20, and 30). Interest rate terms to
final maturity date, if other than published by Treasury, will be determined
by RUS. Interest rates for terms greater than 30 years will be at the 30-year
rate. There will be no interest rate cap
on Treasury rate loans.
(2) Prepayment. A Treasury rate direct electric loan may be repaid at par
on its rollover maturity date if there is
one. Such a loan, or portion thereof,
may also be prepaid after it has been
advanced for not less than two years,
at any time prior to its rollover or
final maturity date at its ‘‘net present
value’’ (NPV) as determined by RUS.
(3) Supplemental financing. Supplemental financing will not be required
in connection with Treasury rate direct electric loans.
(4) Transitional assistance. A Treasury
rate direct loan is not available to provide transitional assistance to borrowers.
(b) Loan documents. Successful applicants will be required to execute and
deliver to RUS a promissory note evidencing the borrower’s obligation to
repay the loan. The note must be in
form and substance satisfactory to
RUS. RUS will require a form of note
substantially in the form that it currently accepts for direct municipal
rate electric loans, with such revisions
as may be necessary or appropriate to
reflect the different interest setting
provisions and the terms of paragraphs
(a) (1) and (2) of this section. All notes
will be secured in accordance with the
terms of 7 CFR part 1718.

guarantees are made for a term of up
to 35 years, and the interest rate is established at a rate agreed to by the
borrower and the lender, with RUS
concurrence. The guarantee applies to
the repayment of both principal and interest.
[58 FR 66264, Dec. 20, 1993]

§§ 1710.53–1710.99

[Reserved]

Subpart C—Loan Purposes and
Basic Policies
§ 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]

§ 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

[66 FR 66294, Dec. 26, 2001]

§ 1710.52 Loan guarantees.
RUS provides financing through 100
percent loan guarantees made under
sections 306 and 306A of the RE Act.
RUS also provides 90 percent loan guarantees under section 311 of the RE Act
to enable borrowers to secure financing
from certain private lenders. The loan

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§ 1710.102

7 CFR Ch. XVII (1–1–04 Edition)

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
not in default on the repayment of a
loan made or guaranteed under the RE
Act for a loan, loan guarantee, or lien
accommodation, a default by a borrower from which a distribution borrower purchases wholesale power shall
not:
(1) Be considered a default by the distribution borrower;
(2) Reduce the eligibility of the distribution borrower for assistance under
the RE Act; or
(3) Be the cause, directly or indirectly, of imposing any requirement or
restriction on the borrower as a condition of the assistance, except such requirements or restrictions as are necessary to implement a debt restructuring agreed on by the power supply
borrower and RUS.
(d) For the purpose of determining
the eligibility of a distribution borrower, RUS will consider whether the
distribution borrower is current on its
obligations to its wholesale power supplier under the RUS wholesale power
contract.
(e) Nothing in paragraph (c) of this
section relieves any distribution borrower that is a member of a power supply borrower in default on its obligations to RUS or operating under a debt
restructuring agreement, of requirements set forth in RUS regulations, including,
without
limitation,
§ 1710.112(b)(6), or of any terms and conditions that the Administrator may
otherwise impose on any borrower as a
condition of obtaining a loan or loan
guarantee (including, in appropriate
cases, member guarantees).
(f) Except as provided in paragraph
(g) of this section, former borrowers
that have paid off all outstanding loans
may reapply for a loan to serve RE Act
beneficiary loads accruing from the
time the former borrower’s complete
loan application is received by RUS.
The determination of whether an area
is rural will be based on the Census
designation of the area at the time of
the reapplication for a loan, if the area
is not served by electric facilities financed by RUS. If the area is served by

electric facilities financed by RUS, it
will continue to be considered rural.
(g) Former borrowers that have prepaid all, or portions of outstanding insured and direct loans in accordance
with RUS regulations must comply
with the provisions of 7 CFR part 1786
before being considered eligible to borrow additional funds from RUS.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5,
1992. Revised and redesignated at 58 FR 66264,
Dec. 20, 1993]

§ 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 § 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 § 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

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Rural Utilities Service, USDA

§ 1710.105

306 loan guarantee to finance all or a
portion of distribution and subtransmission facilities, such request will not
affect the borrower’s eligibility for an
insured loan to finance any remaining
portion of said facilities or for any future insured loan to finance other distribution or subtransmission facilities.
A section 306 loan guarantee, however,
may not be used to guarantee a supplemental loan required by § 1710.110.
(d) One hundred percent loan guarantees under section 306A. Under section
306A of the RE Act, both distribution
and power supply borrowers are eligible
under certain conditions to use an existing section 306 guarantee to refinance advances made on or before July
2, 1986 from a loan made by the Federal
Financing Bank. (See 7 CFR part 1786.)
(e) Ninety percent guarantees of private-sector loans under section 311. Under
section 311 of the RE Act, both distribution and power supply borrowers
in the state of Alaska are eligible
under certain conditions to obtain
from RUS a 90 percent guarantee of a
private-sector loan to refinance their
Federal Financing Bank loans. (See 7
CFR part 1786.)
[57 FR 2832, Jan. 24, 1992, as amended at 58
FR 66264, Dec. 20, 1993; 66 FR 66294, Dec. 26,
2001]

§ 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 con-

sumer that demands electric service
over a period of less than five years.
(c) Borrowers may assess contributions in aid of construction provided
such assessments are consistent with
the policy set forth in this section.
[57 FR 1053, Jan. 9, 1992, as amended at 60 FR
67404, Dec. 29, 1995]

§ 1710.104 Service to non-RE Act beneficiaries.
(a) To the greatest extent practical,
loans are limited to providing and improving electric facilities to serve consumers that are RE Act beneficiaries.
When it is determined by the Administrator to be necessary in order to furnish or improve electric service in
rural areas, loans may, under certain
circumstances, be made to finance
electric facilities to serve consumers
that are not RE Act beneficiaries.
(b) Loan funds may be approved for
facilities to serve non-RE Act beneficiaries only if:
(1) The primary purpose of the loan is
to furnish or improve service for RE
Act beneficiaries; and
(2) The use of loan funds to serve
non-RE Act beneficiaries is necessary
and incidental to the primary purpose
of the loan.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5,
1992, as amended at 58 FR 66264, Dec. 20, 1993]

§ 1710.105 State 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

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§ 1710.106

7 CFR Ch. XVII (1–1–04 Edition)

be required before loan funds are advanced.
(c) In cases where state regulatory
authority approval has been obtained,
but the borrower has failed to proceed
with the project in a timely manner according to the schedule contained in
the borrower’s project design manual,
or if there are cost overruns or other
developments that threaten loan feasibility or security, RUS may require the
borrower to obtain a reaffirmation of
the project and its financing from the
state 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]

§ 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 § 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
§ 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

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Rural Utilities Service, USDA

§ 1710.108

request a loan period of not more than
4 years for transmission and substation
facilities and improvements or replacements of generation facilities. The loan
period for new generating facilities is
determined on a case by case basis. The
loan period for DSM activities will be
determined
in
accordance
with
§ 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 §§ 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 cor-

porate 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]

§ 1710.107 Amount lent for acquisitions.
The maximum amount that will be
lent for an acquisition is limited to the
value of the property, as determined by
RUS. If the acquisition price exceeds
this amount, the borrower shall provide the remainder without RUS financial assistance.
§ 1710.108 Mergers and consolidations.
(a) RUS encourages its borrowers to
consider merging or consolidating with
another electric borrower when such
action will contribute to greater operating efficiency and financial soundness.
(b) After a merger or consolidation,
RUS will give priority consideration
per § 1710.119 to the processing of loans

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§ 1710.109

7 CFR Ch. XVII (1–1–04 Edition)

for the surviving system to finance the
integration and rehabilitation of electric facilities, if necessary, and the improvement or extension of electric
service in rural areas. Such priority
consideration will also be given in the
case of a borrower that has merged or
consolidated with an electric system
that has not previously received RUS
financial assistance, if such system was
serving primarily rural residents at the
time of the merger or consolidation
and such rural residents will continue
to be served by the merged or consolidated system. RUS does not make
loans for costs incurred in effectuating
mergers or consolidations, such as
legal expenses or feasibility study
costs.
§ 1710.109 Reimbursement of general
funds and interim financing.
(a) Borrowers may request that a
loan include funds to reimburse general
funds and/or replace interim financing
used to finance equipment and facilities that were included in an RUS-approved construction work plan, work
plan amendment or other RUS-approved plan, and for which loan funds
have not been provided by RUS. Such
reimbursement and/or replacement of
interim financing may include the direct costs of procurement and construction, as well as the related cost of
engineering, architectural, environmental and other studies and plans
needed to support the project, when
such cost is capitalized as part of the
cost of the facilities.
(b) If procurement and/or construction of the equipment and facilities
was completed prior to the current
loan period, reimbursement, including
replacement of interim financing, will
be limited, except in cases of extreme
financial hardship as determined by
the Administrator, to the cost of procurement and construction completed
during the period immediately preceding the current loan period, as specified in paragraph (c) of this section. As
defined in § 1710.2, the loan period begins on the date shown on page 1 of
RUS Form 740c, Cost Estimates and
Loan Budget for Electric Borrowers.
(c)(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]

§ 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

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Rural Utilities Service, USDA

§ 1710.110

in the same manner as RUS loans made
concurrently. Borrowers may elect to
repay the loans either in substantially
equal periodic installments covering
interest and principal, or in periodic
installments that include interest and
level amortization of principal.
(c) Supplemental financing required for
municipal rate loans—(1) Distribution
borrowers. (i) Distribution borrowers
that had, as of December 31, 1980, an
average consumer density of 2 or fewer
consumers per mile or an average adjusted plant revenue ratio (APRR), as
defined in § 1710.2, of over 9.0 shall obtain supplemental financing equal to 10
percent of their loan request.
(ii) All other distribution borrowers
must obtain supplemental financing
according to their plant revenue ratio
(PRR), as defined in § 1710.2, based on
the most recent year-end data available on the date of loan approval, as
follows:
Supplemental loan
percentage

PRR
9.00 and above ........................................
8.01–8.99 .................................................
8.00 and below ........................................

10
20
30

(iii) If a distribution borrower enters
into a merger, consolidation, or transfer of system substantially in its entirety, and the provisions of 7 CFR
1717.154(b) do not apply, required supplemental financing will be determined
as follows for loans approved by RUS
after December 19, 1996. If one of the
merging parties met the criteria in
paragraph (c)(1)(i) of this section prior
to the effective date of the merger consolidation or transfer, the borrower
will be required to obtain supplemental
financing equal to 10 percent of any
loan funds requested for facilities to
serve consumers located in the territory formerly served by the ‘‘paragraph
(c)(1)(i)’’
borrower.
The
required
amount of supplemental financing for
the rest of the loan will be determined
according to the provisions of paragraph (c)(1)(ii) of this section.
(2) Power supply borrowers. The supplemental loan proportion required of a
power supply borrower is based on the
simple arithmetic mean of the supplemental loan proportions required of the
borrower’s distribution members.

(3) Subsequent loans. (i) If more than 5
percent of an insured loan made prior
to November 1, 1993, or of a municipal
rate loan is terminated or rescinded,
the amount of supplemental financing
required in the borrower’s next loan
after the rescission for which supplemental financing is required, pursuant
to paragraph (a) of this section, will be
adjusted to average the actual supplemental financing portion on the terminated or rescinded loan with the supplemental financing portion that would
have been required on the new loan according to paragraphs (c)(1) and (2) of
this section, in accordance with the
formulas set forth in paragraphs
(c)(3)(ii) and (iii) of this section.
(ii) If a borrower’s supplemental financing requirement as set forth in
paragraphs (a), (c)(1), and (c)(2) of this
section has not changed between the
most recent loan and the loan being
considered, then the amount of supplemental financing required for the new
loan will be computed as follows:
Supplemental financing amount, new
loan = [(A + B) × C] ¥ D
where:
A = The total funds ($) actually advanced
from the first loan, including both RUS
loan funds and funds from the supplemental loan, plus any unadvanced funds
still available to the borrower after the rescission.
B = The total amount ($) for facilities of the
new loan request, including both RUS loan
funds and funds from supplemental loans.
C = The proportion (%) of supplemental financing required on the loans according to
paragraphs (a), (c)(1) and (c)(2) of this section.
D = The amount ($) of supplemental funds
actually advanced on the first loan, plus
any unadvanced supplemental funds still
available to the borrower after the rescission.

(iii) If a borrower’s supplemental financing requirement as set forth in
paragraphs (a), (c)(1), and (c)(2) of this
section has changed between the most
recent loan and the loan being considered, then the amount of supplemental
financing required for the new loan will
be the weighted average of the portions
otherwise applicable on the two loans
and will be computed as follows:
Supplemental financing amount, new
loan = (A×C1)+(B×C2)¥D

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§ 1710.111

7 CFR Ch. XVII (1–1–04 Edition)

where:
A = The total funds ($) actually advanced
from the first loan, including both RUS
loan funds and funds from the supplemental loan, plus any unadvanced funds
still available to the borrower after the rescission.
B = The total amount ($) for facilities of the
new loan request, including both RUS
funds and funds from supplemental loans.
C1 = The proportion (%) of supplemental financing required on the old loan according
to paragraphs (a), (c)(1) and (c)(2) of this
section.
C2 = 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]

§ 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 § 1710.109).

§ 1710.112 Loan feasibility.
(a) RUS will make a loan only if
there is reasonable assurance that the
loan, together with all outstanding
loans and other obligations of the borrower, will be repaid in full as scheduled, in accordance with the mortgage,
notes, and loan contracts. The borrower must provide evidence satisfactory to the Administrator that the
loan will be repaid in full as scheduled,
and that all other obligations of the
borrower will be met.
(b) Based on evidence submitted by
the borrower and other information,
RUS will use the following criteria to
evaluate loan feasibility:
(1) Projections of power requirements, rates, revenues, expenses, margins, and other factors for the present
system and proposed additions are
based on reasonable assumptions and
adequate supporting data and analysis,
including analysis of a range of assumptions for the significant variables,
when required by § 1710.300(d)(5).
(2) Projected revenues from the rates
proposed by the borrower are adequate
to meet the required TIER and DSC ratios based on the borrower’s total
costs, including the projected maximum debt service cost of the new loan.
(3) The economics of the borrower’s
operations and service area are such
that consumers can reasonably be expected to pay the proposed rates required to cover all expenses and meet
RUS TIER and DSC requirements, and
the borrower can reasonably compete
with other utilities and other energy
sources to prevent substantial load loss
while providing satisfactory service to
its consumers.
(4) Risks of possible loss of substantial loads from large consumers or
from load concentrations in particular
industries will not substantially impair
loan feasibility.
(5) Risks of loss of portions of the
borrower’s service territory from annexation or other causes will not substantially impair loan feasibility. If
there appears to be a substantial risk,
RUS may require additional information from the borrower, such as a summary and analysis of the risk by the
borrower; state, county or local planning reports having information on
projected growth or expansion plans of

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Rural Utilities Service, USDA

§ 1710.113

local communities; annexation plans of
the municipalities in question; and any
other relevant information.
(6) In states where rates or investment decisions are subject to approval
by state regulatory authorities, there
is reasonable expectation that such approvals will be forthcoming to enable
repayment of the loan in full according
to its terms.
(7) The experience and performance
of the system’s management is acceptable.
(8) In the case of joint ventures, the
borrower has sufficient management
control or other contractual safeguards
with respect to the construction and
operation of the jointly owned facility
to ensure that the borrower’s interests
are protected and the credit risk is
minimized.
(9) The borrower has implemented
adequate financial and management
controls and there are and have been
no significant financial or other irregularities.
(10) The borrower’s projected capitalization, measured by its equity as a
percentage of total assets, is adequate
to enable the borrower to meet its financial needs and to provide service
consistent with the RE Act. Among the
factors to be considered in reviewing
the borrower’s projected capitalization
are the economic strength of the borrower’s service territory, the inherent
cost of providing service to the territory, the disparity in rates between the
borrower and neighboring utilities, the
intensity of competition faced by the
borrower from neighboring utilities
and other power sources, and the relative amount of new capital investment required to serve existing or new
loads.
(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]

§ 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

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§ 1710.114

7 CFR Ch. XVII (1–1–04 Edition)

co-owned with other electric utilities),
the borrower shall, in addition to the
mortgage lien on all of the borrower’s
electric facilities, furnish adequate assurance, in the form of contractual or
other security arrangements, that the
system will be operated on an efficient
and continuous basis. Satisfactory evidence must also be provided that the
non-RUS financed system is financially
sound and under capable management.
Examples of such evidence include financial reports, annual reports, Security and Exchange Commission 10K reports if the system is required to file
them, credit reports from Standard and
Poor’s, Moodys or other recognized
sources, reports to state regulatory authorities and the Federal Energy Regulatory Commission, and evidence of a
successful track record in related construction projects.
(e) Additional controls on the borrower’s financial, investment and managerial activities appear in the loan
contract and mortgage required by
RUS.
[57 FR 1053, Jan. 9, 1992, as amended at 62 FR
7665, Feb. 20, 1997]

§ 1710.114 TIER, DSC,
ODSC requirements.

OTIER

and

(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

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§ 1710.115

meet the requirements of this paragraph under the assumption that average weather conditions in the borrower’s service territory will prevail in
the future, including average system
damage and outages due to weather
and the related costs. Failure to design
and implement rates pursuant to the
requirements of this paragraph shall be
an event of default upon notice provided in accordance with the terms of
the borrower’s mortgage or loan contract.
(2) Retrospective requirement. The average coverage ratios achieved by a
borrower in the 2 best years out of the
3 most recent calendar years must
meet the levels required by paragraph
(b) of this section. If a borrower fails to
achieve these average levels, it must
promptly notify RUS in writing. Within 30 days of such notification or of the
borrower being notified in writing by
RUS, whichever is earlier, the borrower, in consultation with RUS, must
provide a written plan satisfactory to
RUS setting forth the actions that will
be taken to achieve the required coverage ratios on a timely basis. Failure
to develop and implement a plan satisfactory to RUS shall be an event of default upon notice provided in accordance with the terms of the borrower’s
mortgage or loan contract.
(3) Fixed and variable expenses, as used
in this section, include but are not limited to: all taxes, depreciation, maintenance expenses, and the cost of electric
power and energy and other operating
expenses of the electric system, including all obligations under the wholesale
power contract, all lease payments
when due, and all principal and interest payments on outstanding indebtedness when due.
(e) Requirements for advance of funds.
(1) If a borrower applying for a loan has
failed to achieve the coverage ratios
required by paragraph (b) of this section during the latest 12 month period
immediately preceding approval of the
loan, or if any of the borrower’s average coverage ratios for the 2 best years
out of the most recent 3 calendar years
were below the levels required in paragraph (b) of this section, RUS may
withhold the advance of loan funds
until the borrower has adopted an annual financial plan and operating budg-

et 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]

§ 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

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§ 1710.116

7 CFR Ch. XVII (1–1–04 Edition)

are a separate class of loans and usually have a final maturity of less than
10 years.
(b) Loans made or guaranteed by
RUS for facilities owned by the borrower generally must be repaid with interest within a period, up to 35 years,
that approximates the expected useful
life of the facilities financed. The expected useful life shall be based on the
weighted average of the useful lives
that the borrower proposes for the facilities financed by the loan, provided
that the proposed useful lives are
deemed appropriate by RUS. RUS
Form 740c, Cost Estimates and Loan
Budget for Electric Borrowers, submitted as part of the loan application
must include, as a note, either a statement certifying that at least 90 percent
of the loan funds are for facilities that
have a useful life of 33 years or longer,
or a schedule showing the costs and
useful life of those facilities with a useful life of less than 33 years. If the useful life determination proposed by the
borrower is not deemed appropriate by
RUS, RUS will base expected useful life
on an independent evaluation, the
manufacturer’s estimated useful-life or
RUS experience with like-property, as
applicable. Final maturities for loans
for the implementation of programs for
demand side management and energy
resource conservation and on and off
grid renewable energy sources not
owned by the borrower will be determined by RUS. Due to the uncertainty
of predictions over an extended period
of time, RUS may add up to 2 years to
the composite average useful life of the
facilities in order to determine final
maturity.
(c) [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 54336, May 7,
2003]

§ 1710.116

[Reserved]

§ 1710.117 Environmental
ations.

consider-

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.
§ 1710.118

[Reserved]

§ 1710.119

Loan processing priorities.

(a) Generally loans are processed in
chronological order based on the date
the complete application is received in
the Regional office.
(b) The Administrator may give priority to processing loans that are required to meet the following needs:
(1) To restore electric service following a major storm or other catastrophe;
(2) To bring existing electric facilities into compliance with any environmental requirements imposed by Federal or state law that were not in effect
at the time the facilities were originally constructed;
(3) To finance the capital needs of
borrowers that are the result of a
merger, consolidation, or a transfer of
a system substantially in its entirety,
provided that the merger, consolidation, or transfer has either been approved by RUS or does not need RUS
approval pursuant to the borrower’s
loan documents (See 7 CFR 1717.154); or
(4) To correct serious safety problems, other than those resulting from
borrower mismanagement or negligence.
(c) The Administrator may also
change the normal order of processing
loan applications when it is necessary
to ensure that all loan authority for
the fiscal year is utilized.
[57 FR 1053, Jan. 9, 1992, as amended at 61 FR
66871, Dec. 19, 1996]

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§ 1710.151

§ 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.
§ 1710.121

Insurance requirements.

Borrowers are required to comply
with certain requirements with respect
to insurance and fidelity coverage as
set forth in 7 CFR part 1788.
§ 1710.122 Equal opportunity and nondiscrimination.
Borrowers are required to comply
with certain regulations on nondiscrimination in program services and
benefits and on equal employment opportunity as set forth in RUS Bulletins
20–15 and 20–19 or their successors; 7
CFR parts 15 and 15b; and 45 CFR part
90.
§ 1710.123

§ 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.
§§ 1710.128–1710.149

Debarment and suspension.

Borrowers are required to comply
with certain requirements on debarment and suspension as set forth in 7
CFR part 3017.
§ 1710.124

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.

Uniform Relocation Act.

Borrowers are required to comply
with applicable provisions of 49 CFR
part 24, which sets forth the requirements of the Uniform Relocation Assistance and Real Property Acquisition
Policy Act of 1970 (Pub. L. 91–646; 84
Stat. 1894), as amended by the Uniform
Relocation Act Amendments of 1987
(Pub. L. 100–17; 101 Stat. 246–256) and
the Intermodal Surface Transportation
Efficiency Act of 1991.
§ 1710.125 Restrictions on lobbying.
Borrowers are required to comply
with certain requirements with respect
to restrictions on lobbying activities.
See 7 CFR part 3018.
§ 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

[Reserved]

Subpart D—Basic Requirements
for Loan Approval
§ 1710.150

General.

The RE Act and prudent lending
practice require that the Administrator make certain findings before approving an electric loan or loan guarantee. The borrower shall provide the
evidence determined by the Administrator to be necessary to make these
findings.
§ 1710.151 Required
loans.

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(a) Area coverage. Adequate electric
service will be made available to the
widest practical number of rural users
in the borrower’s service area during
the life of the loan. See § 1710.103.
(b) Feasibility. The loan is feasible
and it will be repaid on time according
to the terms of the mortgage, note, and
loan contract. At any time after the
original determination of feasibility,
the Administrator may require the borrower to demonstrate that the loan remains feasible if there have been, or
are anticipated to be, material changes
in the borrower’s costs, loads, rates,

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7 CFR Ch. XVII (1–1–04 Edition)

rate disparity, revenues, or other relevant factors from the time that feasibility was originally determined. See
§ 1710.112 and subpart G of this part.
(c) Security. RUS will have a first lien
on the borrower’s total system or other
adequate security, and adequate financial and managerial controls will be included
in
loan
documents.
See
§ 1710.113.
(d) Interim financing. For loans that
include funds to replace interim financing, there is satisfactory evidence
that the interim financing was used for
purposes approved by RUS and that the
loan meets all applicable requirements
of this part.
(e) Facilities for nonrural areas. Whenever a borrower proposes to use loan
funds for the improvement, expansion,
construction, or acquisition of electric
facilities for non-RE Act beneficiaries,
there is satisfactory evidence that such
funds are necessary and incidental to
furnishing or improving electric service for RE Act beneficiaries. See
§ 1710.104.
(f) Facilities to be included in rate base.
In states having jurisdiction, the borrower has provided satisfactory evidence based on the information available, such as an opinion of counsel,
that the state regulatory authority
will not exclude from the borrower’s
rate base any of the facilities included
in the loan request, or otherwise prevent the borrower from charging rates
sufficient to repay with interest the
debt incurred for the facilities. Such
evidence may be based on, but not necessarily limited to, the provisions of
applicable state laws; the rules and
policies of the state authority; precedents in other similar cases; statements made by the state authority;
any assurances given to the borrower
by the state authority; and other relevant information and experience.
§ 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]

§ 1710.153 Additional
and procedures.

requirements

Additional requirements and procedures for obtaining RUS financial assistance are set forth in 7 CFR part 1712
for loan guarantees, and in 7 CFR part
1714 for insured loans.
§§ 1710.154–1710.199

[Reserved]

Subpart E—Load Forecasts
SOURCE: 65 FR 14786, Mar. 20, 2000, unless
otherwise noted.

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Rural Utilities Service, USDA

§ 1710.203

§ 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
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.
§ 1710.201 General.
(a) The policies, procedures and requirements in this subpart are intended to implement provisions of the
loan documents between RUS and the
electric borrowers and are also necessary to support approval by RUS of
requests for financial assistance.
(b) Notwithstanding any other provisions of this subpart, RUS may require
any power supply or distribution borrower to prepare a new or updated load
forecast for RUS approval or to maintain an approved load forecast on an
ongoing basis, if such documentation is
necessary for RUS to determine loan
feasibility, or to ensure compliance
under the loan documents.
§ 1710.202 Requirement to prepare a
load forecast—power supply borrowers.
(a) A power supply borrower with a
total utility plant of $500 million or
more must maintain 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.
§ 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

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§ 1710.204

7 CFR Ch. XVII (1–1–04 Edition)

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
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.

§ 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 § 1710.202 or § 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.
§ 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:

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§ 1710.206

(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;
(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.
§ 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
§ 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

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§ 1710.207

7 CFR Ch. XVII (1–1–04 Edition)

evaluating the potential effects on
electric revenues caused by competition from alternative energy sources or
other electric suppliers. Examples of
external uses include meeting state
and Federal regulatory requirements,
obtaining financial ratings, and participation in reliability council, power
pool, regional transmission group,
power supplier or member system forecasting and planning activities.
(2) Resources used to develop the load
forecast. The discussion shall identify
and discuss the borrower personnel,
consultants, data processing, methods
and other resources used in the preparation of the load forecast. The borrower shall identify the borrower’s
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. Computergenerated 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.
§ 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

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§ 1710.209

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.
§ 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.

§ 1710.209 Approval requirements for
load forecast work plans.
(a) In addition to the approved load
forecast required under §§ 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.

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§ 1710.210

7 CFR Ch. XVII (1–1–04 Edition)

(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
§ 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
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.
§ 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’ objec-

tives and if the requirement imposes a
substantial burden on the borrower.
The borrower’s general manager must
request the waiver in writing.
§§ 1710.211–1710.249

[Reserved]

Subpart F—Construction Work
Plans and Related Studies
§ 1710.250

General.

(a) An ongoing, integrated planning
system is needed by borrowers to determine their short-term and long-term
needs for plant additions, improvements, replacements, and retirements.
The primary components of the system
consist of long-range engineering
plans, construction work plans (CWPs),
CWP amendments, and special engineering and cost studies. Long range
engineering plans identify plant investments required over a period of 10
years or more. CWPs specify and document plant requirements for the shortterm, 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

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§ 1710.251

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
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 longrange 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]

§ 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.

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§ 1710.252

7 CFR Ch. XVII (1–1–04 Edition)

Construction of new generation capacity need not be included in a CWP but
must be specified and supported by specific engineering and cost studies. (See
§ 1710.253.)
(b) A distribution borrower’s CWP
shall 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.
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]

§ 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 § 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

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Rural Utilities Service, USDA

§ 1710.254

and Data Acquisition equipment, including communications, dispatching
and sectionalizing equipment, and load
management equipment;
(3) The borrower’s proportionate
share of transmission facilities required to tie together the operating
systems of supporting power pools and
to connect with adjacent power suppliers;
(4) Improvements and replacements
of generation facilities; and
(5) The cost of engineering, architectural, environmental and other studies
and plans needed to support the construction of facilities, when such cost
is capitalized as part of the cost of the
facilities.
(d) A CWP for transmission facilities
shall normally include studies of load
flows, voltage regulation, and stability
characteristics to demonstrate system
performance and needs.
[57 FR 1053, Jan. 9, 1992, as amended at 60 FR
3731, Jan. 19, 1995; 60 FR 67405, Dec. 29, 1995]

§ 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 purchasedpower options are set forth in § 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.
§ 1710.254 Alternative
power.

sources

(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

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§§ 1710.255–1710.299

7 CFR Ch. XVII (1–1–04 Edition)

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,
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 cogenerators, 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]

§§ 1710.255–1710.299

[Reserved]

Subpart G—Long-Range Financial
Forecasts
§ 1710.300

General.

(a) RUS encourages borrowers to
maintain a current long-range financial forecast. The forecast should be

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Rural Utilities Service, USDA

§ 1710.300

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
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 § 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,

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§ 1710.301

7 CFR Ch. XVII (1–1–04 Edition)

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]

§ 1710.301 Financial
forecasts—distribution borrowers.
(a) Financial forecasts prepared by
distribution borrowers shall cover at
least a ten-year period, unless a shorter period is authorized by other RUS
regulations.
(b) In addition to the requirements
set forth in § 1710.300 of this part, financial forecasts prepared by distribution
borrowers in support of a loan application shall:
(1) Include expenditures for any
maintenance determined to be needed
in the current system’s operation and
maintenance review and evaluation in
order to comply with mortgage covenants and prudent utility practice;
(2) Fully explain the basis for the
power cost projections used. Generally,
the power supplier’s most recent forecasted rates shall be used; and
(3) Use RUS Form 325 or computergenerated equivalent reports.
§ 1710.302 Financial forecasts—power
supply borrowers.
(a) The requirements of this section
apply only to financial forecasts submitted by power supply borrowers in
support of a loan from RUS. The financial forecast prepared by power supply
borrowers shall demonstrate the effects
that the addition of generation, transmission and any distribution facilities
will have on the power supply borrower’s sales, costs, and revenues, and
on the cost of power to the member distribution systems.
(b) The financial forecast shall cover
a period of 10 years. RUS may request
projections for a longer period of time
if RUS deems necessary.
(c) Financial forecasts prepared in
support of loan applications to finance
additional generation capacity shall
include a power cost study as set forth
in § 1710.303.
(d) In addition to the requirements
set forth in § 1710.300, financial forecasts prepared by power supply borrowers shall:

(1) Identify all plans for generation
and transmission capital additions and
system operating expenses on a yearby-year basis, beginning with the
present and running for 10 years, unless
a longer period of time has been requested by RUS.
(2) Integrate projections of operation
and maintenance expenses associated
with existing plant with those of new
proposed facilities to determine total
costs of system operation as well as the
costs of new generation and generation-related facilities;
(3) Provide an in-depth analysis of
the regional markets for power if loan
feasibility depends to any degree on a
borrower’s ability to sell surplus power
while its system loads grow to meet
the planned capacity of a proposed
plant;
(4) If not previously submitted, furnish RUS with all material information on operating agreements, ownership agreements, fuel contracts and
any other special agreements that affect annual cost projections, as may be
required by RUS on a case by case
basis; and
(5) Include sensitivity analysis if required
by
RUS
pursuant
to
§ 1710.300(d)(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]

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Rural Utilities Service, USDA

§ 1710.401

§ 1710.303 Power cost studies—power
supply borrowers.
(a) All applications for financing of
additional generation capacity and the
associated bulk transmission facilities
shall be supported by a power cost
study to demonstrate that the proposed generation and associated transmission facilities are the most economical and effective means of meeting the borrower’s power requirements.
This study usually is a separate study
but it may be integrated with the financial forecast required by § 1710.302.
(b) A power cost study shall include
the following basic elements:
(1) A study of all reasonably available self-generation, purchased-power,
load management, and energy conservation alternatives as set forth in
§§ 1710.253 and 1710.254;
(2) A present-value analysis of the
costs of the alternatives and their effects on total power costs, covering a
period of at least 10 years beyond the
projected in-service date of the facilities;
(3) A description of proposed new
power-purchase contracts or revisions
to existing contracts, and an analysis
of the effects on power costs;
(4) Use of sensitivity analyses to determine the vulnerability of the alternatives to a reasonable range of assumptions about fuel costs, failure to
achieve projected load growth, changes
in operating and financing costs, and
other major factors, if the financial
forecast is used in support of a loan or
loan guarantee that exceeds the smaller of $25 million or 10 percent of the
borrower’s total utility plant. Individual sensitivity analyses need not be
duplicated if they have been included
in other materials submitted to RUS;
and
(5) Assessment of the financial risks
of the various alternatives, especially
as between capital-intensive and noncapital-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 sensi-

tivity analyses required by paragraph
(b)(4) of this section.
(Approved by the Office of Management and
Budget under control number 0572–0032)

§§ 1710.304–1710.349

[Reserved]

Subpart H [Reserved]
Subpart I—Application Requirements and Procedures for
Loans
SOURCE: 60 FR 3731, Jan. 19, 1995, unless
otherwise noted.

§ 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 § 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 § 1710.401(a)(8).
§ 1710.401 Loan
ments.

application

(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

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§ 1710.401

7 CFR Ch. XVII (1–1–04 Edition)

Loan Application, or a computer generated equivalent as this list.
(1) Transmittal letter. A letter signed
by the borrower’s manager indicating
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 (§ 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 § 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 § 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.

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Rural Utilities Service, USDA

§ 1710.401

(5) Financial and statistical report. Distribution borrowers shall submit these
data on RUS Form 7; power supply borrowers shall use RUS Form 12. The
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
§ 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 § 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,

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§ 1710.401

7 CFR Ch. XVII (1–1–04 Edition)

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
§ 1710.124.
(12) Lobbying. The following information on lobbying is required pursuant
to 7 CFR part 3018 and § 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 §§ 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.

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Rural Utilities Service, USDA

§ 1710.401

(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
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 §§ 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 § 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

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§§ 1710.402–1710.403

7 CFR Ch. XVII (1–1–04 Edition)

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)

§§ 1710.402–1710.403

[Reserved]

AUTHORITY: 7 U.S.C. 901 et seq.; 1921 et seq.;
and 6941 et seq.
SOURCE: 58 FR 66260, Dec. 20, 1993, unless
otherwise noted.

§ 1710.404 Additional requirements.
Additional requirements for insured
electric loans are set forth in 7 CFR
part 1714.
§ 1710.405 Supplemental financing documents.
(a) The borrower is responsible for
ensuring that the loan documents required for supplemental financing pursuant to § 1710.110 are executed in a
timely fashion. These documents are
subject to RUS approval.
(b) Security. Any security offered by
the borrower to a supplemental lender
is subject to RUS approval.
§ 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.
§ 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.

PART 1714—PRE-LOAN POLICIES
AND PROCEDURES FOR INSURED
ELECTRIC LOANS
Subpart A—General
Sec.
1714.1 [Reserved]
1714.2 Definitions.
1714.3 Applicability of provisions.
1714.4 Interest rates.
1714.5 Determination of interest rates on
municipal rate loans.
1714.6 Interest rate term.
1714.7 Interest rate cap.
1714.8 Hardship rate loans.
1714.9 Prepayment of insured loans.
1714.10–1714.49 [Reserved]

Subpart B—Terms of Insured Loans
1714.50–1714.54

1714.55 Advance of funds from insured loans.
1714.56 Fund advance period.
1714.57 Sequence of advances.
1714.58 Amortization of principal.
1714.59 Rescission of loans.

[Reserved]

Subpart A—General
§ 1714.1

[Reserved]

§ 1714.2 Definitions.
The definitions set forth in 7 CFR
1710.2 are applicable to this part, unless
otherwise stated. References to specific
RUS forms and other RUS documents,
and to specific sections of such forms
and documents, shall include the corresponding forms, documents, sections
and lines in any subsequent revisions
of these forms and documents.
§ 1714.3 Applicability of provisions.
(a) Insured electric loans approved on
or after November 1, 1993. On November
1, 1993, the Rural Electrification Loan
Restructuring Act, Pub. L. 103–129, 107
Stat. 1356, (RELRA) amended the Rural
Electrification Act of 1936, 7 U.S.C. 901
et seq., (RE Act) to establish a new interest rate structure for insured electric loans. Insured electric loans approved on or after this date, are either
municipal rate loans or hardship rate
loans. Borrowers meeting the criteria
set forth in § 1714.8 are eligible for 5
percent hardship rate loans. The interest rate on loans to other borrowers is
the municipal interest rate, and borrowers meeting the criteria set forth in
§ 1714.7 are eligible for the interest rate
cap on their municipal rate loans. Interest rates for the initial interest rate
term and rollover terms (§ 1714.6) will
be determined pursuant to § 1714.4. Provisions for prepayment are set forth in
§ 1714.9. The provisions of this subpart
apply to loans approved on or after November 1, 1993, unless otherwise stated.
(b) Insured electric loans approved prior
to November 1, 1993. These loans have a
single interest rate applicable to the
entire loan. The rate is generally 5 percent, but, in some cases, may be as low
as 2 percent. These loans have a single
interest rate term and may be prepaid

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