[Federal Register Volume 60, Number 12 (Thursday, January 19, 1995)]
[Rules and Regulations]
[Pages 3726-3735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1051]
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DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Parts 1710, 1712, 1714, 1717, 1719, and 1785
RIN 0572-AA69
Loan Policies and Procedures for Electric Loans
AGENCY: Rural Utilities Service, USDA.
ACTION: Final rule.
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SUMMARY: The Rural Utilities Service (RUS) hereby amends its
regulations for electric loans. Key provisions of this regulation
include: Lengthening the allowable construction financing period for
most electric loans; clarifying RUS requirements for supplemental
financing concurrent with municipal rate loans; substantially modifying
the requirement that borrowers develop and maintain certain levels of
equity; and clearly setting forth the documents required for a complete
loan application. In addition, this regulation eliminates some policies
and procedures that have become obsolete. This regulation is intended
to simplify loan application procedures for borrowers and reduce
administrative costs to the Government.
EFFECTIVE DATE: This rule is effective February 21, 1995.
FOR FURTHER INFORMATION CONTACT: Sue Arnold, Financial Analyst, U.S.
Department of Agriculture, Rural Utilities Service, room 2230-s, 14th
Street and Independence Avenue, SW., Washington, DC 20250-1500.
Telephone: 202-720-0736. FAX 202-742-4120.
SUPPLEMENTARY INFORMATION: This rule has been determined to be not
significant for the purposes of Executive Order 12866 and therefore has
not been reviewed by the Office of Management and Budget (OMB). The
Administrator of RUS has determined that the Regulatory Flexibility Act
(5 U.S.C. 601 et seq.) does not apply to this rule. The Administrator
of RUS has determined that this rule will not significantly affect the
quality of the human environment as defined by the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). Therefore,
this action does not require an environmental impact statement or
assessment. The program described by this rule is listed in the Catalog
of Federal Domestic Assistance Programs under number 10.850 Rural
Electrification Loans and Loan Guarantees. This catalog is available on
a subscription basis from the Superintendent of Documents, the United
States Government Printing Office, Washington, DC 20402-9325. This rule
is excluded from the scope of Executive Order 12372, Intergovernmental
Consultation, which may require consultation with State and local
officials. A Notice of Final Rule titled Department Programs and
Activities Excluded from Executive Order 12372 (50 FR 47034) exempts
electric loans and loan guarantees made pursuant to the Rural
Electrification Act of 1936, as amended (7 U.S.C. 901 et seq.) (RE
Act), from coverage under this Order. This rule has been reviewed under
Executive Order 12778, Civil Justice Reform. This rule: (1) Will not
preempt any state or local laws, regulations, or policies, unless they
present an irreconcilable conflict with this rule; (2) Will not have
any retroactive effect; and (3) Will not require administrative
proceedings before any parties may file suit challenging the provisions
of this rule.
Information Collection and Recordkeeping Requirements
The existing recordkeeping and reporting burdens contained in this
rule were approved by OMB pursuant to the Paperwork Reduction Act of
1980 (44 U.S.C. 3501 et seq.), under control numbers 0572-0017, 0572-
0032, and 0572-0103.
Send questions or comments regarding these burdens or any other
aspect of these collections of information, including suggestions for
reducing the burden, to the Office of
[[Page 3727]]
Information and Regulatory Affairs, Office of Management and Budget,
Attention: Desk Officer for USDA, room 3201, NEOB, Washington, DC
20503.
Background
On August 5, 1994, at 59 FR 39972, the Rural Electrification
Administration (REA) proposed several amendments to pre-loan
regulations affecting both insured and guaranteed electric loans
pursuant to the Rural Electrification Act of 1936, as amended (7 U.S.C.
901 et seq.) (RE Act). These amendments are intended to enhance the
delivery of customer service by facilitating the application process
for borrowers, and reducing administrative costs to the Government. Key
provisions of the proposed rule include lengthening the allowable
construction financing period for many electric loans; substantially
revising the requirement that borrowers achieve and maintain certain
levels of equity; and clearly listing the documents required for a
complete loan application.
Since publication of the proposed rule, the Federal Crop Insurance
Reform and Department of Agriculture Reorganization Act of 1994 (Pub.
L. 103-354, 108 Stat. 3178) (Reorganization Act) has been enacted. The
Reorganization Act requires in section 232(a) that the Secretary of
Agriculture (Secretary) establish and maintain within the Department of
Agriculture the Rural Utilities Service (RUS). Section 232(c)(1)(A)
requires that the Secretary carry out through RUS electric loan
programs authorized under the RE Act. Secretary's Memorandum 1010-1,
Reorganization of the Department of Agriculture, issued October 20,
1994, abolished REA and established RUS. On December 27, 1994, the
Department of Agriculture published a notice in the Federal Register at
59 FR 66517 announcing this reorganization. In other words, RUS is the
successor to REA with respect to electric loan and loan guarantee
programs under the RE Act.
Rules formerly published by REA were reassigned to RUS pursuant to
a final rule published in the Federal Register on December 27, 1994, at
59 FR 66438. Therefore, this final rule culminating a rulemaking
proceeding initiated by REA is being published by RUS. According to 7
CFR 1710.3 of the rule changing nomenclature, the terms ``RUS
bulletin'' and ``RUS form'' have the same meaning as the terms ``REA
bulletin'' and ``REA form, `` respectively.
The period for public comments on the REA proposed rule expired
October 4, 1994. Twenty-one comments were received from individual
borrowers, associations representing borrowers, a lender that provides
supplemental financing to electric borrowers, and an engineering
consulting firm. In general, comments expressed support for the
proposed rule. A number of comments addressed specific provisions.
Loan Period
The first of the amendments in the proposed rule lengthens the
allowable loan period to 4 years for both insured and guaranteed loans
for the construction of distribution and transmission facilities and
for improvements to generation facilities. The loan period, sometimes
referred to as the financing period, means the period of time during
which the facilities included in a loan application will be
constructed. In the past, loans to distribution borrowers were limited
to a 2 year loan period, and loans to power supply borrowers to a 3
year period. Some borrowers needed to apply for loans every 2 or 3
years in order to meet their financing needs. RUS believes that
allowing a longer loan period will, in the long run, significantly
reduce loan application costs to Agency customers, including RUS
borrowers and supplemental lenders, as well as loan processing costs to
the Government. Borrowers will still have the option of applying for
loans for a shorter period, if they so desire, and RUS reserves the
right to limit loans to a period of less than 4 years under certain
circumstances.
Most commentors supported the changes proposed. Several requested
that RUS allow more loan fund advances on a municipal rate loan made
for a longer loan period. The proposed rule at 7 CFR 1714.6(a)(2) would
allow up to 6 advances from a municipal rate loan if the loan period is
2 years or less, and up to 8 advances if the loan period is longer than
2 years. A limit on the number of loan fund advances from municipal
rate loans was first set forth in the rule published December 20, 1993,
at 58 FR 66260, that established the municipal rate loan program. As
noted in the preamble to this rule at 58 FR 66261, the limit was
intended to provide borrowers with financial flexibility, while
minimizing the administrative costs to the Government of tracking
multiple advances, each bearing its own interest rate, interest rate
term, and rollover maturity date. Agency research conducted before
publication of the 1993 rule indicated that the vast majority of loans
were fully advanced in 6 or fewer advances.
The comment period on the 1993 rule closed on March 21, 1994, and
no comments on were received on limiting the number of advances. RUS
believes that 8 advances from a municipal rate loan with a 4 year loan
period will allow the borrowers sufficient flexibility. Because
hardship rate loans and guaranteed loans bear a single interest rate
for the entire amount, and there are no interest rate terms or rollover
maturity dates associated with these loans, there is no limit on the
number of advances.
One commentor, an engineering consulting firm, opposed a 4 year
loan period. The commentor questioned RUS' ability to maintain adequate
engineering oversight over facilities constructed under a longer
construction work plan (CWP). RUS is confident that electric system
reliability will not suffer as a result of a longer financing period.
RUS reserves in, Sec. 1710.106(f), the right to approve a loan period
shorter than the period requested by the borrower if a loan for the
longer period would fail to meet RUS requirements for loan feasibility
and security.
Fund Advance Period
In conjunction with lengthening the allowable loan period, the rule
proposed lengthening the fund advance period, which is the period
during which RUS may advance funds to the borrower from an insured
loan. Agency policy first promulgated in 1984 provides that the fund
advance period terminates automatically 4 years after the date of the
loan contract. To allow borrowers to complete construction projects
based on a loan period of more than 2 years, the rule proposed, in
Sec. 1714.56, that funds from insured loans approved on or after the
effective date of the rule may be advanced for a period beginning on
the date of the loan note and lasting 1 year longer than the loan
period, provided that the fund advance period may not be shorter than 4
years. In other words, if the loan period is 3 years or less, the fund
advance period would terminate 4 years after the date of the loan note;
if the loan period is 4 years, the fund advance period would terminate
5 years after the date of the note. The Administrator may approve an
extension of the fund advance period if the borrower meets the
requirements of Sec. 1714.56(c).
Several commentors expressed support for the proposed change. One
commentor suggested that the fund advance period be calculated from the
date of the first advance, rather than from the date of the loan note.
RUS believes, as stated in the preamble to the proposed rule, that,
dating the fund advance period from the date of the loan note assists
both the borrower and RUS,
[[Page 3728]]
by providing a fixed date that is determined as early as possible.
On April 7, 1993, at 58 FR 18043, REA published a proposed
amendment to 7 CFR part 1785, where provisions for automatic
termination of the insured electric loans were originally published,
that would, in effect, redesignate subpart A as 7 CFR 1785 subpart F.
Since automatic termination of the fund advance period on insured
electric loans is more closely related to the subject matter of part
1714 than of part 1785, RUS has determined that setting out the
requirements in detail in part 1714 would better serve the public.
Therefore, the rule published today removes subpart A (proposed subpart
F) of part 1785.
Supplemental Financing
Another amendment in the proposed rule clarifies policy on
supplemental financing requirements. Except in cases of financial
hardship, applicants for a municipal rate insured loan are required to
obtain a portion of their loan funds from a supplemental source without
an RUS guarantee. The method for determining the supplemental financing
percentage for each individual loan is set forth in 7 CFR 1710.110(c)
(1) and (2). For most borrowers, this percentage is based on the
borrower's plant revenue ratio (PRR), as defined in Sec. 1710.2. To
clarify the requirement for those borrowers whose PRR changes between
the time of the loan application and the time of loan approval, the
rule proposed to codify the policy of using the PRR based on the most
recent year-end data available on the date of loan approval.
The rule further proposed to clarify policies in cases where
termination or rescission of an insured loan, or its associated
supplemental loan, substantially affects the overall proportion of RUS
and supplemental financing to a borrower. Under longstanding policy,
the amount of supplemental financing required on that borrower's next
municipal rate loan is adjusted to maintain the overall proportion of
RUS to supplemental financing. The rule published today clarifies that
the adjustment will only be made following rescission or termination of
more than 5 percent of an insured loan subject to supplemental
financing. No adjustment will be made based on rescission of a hardship
rate loan where no supplemental financing was required. The amendment
will also set forth the formula used to compute the adjustment.
Most commentors supported the proposed changes. One commentor
suggested an alternative to PRR in determining the amount of
supplemental financing required. RUS is analyzing other possible
methods of targeting assistance to needy communities. Changes in the
methodology for determining the supplemental financing proportions may
be proposed at a later date.
Amortization of Principal
In conjunction with lengthening the allowable loan period, the
agency proposed that principal amortization on advances made more than
2 years after the date of the note begin with the loan payment billed
in the next full month after the month of the advance. For example,
principal amortization on funds advanced any time during the month of
June of the third year after the date of the note would begin with the
bill sent to the borrower in July of that year. In cases of financial
hardship, the Administrator may approve a principal deferment period of
up to 2 years for any advances made after the second year of the loan.
Most commentors expressed support for the proposed provisions. One
commentor believed that provisions concerning amortization are more
restrictive than provisions for deferral of principal permitted by
section 12 of the RE Act. Section 12 deferrals of principal are
permitted for the specific purposes set forth in the RE Act. Regulatory
provisions for amortization, on the other hand, apply uniformly to all
loans. RUS believes that the provisions in the proposed rule concerning
amortization of principal are appropriate.
Final Maturity
Another amendment makes technical changes in the method used to
evaluate final maturity of loans. RUS loans must be repaid with
interest within a period, up to 35 years, that approximates the
expected useful life of the facilities financed. The old rule based
expected useful life on the weighted average of the depreciation rates
proposed by the borrower. The amendment provides that final maturity
will based on the weighted average useful life of the facilities
financed, instead of depreciation rates.
One commentor objected to the proposed change, stating that the
agency should continue to base final maturity on depreciation rates,
and that depreciation rates should be modified to more accurately
reflect useful life. RUS agrees that depreciation rates should reflect
useful life. However, basing loan maturity directly on useful life is a
more straightforward approach that RUS believes will reduce
administrative costs for both the borrowers and the Government.
To facilitate the determination of the final maturity, RUS is
incorporating into the final rule published today, a provision from a
proposed rule published by REA on August 20, 1993, at 58 FR 44288.
According to this proposed rule, Long-Range Financial Forecasts of
Electric Borrowers, for the purpose of determining final loan maturity,
the borrower may either (1) Certify that at least 90 percent of the
loan funds are for facilities that have a useful life of 33 years or
longer, or (2) Submit a schedule showing the costs and useful life of
those facilities with a useful life of less than 33 years. Loan
maturity will be based on the weighted average of these useful lives.
Since exact useful life is often difficult to predict, RUS may add
up to two years to the composite average useful life in order to
compute loan maturity. In other words, if the weighted average useful
life of the facilities is 33 years, the final maturity for the loan may
be up to 35 years.
The comment period on the 1993 proposed rule, as extended by a
notice published September 30, 1993, at 58 FR 48800, closed on October
20, 1993. No commentors objected to the proposed method of
approximating the useful life of the facilities financed. Accordingly,
the rule published today includes this methodology in paragraph
1710.115(b). To set forth the specific loan application document for
the information about useful life, a new paragraph 1710.401(a)(3)(ii)
is added requiring that Form 740c, Cost Estimates and Loan Budget for
Electric Borrowers, include as a note, either a certification 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. The paragraphs designated in the proposed rule as
1710.401(a)(3)(ii) and (iii) are included in the final rule as
1710.401(a)(3)(iii) and (iv), respectively. Language in paragraph
1710.401(c)(1) of the proposed rule requiring a proposed schedule of
the useful life of facilities as part of the Long-range financial
forecast is removed from this final rule. A final rule on long-range
financial forecasts will be published at a later date.
Equity
The rule proposed replacing the requirement that certain borrowers
prepare a formal equity development plan with a more general
requirement that the borrower's capitalization is adequate to enable
the borrower to meet its financial needs and to provide electric
service consistent with the RE Act. Capital structure will be measured
[[Page 3729]]
by equity as a percentage of total assets and will be a factor in RUS's
evaluation of loan feasibility pursuant to = 1710.112, in determining
borrower eligibility for advance approval of a lien accommodation
pursuant to 7 CFR 1717.854, and in evaluating certain other borrower
requests under the mortgage.
Most commentors expressed support for this proposal. One commentor
opposed the proposal, arguing that the requirement to prepare and
follow an equity development plan better supports borrowers requesting
rate increases from state public utility commissions, and better
positions borrowers to obtain financing at market rates and replace old
plant with new more expensive plant. RUS agrees that reasonable levels
of equity are an important component of credit quality. However, as
stated in the preamble to the proposed rule, agency experience with
equity development plans has demonstrated that such plans are an
unnecessary and burdensome means of achieving the desired result.
One commentor requested that those borrowers who have adopted
equity development plans as a condition for obtaining an electric loan
be permitted to amend these plans pursuant to the new rule. RUS points
out that the new rule establishes, in Sec. 1710.112(b)(10), a new loan
feasibility criterion addressing the borrower's capitalization. It
would not be feasible to revisit each loan that required an equity
development plan as a condition of loan approval in the light of the
new loan feasibility criterion.
Credit Reform
A policy change mandated by the Federal Credit Reform Act of 1990
(2 U.S.C. 661f), affects loans approved on or after October 1, 1991.
The Federal Credit Reform Act requires Federal agencies to match funds
obligated, disbursed, and collected with their intended purposes.
Therefore, the rule proposed, in Sec. 1710.106(f), that advances of
funds from a loan made on or after that date be made only for primary
budget purposes included in that particular loan, unless the borrower
applies for and RUS approves a budget transfer. Primary budget purposes
as listed in RUS Bulletin 26-1, Budgetary Control and Advance of Loan
Funds, and on RUS Form 595, Financial Requirement and Expenditure
Statement, are (1) Distribution, (2) Transmission, (3) Generation, (4)
Headquarters Facilities, (5) Acquisitions, and (6) All Other.
Only one comment addressed this provision. The commentor recognized
the requirements of Federal Credit Reform, but hopes that RUS can find
a way to be flexible. The rule provides this flexibility by providing
that RUS may approve a budget transfer.
Loan Application Documents
Finally, the rule proposed to add new subpart I to part 1710 to set
forth a list of the documents and procedures required for a loan
application. This list is intended to facilitate the application
process for borrowers and supplemental or other lenders. The general
requirement to submit each of the documents is set forth in existing
part 1710 or in other RUS regulations. The proposed new subpart I is
simply a summary list for the convenience of the public. RUS is
exploring possibilities for electronic submission of certain documents.
Most commentors expressed support for such a list. Several had
specific suggestions for the list. A few commentors suggested a
materiality threshold for determining whether the lists of pending
actions by third parties and pending regulatory actions
(Sec. 1710.401(a)(1)(iv) and (v), respectively), are required. Another
would like a clear definition of a material change to real property
(Sec. 1710.401(a)(7)). RUS believes that the nature of these matters
precludes any rule of thumb for determining materiality. This
suggestion cannot be accepted.
However, another commentor suggested that the borrower be allowed
to combine into a single statement from counsel information on pending
litigation and the state regulatory approvals (Secs. 1710.401(a)(6) and
(15), respectively). RUS has no objection to accepting, in a single
statement, information from counsel required by Sec. 1710.401(a)(6),
(7), and (15), and clarification has been added to Sec. 1710.401(a)(6).
One commentor requested that the borrower be required to submit the
rate disparity and consumer income data needed for certain municipal
rate loans subject to the interest rate cap and for some hardship rate
loans to RUS prior to submitting the loan application. Language in
Sec. 1710.401(a)(8) encourages borrowers to provide this information to
the RUS general field representative prior to submitting the
application.
One commentor questioned the reference to subpart H of part 1710 in
connection with the requirement to submit a Demand Side Management Plan
(Sec. 1710.401(c)(2)(iv)). Subpart H of part 1710, Demand Side
Management and Renewable Energy Systems, was published January 4, 1994,
at 59 FR 494. Another suggested that RUS establish a threshold level
test for determining the need for RUS approval of security offered to a
supplemental lender (Sec. 1710.405(b)). RUS believes that the right to
approve collateral offered to a supplemental lender is necessary for
RUS to protect its loan security.
One commentor requested that RUS provide the borrower with written
grounds if a loan cannot be approved. Such language has been added to
Sec. 1710.406(b). See also Secs. 1710.401(d)(3) and (4) and .401(e).
Conforming Amendments to RUS Regulations
The rule published today includes conforming amendments to
Secs. 1710.7(d)(1)(vi), 1717.856(d), and 1717.860(e) to reflect the
elimination of the requirement to submit an equity development plan.
Other Regulations
On August 27, 1991, at 56 FR 42461, REA published 7 CFR Parts 1712
and 1719 that established pre- and post-loan policies for 90 percent
REA guarantees of certain loans from qualified private lenders. This
program was authorized under section 314 of the RE Act. The Rural
Electrification Loan Restructuring Act of 1993, Pub. L. 103-129, signed
by President Clinton on November 1, 1993, amended section 314 of the RE
Act to abolish this 90 percent guarantee program. RUS is, therefore,
removing 7 CFR parts 1712 and 1719. Regulations affecting loan
guarantees under sections 306, 306A, and 311 of the RE Act will be
published at a later date.
Other Issuances
Electric Operations Manual, EOM-1 Guide for the Preparation of
Electric Distribution Loan Applications is rescinded effective February
21, 1995.
In addition, this rule consolidates, updates, and, in some
instances, revises information contained in the following RUS
Bulletins:
20-5 Extensions of Payments of Principal and Interest
20-9 Loan Payments and Statements
26-1 Budgetary Control and Advance of Electric Loan Funds
86-3 Headquarters Facilities for Electric Borrowers
When this regulation and other related rules are effective, these
publications will be rescinded, in whole or in part, or revised.
Finally, RUS is rescinding RUS Bulletins 101-3, Business Management
for Board Members of Electric Cooperatives, and 103-1, A Practical
Approach to Making Policy, effective February 21, 1995. These bulletins
were last issued in 1978 and 1959, respectively, and RUS believes the
[[Page 3730]]
information they contain is obsolete and unnecessary.
List of Subjects
7 CFR Part 1710
Electric power, Electric utilities, Loan programs--energy, Rural
areas.
7 CFR Part 1712
Administrative practice and procedure, Electric power, Electric
utilities, Guaranteed program, Loan programs--energy, Reporting and
recordkeeping requirements, Rural areas.
7 CFR Part 1714
Electric power, Loan programs--energy, Rural areas.
7 CFR Part 1717
Administrative practice and procedure, Electric power, Electric
utilities, Intergovernmental relations, Investments, Lien
accommodation, Lien subordination, Loan programs--energy, Reporting and
recordkeeping requirements, Rural development.
7 CFR Part 1719
Administrative practice and procedure, Electric power, Electric
utilities, Guaranteed program, Loan programs--energy, Reporting and
recordkeeping requirements, Rural areas.
7 CFR Part 1785
Electric power, Loan programs--energy, Rural areas.
For the reasons set out in the preamble and under the authority of
7 U.S.C. 90 et seq., RUS amends 7 CFR Chapter XVII as follows:
PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO
INSURED AND GUARANTEED ELECTRIC LOANS
1.The authority citation for part 1710 continues to read as
follows:
Authority: 7 U.S.C. 901-950(b); Public Law 99-591, 100 Stat.
3341-16; Public Law 103-354, 108 Stat. 3178.
2. Section 1710.2 is amended by removing the existing definition of
``Loan Period'' and adding two new definitions in alphabetical order to
read as follows:
Sec. 1710.2 Definitions and rules of construction.
(a) * * *
Fund advance period means the period of time during which the
Government may advance loan funds to the borrower. See 7 CFR 1714.56.
* * * * *
Loan period means the period of time during which the facilities
included in a loan application will be constructed. It commences with
the date shown on page 1, in the block headed ``Cost Estimates as of,''
of RUS Form 740c, Cost Estimates and Loan Budget for Electric
Borrowers, which is the same as the date on the Financial and
Statistical Report submitted with the loan application. The loan period
may be up to 4 years for distribution borrowers and, except in the case
of a loan for new generating and associated transmission facilities, up
to 4 years for the transmission facilities and improvements or
replacements of generation facilities for power supply borrowers. The
loan period for new generating facilities is determined on a case by
case basis.
* * * * *
3. Section 1710.7 is amended by removing and reserving paragraph
(d)(1)(vi).
4. Section 1710.106 is amended by redesignating paragraph (d) as
paragraph (e) and adding new paragraphs (d) and (f) to read as follows:
Sec. 1710.106 Uses of loan funds.
* * * * *
(d) A distribution borrower may request a loan period of up to 4
years. Except in the case of loans for new generating and associated
transmission facilities, a power supply borrower may request a loan
period of not more than 4 years for transmission and substation
facilities and improvements or replacements of generation facilities.
The loan period for new generating facilities is determined on a case
by case basis. The loan period for DSM activities will be determined in
accordance with Sec. 1710.355. The Administrator may approve a loan
period shorter than the period requested by the borrower, if in the
Administrator's sole discretion, a loan made for the longer period
would fail to meet RUS requirements for loan feasibility and loan
security set forth in Secs. 1710.112 and 1710.113, respectively.
* * * * *
(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.
5. Section 1710.110 is amended by revising paragraph (c)(1)(ii) and
adding a new paragraph (c)(3) to read as follows:
Sec. 1710.110 Supplemental financing.
* * * * *
(c) Supplemental financing required for municipal rate loans--(1)
Distribution borrowers.
* * * * *
(ii) All other distribution borrowers must obtain supplemental
financing according to their plant revenue ratio (PRR), as defined in
Sec. 1710.2, based on the most recent year-end data available on the
date of loan approval, as follows:
------------------------------------------------------------------------
Supplemental loan
PRR percentage
------------------------------------------------------------------------
9.00 and above....................................... 10
8.01-8.99............................................ 20
8.00 and below....................................... 30
------------------------------------------------------------------------
* * * * *
(3) Subsequent loans. (i) If more than 5 percent of an insured loan
made prior to November 1, 1993, or of a municipal rate loan is
terminated or rescinded, the amount of supplemental financing required
in the borrower's next loan after the rescission for which supplemental
financing is required, pursuant to paragraph (a) of this section, will
be adjusted to average the actual supplemental financing portion on the
terminated or rescinded loan with the supplemental financing portion
that would have been required on the new loan according to paragraphs
(c)(1) and (2) of this section, in accordance with the formulas set
forth in paragraphs (c)(3)(ii) and (iii) of this section.
(ii) If a borrower's supplemental financing requirement as set
forth in paragraphs (a), (c)(1), and (c)(2) of this section has not
changed between the most recent loan and the loan being considered,
then the amount of supplemental financing required for the new loan
will be computed as follows:
Supplemental financing amount, new loan = [(A + B) x C] - D
where:
[[Page 3731]]
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 ($) of supplemental funds actually advanced on the first
loan, plus any unadvanced supplemental funds still available to the
borrower after the rescission.
(iii) If a borrower's supplemental financing requirement as set
forth in paragraphs (a), (c)(1), and (c)(2) of this section has changed
between the most recent loan and the loan being considered, then the
amount of supplemental financing required for the new loan will be the
weighted average of the portions otherwise applicable on the two loans
and will be computed as follows:
Supplemental financing amount, new loan = (A x C1)+(B x C2)-D
where:
A = The total funds ($) actually advanced from the first loan,
including both RUS loan funds and funds from the supplemental loan,
plus any unadvanced funds still available to the borrower after the
rescission.
B = The total amount ($) for facilities of the new loan request,
including both RUS funds and funds from supplemental loans.
C1 = The proportion (%) of supplemental financing required on the
old loan according to paragraphs (a), (c)(1) and (c)(2) of this
section.
C2 = The proportion (%) of supplemental financing required on the
new loan according to paragraphs (a), (c)(1) and (c)(2) of this
section.
D = The amount ($) of supplemental funds actually advanced on the first
loan, plus any unadvanced supplemental funds still available to the
borrower after the rescission.
* * * * *
6. Section 1710.112 is amended by adding a new paragraph (b)(10) to
read as follows:
Sec. 1710.112 Loan feasibility.
* * * * *
(b) * * *
(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.
7. Section 1710.115 is amended by revising paragraph (b) to read as
follows:
Sec. 1710.115 Final maturity.
* * * * *
(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. The useful lives proposed by the borrower for the facilities
financed must be consistent with the borrower's proposed depreciation
rates for these facilities. In states where the borrower must obtain
state regulatory authority approval of depreciation rates for rate
making purposes, the depreciation rates used for the purposes of this
paragraph shall be the rates currently approved by the state authority
or rates for which the borrower plans to seek state authority approval,
provided that these rates are deemed appropriate by RUS. In other
states, if the rates proposed by the borrower are not deemed
appropriate by RUS, RUS will base expected useful life on the
depreciation rates listed in Bulletin 183-1, or its successor, revising
such rates as necessary to reflect current industry practice (for
availability of bulletins, see Sec. 1710.5.). 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.
* * * * *
Sec. 1710.116 [Removed and Reserved]
8. Section 1710.116 is removed and reserved.
9. Section 1710.251 is amended by revising paragraph (b) to read as
follows:
Sec. 1710.251 Construction work plans--distribution borrowers.
* * * * *
(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.
* * * * *
10. Section 1710.252 is amended by revising paragraph (b) to read
as follows:
Sec. 1710.252 Construction work plans--power supply borrowers.
* * * * *
(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.
* * * * *
11. Subpart I is added to part 1710 to read as follows:
Subpart I--Application Requirements and Procedures for Insured and
Guaranteed Loans
Sec.
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.
[[Page 3732]]
Subpart I--Application Requirements and Procedures for Insured and
Guaranteed Loans
Sec. 1710.400 Initial contact.
(a) Loan applicants that do not have outstanding loans from RUS
should write to the Rural Utilities Service Administration, United
States Department of Agriculture, Washington, DC 20250-1500. A field or
headquarters staff representative may be assigned by RUS to visit the
applicant and discuss its financial needs and eligibility. Borrowers
that have outstanding loans should contact their assigned RUS general
field representative (GFR) or, in the case of a power supply borrower,
the Director, Power Supply Division. Borrowers may consult with RUS
field representatives and headquarters staff, as necessary.
(b) Before submitting an application for an insured loan the
borrower shall ascertain from RUS the amount of supplemental financing
required, as set forth in Sec. 1710.110. If the borrower is applying
for either a municipal rate loan subject to the interest rate cap or a
hardship rate loan, the application must provide a preliminary
breakdown of residential consumers either by county or by census tract.
Final data must be included with the application. See
Sec. 1710.401(a)(8).
Sec. 1710.401 Loan application documents.
(a) All borrowers. All applications for electric loans shall
include the documents listed in this paragraph. The first page of the
application shall be a list of the documents included in the
application. The borrower may use RUS Form 726, Checklist for Electric
Loan Application, or a computer generated equivalent as this list.
(1) Transmittal letter. A letter signed by the borrower's manager
indicating 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 amount, loan term, final maturity, and
method of amortization (Sec. 1710.110(b));
(ii) The sources and amounts of any supplemental or other
financing;
(iii) Authorization for RUS to release appropriate information to
supplemental or other lender(s), and authorization for these lenders to
release appropriate information to RUS; and
(iv) For an insured loan, a statement of whether the application is
for a municipal rate loan, with or without the interest rate cap, or a
hardship loan. If the application is for a municipal rate loan, the
board resolution must indicate whether the borrower intends to elect
the prepayment option. See 7 CFR 1714.4(c).
(3) RUS Form 740c, Cost Estimates and Loan Budget for Electric
Borrowers. This form together with its attachments lists the
construction, equipment, facilities and other cost estimates from the
construction work plan or engineering and cost studies, and the sources
of financing for each component. The date on page 1 of the form is the
beginning date of the loan period and shall be the same as the date on
the Financial and Statistical Report submitted with the application
(paragraph (a)(5) of this section). Form 740c also includes the
following information, exhibits, and attachments:
(i) Description of funds and materials. This description details
the availability of materials and equipment, any unadvanced funds from
prior loans, and any general funds the borrower designates, to
determine the amount of such materials and funds to be applied against
the capital requirements estimated for the loan period.
(ii) Useful life of facilities financed by the loan. Form 740c must
include, as a note, either a statement certifying that at least 90
percent of the loan funds are for facilities that have a useful life of
33 years or longer, or a schedule showing the costs and useful life of
those facilities with a useful life of less than 33 years. This
statement or schedule will be used to determine the final maturity of
the loan. See Sec. 1710.115.
(iii) Reimbursement schedule. This schedule lists the date, amount,
and identification number of each inventory of work orders and special
equipment summary that form the basis for the borrower's request for
reimbursement of general funds on the RUS Form 740c. See Sec. 1710.109.
If the borrower is not requesting reimbursement, this schedule need not
be submitted.
(iv) Location of consumers. If the application is for a municipal
rate loan subject to the interest rate cap, or for a loan at the
hardship rate, and the average number of consumers per mile of the
total electric system exceeds 17, Form 740c must include, as a note, a
breakdown of funds included in the proposed loan to furnish or improve
service to consumers located in an urban area. See 7 CFR 1714.7(c) and
1714.8(d). This breakdown must indicate the method used by the borrower
for allocating loan funds between urban and non urban consumers.
(4) RUS Form 740g, Application for Headquarters Facilities. This
form lists the individual cost estimates from the construction work
plan or other engineering study that support the need for RUS financing
for any warehouse and service type facilities included, and funding
requested for such facilities shown on RUS Form 740c. If no loan funds
are requested for headquarters facilities, Form 740g need not be
submitted.
(5) Financial and statistical report. Distribution borrowers shall
submit these data on RUS Form 7; power supply borrowers shall use RUS
Form 12. The 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:
[[Page 3733]]
(A) A listing of the counties where the borrower's existing
electric facilities and new facilities are or will be located;
(B) A listing and description of all real property owned by the
borrower; and
(C) An opinion of the borrower's counsel certifying that the
property schedule is complete and adequate for inclusion in a security
instrument to be executed by the borrower to secure an RUS loan.
(ii) Maximum debt limit. For a new mortgage, or if the proposed
loan would result in the borrower's existing mortgage debt limit being
exceeded, a resolution of the borrower's board of directors, and any
other authorizations or certifications required by State law,
certifying that a new debt limit has been legally established that is
adequate to accommodate existing indebtedness and the proposed new
financing, including any concurrent loans.
(8) Rate disparity and consumer income data. If the borrower is
applying under the rate disparity and consumer income tests for either
a municipal rate loan subject to the interest rate cap or a hardship
rate loan, the application must provide a breakdown of residential
consumers either by county or by census tract. In addition, if the
borrower serves in 2 or more states, the application must include a
breakdown of all ultimate consumers by state. This breakdown may be a
copy of Form EIA 861 submitted by the Borrower to the Department of
Energy or in a similar form. See 7 CFR 1714.7(b) and 1714.8(a). To
expedite the processing of loan applications, RUS strongly encourages
distribution borrowers to provide this information to the GFR prior to
submitting the application.
(9) Standard Form 100--Equal Employment Opportunity Employer Report
EEO--1. This form, required by the Department of Labor, sets forth
employment data for borrowers with 100 or more employees. A copy of
this form, as submitted to the Department of Labor, is to be included
in the application for an insured loan if the borrower has more than
100 employees. See Sec. 1710.122.
(10) Form AD-1047, Certification Regarding Debarment, Suspension,
and Other Responsibility Matters--Primary Covered Transactions. This
statement certifies that the borrower will comply with certain
regulations on debarment and suspension required by Executive Order
12549, Debarment and Suspension (3 CFR, 1986 Comp., p. 189). See 7 CFR
part 3017 and Sec. 1710.123.
(11) Uniform Relocation Act assurance statement. This assurance,
which need not be resubmitted if previously submitted, provides that
the borrower shall comply with 49 CFR part 24, which implements the
Uniform Relocation Assistance and Real Property Acquisition Policy Act
of 1970, as amended by the Uniform Relocation Act Amendments of 1987
and 1991. See Sec. 1710.124.
(12) Lobbying. The following information on lobbying is required
pursuant to 7 CFR part 3018 and Sec. 1710.125. Borrowers applying for
both insured and guaranteed financing should consult RUS before
submitting this information.
(i) Certification regarding lobbying. This statement certifies that
the borrower shall comply with certain requirements with respect to
restrictions on lobbying activities.
(ii) Standard Form LLL--Disclosure of Lobbying Activities. This
disclosure form is required from those borrowers engaged in lobbying
activities.
(13) Federal debt delinquency requirements. See 1710.126. The
following documents are required:
(i) Report on Federal debt delinquency. This report indicates
whether or not a borrower is delinquent on any Federal debt.
(ii) Certification Regarding Federal Government Collection Options.
This statement certifies that a borrower has been informed of the
collection options the Federal Government may use to collect delinquent
debt. The Federal Government is authorized by law to take any or all of
the following actions in the event that a borrower's loan payments
become delinquent or the borrower defaults on its loans:
(A) Report the borrower's delinquent account to a credit bureau;
(B) Assess additional interest and penalty charges for the period
of time that payment is not made;
(C) Assess charges to cover additional administrative costs
incurred by the Government to service the borrower's account;
(D) Offset amounts owed directly or indirectly to the borrower
under other Federal programs;
(E) Refer the borrower's debt to the Internal Revenue Service for
offset against any amount owed to the borrower as an income tax refund;
(F) Refer the borrower's account to a private collection agency to
collect the amount due; and
(G) Refer the borrower's account to the Department of Justice for
collection.
(14) Articles of incorporation and bylaws. The following are
required if either document has been amended since the last loan
application was submitted to RUS, or if this is a borrower's first
application for a loan under the RE Act:
(i) The borrower's articles of incorporation currently in effect,
as filed with the appropriate state office, setting forth the
borrower's corporate purpose; and
(ii) The bylaws currently in effect, as adopted by the borrower's
board of directors, setting forth the manner by which the borrower's
organization will be governed and regulated.
(15) State regulatory approvals. In states in which regulatory
authorities have jurisdiction over the borrower's rates, the borrower
must provide satisfactory evidence, pursuant to Secs. 1710.105 and
1710.151(f), based on the information available, such as an opinion of
counsel or of another qualified source, that the state regulatory
authority will not exclude from the borrower's rate base any of the
facilities included in the loan request, or otherwise prevent the
borrower from charging rates sufficient to repay with interest the debt
incurred for the facilities.
(16) Seismic safety certifications. This certification shall be
included, if required under 7 CFR part 1792.
(17) Rates. (i) A distribution borrower shall explain any recent or
planned changes in retail rates, the status of any pending rate cases
before a state regulatory authority, or other pertinent rate
information.
(ii) A power supply borrower shall submit a schedule of its
wholesale rates currently in effect. Any changes in this schedule are
subject to RUS approval.
(18) Additional supporting data. Additional supporting data may be
required by RUS depending on the individual application or conditions.
Examples of such additional supporting data include information about
acquisitions, headquarters facilities, generation or transmission
facilities, large power loads or special loads.
(b) Distribution borrowers. In addition to the items in paragraph
(a) of this section, applications for loans submitted by distribution
borrowers shall include the borrower's area coverage and line extension
policies. If there have been any amendments to area 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 Secs. 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
[[Page 3734]]
borrowers must also provide RUS with the following primary support
documents pursuant to Sec. 1710.152:
(1) Along with the loan application, the borrower shall submit to
RUS a Long-Range Financial Forecast (LRFF), that meets the requirements
of subpart G of this part. The forecast shall include any sensitivity
analysis or analysis of alternative scenarios required by subpart G of
this part, and shall be accompanied by a certified board resolution
adopting, and indicating the board of directors' approval of, the LRFF,
and directing management to take whatever steps may be necessary,
including the filing for rate increases, to achieve the TIER goals set
forth in the LRFF.
(2) Prior to RUS's acceptance of the loan application, the borrower
shall submit to RUS and receive approval of:
(i) Power Requirements Study (PRS) that meets the requirements of
subpart E of this part, and is accompanied by a certified board
resolution adopting, and indicating the board of directors' approval
of, the PRS.
(ii) Construction Work Plan (CWP) and/or related engineering and
cost studies that meets the requirements of subpart F of this part, and
is accompanied by a certified board resolution adopting, and indicating
the board of directors' approval of, the CWP and/or engineering and
cost studies.
(iii) Borrower's Environmental Report (BER), or other environmental
information as required by 7 CFR part 1794.
(iv) Demand Side Management Plan and/or Integrated Resource Plan,
if required by subpart H of this part.
(d) Submission of documents. (1) Generally, all information
required by paragraphs (a), (b), and (c)(1) of this section is
submitted to RUS in a single application package. The information
required by paragraph (c)(2) of this section is generally submitted to,
and approved by RUS before the application is submitted.
(2) To facilitate loan review, RUS urges borrowers to ensure that
their applications contain all of the information required by this
section before submitting the application to RUS. Borrowers may consult
with RUS field representatives and headquarters staff as necessary for
assistance in preparing loan applications.
(3) RUS may, in its discretion, return an application to the
borrower if the application is not materially complete to the
satisfaction of RUS within 10 months of receipt of any of the items
listed in paragraph (a) or (b) of this section. RUS will generally
advise the borrower in writing at least 2 months prior to returning the
application as to the elements of the application that are not
complete.
(4) If an application is returned, an application for the same loan
purposes will be accepted by RUS if satisfactory evidence is provided
that all of the information required by this section will be submitted
to RUS within a reasonable time. An application for loan purposes
included in an application previously returned to the borrower will be
treated as an entirely new application.
(e) Complete applications. An application is complete when all
information required by RUS to approve a loan is materially complete in
form and substance satisfactory to RUS.
(f) Change in borrower circumstances. A borrower shall, after
submitting a loan application, promptly notify RUS of any changes in
its circumstances that materially affect the information contained in
the loan application or in the primary support documents.
(g) Interest rate category. For pending loans, RUS will promptly
notify the borrower if its eligibility for an interest rate category
changes pursuant to new information from the Department of Energy or
the Bureau of the Census. See 7 CFR part 1714.
(Approved by the Office of Management and Budget under control
numbers 0572-0017, 0572-0032 and 0572-1013.)
Secs. 1710.402-1710.403 [Reserved]
Sec. 1710.404 Additional requirements.
Additional requirements for insured electric loans are set forth in
7 CFR part 1714.
Sec. 1710.405 Supplemental financing documents.
(a) The borrower is responsible for ensuring that the loan
documents required for supplemental financing pursuant to Sec. 1710.110
are executed in a timely fashion. These documents are subject to RUS
approval.
(b) Security. Any security offered by the borrower to a
supplemental lender is subject to RUS approval.
Sec. 1710.406 Loan approval.
(a) A loan is approved when the Administrator signs the
administrative findings.
(b) If the loan is not approved, RUS will notify the borrower of
the reason.
Sec. 1710.407 Loan documents.
Following approval of a loan, RUS will forward the loan documents
to the borrower for execution, delivery, recording, and filing, as
directed by RUS.
PART 1712--[REMOVED]
12. Part 1712 is removed.
PART 1714--PRE-LOAN POLICIES AND PROCEDURES FOR INSURED ELECTRIC
LOANS
13. The authority citation for part 1714 continues to read as
follows:
Authority: 7 U.S.C. 901-950(b); Pub. L 99-591, 100 Stat. 3341;
Pub. L. 103-353, 108 Stat. 3178 (7 U.S.C. 6941 et seq).
14. Section 1714.6 is amended by revising paragraph (a)(2) to read
as follows:
Sec. 1714.6 Interest rate term.
(a) * * *
(2) The following limits apply to the number of advances of funds
that may be made to the borrower on any municipal rate loan:
(i) If the loan period is 2 years or less, not more than 6
advances;
(ii) If the loan period is more than 2 years, not more than 8
advances.
* * * * *
15. Subpart B is added to part 1714 to read as follows:
Subpart B--Terms of Insured Loans
Sec.
1714.50-1714.54 [Reserved]
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.
Subpart B--Terms of Insured Loans
Sec. 1714.50-1714.54 [Reserved]
Sec. 1714.55 Advance of funds from insured loans.
The borrower shall request advances of funds as needed. Advances
are subject to RUS approval and must be requested in writing on RUS
Form 595 or an RUS approved equivalent. Funds will not be advanced
until the Administrator has received satisfactory evidence that the
borrower has met all applicable conditions precedent to the advance of
funds, including evidence that the supplemental financing required
under 7 CFR part 1710 and any concurrent loan guaranteed by RUS are
available to the borrower under terms and conditions satisfactory to
RUS.
Sec. 1714.56 Fund advance period.
(a) For loans approved on or after February 21, 1995, the fund
advance period begins on the date of the loan note and is one year
longer than the loan period, but not less than 4 years. For example,
the fund advance period for a loan with a 2-year loan period
[[Page 3735]]
terminates automatically 4 years after the date of the loan note; a
loan with a 4-year loan period terminates automatically 5 years after
the date of the loan note. The Administrator may extend the fund
advance period on any loan if the borrower meets the requirements of
paragraph (c) of this section. As defined in 7 CFR 1710.2, the loan
period begins on the date shown on page 1 of RUS Form 740c submitted
with the loan application.
(b) For loans approved on or after June 1, 1984, and before
February 21, 1995, the fund advance period begins on the date of the
loan contract, or the most recent amendment thereto, and terminates
automatically 4 years from the date of the loan contract, or the most
recent amendment thereto, except as provided in paragraph (c) of this
section.
(c) The Administrator may agree to an extension of the fund advance
period for loans approved on or after June 1, 1984, if the borrower
demonstrates to the satisfaction of the Administrator that the loan
funds continue to be needed for approved loan purposes (i.e.,
facilities included in an RUS-approved construction work plan).
(1) To apply for an extension, the borrower must send to RUS, at
least 120 days before the automatic termination date, the following:
(i) A certified copy of a board resolution requesting an extension
of the Government's obligation to advance loan funds;
(ii) Evidence that the unadvanced loan funds continue to be needed
for approved loan purposes; and
(iii) Notice of the estimated date for completion of construction.
(2) In the case of financial hardship, as determined by the
Administrator, RUS may agree to an extension of the fund advance period
even though the borrower has failed to meet the 120-day requirement of
paragraph (c)(1) of this section.
(3) If the Administrator approves a request for an extension, RUS
will notify the borrower in writing of the extension and the terms and
conditions thereof. An extension will be effective only if it is
obtained in writing prior to the automatic termination date.
(d) Advances of funds from loans approved before June 1, 1984, are
generally made during the first 6 years of the note.
(e) RUS will rescind the balance of any loan funds not advanced to
a borrower as of the final date approved for advancing funds.
Sec. 1714.57 Sequence of advances.
(a) Except as set forth in paragraph (b) of this section,
concurrent loan funds will be advanced in the following order:
(1) 50 percent of the RUS insured loan funds;
(2) 100 percent of the supplemental loan funds;
(3) The remaining amount of the RUS insured loan funds.
(b) At the borrower's request and with RUS approval, all or part of
the supplemental loan funds may be advanced before funds in paragraph
(a)(1) of this section.
Sec. 1714.58 Amortization of principal.
(a) For insured loans approved on or after February 21, 1995:
(1) Amortization of funds advanced during the first 2 years after
the date of the note shall begin no later than 2 years from the date of
the note. Except as set forth in paragraph (a)(2) of this section,
amortization of funds advanced 2 years or more after the date of the
note shall begin with the scheduled loan payment billed in the month
following the month of the advance.
(2) For advances made 2 years or more after the date of the note,
the Administrator may authorize deferral of amortization of principal
for a period of up to 2 years from the date of the advance if the
Administrator determines that failure to authorize such deferral would
adversely affect either the Government's financial interest or the
achievement of the purposes of the RE Act.
(b) For insured loans approved before February 21, 1995,
amortization of principal shall begin 2 years after the date of the
note for advances made during the first and second years of the loan,
and 4 years after the date of the note for advances made during the
third and fourth years.
Sec. 1714.59 Rescission of loans.
(a) A borrower may request rescission of a loan with respect to any
funds unadvanced by submitting a certified copy of a resolution by the
borrower's board of directors.
(b) RUS may rescind loans pursuant to =1714.56.
(c) Borrowers who prepay RUS loans at a discounted present value
pursuant to 7 CFR part 1786, subpart F, are required to rescind the
unadvanced balance of all outstanding electric notes pursuant to 7 CFR
1786.158(j).
PART 1717--POST-LOAN POLICIES AND PROCEDURES COMMON TO INSURED AND
GUARANTEED ELECTRIC LOANS
16. The authority citation for part 1717 continues to read as
follows:
Authority: 7 U.S.C. 901-950b; Pub. L. 103-354, 108 Stat. 3178 (7
U.S.C. 6941 et seq), unless otherwise noted.
Secs. 1717.856 and 1717.860 [Amended]
17. Part 1717 is amended by removing and reserving
Secs. 1717.856(d) and 1717.860(e).
PART 1719--[REMOVED]
18. Part 1719 is removed.
PART 1785--LOAN ACCOUNT COMPUTATIONS, PROCEDURES AND POLICIES FOR
ELECTRIC AND TELEPHONE BORROWERS
19. The authority citation for part 1785 continues to read as
follows:
Authority: 7 U.S.C. 901 et seq.; Title 1, Subtitle D, sec. 1403,
Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-203, 101
Stat. 1330; Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941 et seq).
Subpart A [Removed and Reserved]
20. Subpart A of part 1785 is removed and reserved.
Dated: January 9, 1995.
Bob J. Nash,
Under Secretary, Rural Economic and Community Development.
[FR Doc. 95-1051 Filed 1-18-95; 8:45 am]
BILLING CODE 3410-15-P