[Federal Register Volume 87, Number 233 (Tuesday, December 6, 2022)]
[Rules and Regulations]
[Pages 74493-74502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25788]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
 
 ========================================================================
 

  Federal Register / Vol. 87, No. 233 / Tuesday, December 6, 2022 / 
Rules and Regulations  

[[Page 74493]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Parts 1710, 1720, and 1785

[Docket Number: RUS-21-ELECTRIC-0016]
RIN 0572-AC49


Implementing Provisions of the Agriculture Improvement Act of 
2018

AGENCY: Rural Utilities Service, United States Department of 
Agriculture (USDA).

ACTION: Final rule; request for comments.

-----------------------------------------------------------------------

SUMMARY: The Agriculture Improvement Act of 2018 (2018 Farm Bill) 
amended several sections of the Rural Electrification Act of 1936 (RE 
Act) that are carried out by the Electric Program at the USDA--Rural 
Utilities Service (RUS). Section 6501 extends refinancing authority to 
RUS for loans made or guaranteed by the Secretary. Section 6503 ended 
the Cushion of Credit Payment Program. Section 6505 made several 
changes to the loan guarantee program authorized under section 313A of 
the RE Act. Section 6507 permits RUS to include provisions for 
cybersecurity and grid security improvements.

DATES: 
    Effective date: This rule is effective December 6, 2022.
    Comment date: Comments are solicited from interested members of the 
public on all aspects of the rule. These comments must be submitted 
electronically and received on or before February 6, 2023.

ADDRESSES: Comments may be submitted on this rule using the following 
method:
    Electronically using the Federal eRulemaking Portal: Go to https://www.regulations.gov and, in the lower ``Search Regulations and Federal 
Actions'' box, select ``Rural Utilities Service'' from the agency drop-
down menu, then click on ``Submit.'' In the Docket ID column, select 
RUS-21-ELECTRIC-0016 to submit or view public comments and to view 
supporting and related materials available electronically. To submit a 
comment, choose the ``Comment Now!'' button. Information on using 
Regulations.gov, including instructions for accessing documents, 
submitting comments, and viewing the docket after the close of the 
comment period, is available through the site's ``User Tips'' link.

FOR FURTHER INFORMATION CONTACT: Alexis Solano, Rural Utilities Service 
Electric Program, Rural Development, United States Department of 
Agriculture, 1400 Independence Avenue SW, STOP 1568, Room 5165-S, 
Washington, DC 20250; Telephone: (202) 690-3407; Email 
[email protected].

SUPPLEMENTARY INFORMATION: 

Discussion of Rule

Background

    The 2018 Farm Bill amended several sections of the RE Act. The RE 
Act authorizes Rural Utilities Service's (RUS) Electric Programs (EP) 
to make direct loans and loan guarantees through the Federal Financing 
Bank. Sections 6501, 6503, 6505, and 6507 of the 2018 Farm Bill have a 
significant impact on the regulations for loans and loan guarantees. 
Section 6501 extends refinancing authority to EP for loans made or 
guaranteed by the Secretary. Section 6503 ends the Cushion of Credit 
Program by prohibiting borrowers from establishing new accounts or 
making new deposits into such accounts while reducing the interest paid 
on remaining balances. Section 6505 increased the maximum term of the 
bonds and notes that RUS can guarantee under the loan guarantee program 
authorized under section 313A of the RE Act from 20 years to 30 years. 
Additionally, proceeds from guaranteed bonds may be used to finance or 
refinance broadband loans. Finally, section 6507 addresses grid 
security and cybersecurity; specifically, RUS EP may now finance loans 
for improvements to assist in preventing or mitigating security 
threats. It is expected that these changes will allow borrowers more 
flexibility, with regard to financing new grid security and 
cybersecurity projects and to refinancing loans, when seeking funding 
from RUS.

Summary of Changes

    The following is a discussion, by topic, of the changes made to 
comply with the 2018 Farm Bill.
Cybersecurity and Grid Security Improvements (Sec. Sec.  1710.1, 
1710.2, 1710.100, and 1710.106)
    RUS is amending Sec. Sec.  1710.1, 1710.2, and 1710.106 to include 
provisions for cybersecurity and grid security improvements as an 
eligible loan purpose for RUS EP loans as specified in section 6507 of 
the 2018 Farm Bill. Section 1710.1(a) is updated to expressly reflect 
that loans for cybersecurity and grid security improvements may now be 
financed; Sec.  1710.1(b) establishes refinancing policies for loans 
made for these improvements and other purposes as described in Sec.  
1710.1(a). Section 1710.2 now has additional definitions, including 
those for cybersecurity and grid security. Section 1710.106 describes 
the specific uses that funds may finance regarding cybersecurity and 
grid security improvements as well as for purposes which funds may not 
be used.
    This new purpose authorizes the Secretary to make or guarantee 
loans for cybersecurity and grid security improvements. Additionally, 
this new regulatory language allows borrowers greater flexibility when 
seeking funding from RUS to assess and mitigate the risk from known and 
emerging security threats and risks. Cybersecurity and grid security 
investments relate to resources for prevention, protection, and 
restoration of computers, electronic communications systems, electronic 
communications services, wire and electronic communication, and 
physical assets. The purpose of cybersecurity and grid security 
investments is to mitigate the risk to critical infrastructure or the 
financial condition of RUS's borrowers by physical means or cyber 
measures from intrusions, attacks, or the effects of natural or manmade 
disasters. Prior to the 2018 Farm Bill, RUS approved financing for 
cybersecurity and grid security infrastructure investment as eligible 
purposes when incorporated in larger infrastructure projects. With the 
changes outlined in section 6507, these purposes can be combined as a 
single project specifically designed for

[[Page 74494]]

cybersecurity and grid security purposes. The changes contained in 
section 6507 explicitly incorporate cybersecurity and grid security 
investments as within the RUS EP's lending authority under Titles I and 
III of the RE Act.
Refinancing (Sec. Sec.  1710.1, 1710.53, and 1710.100)
    Section 6501 of the 2018 Farm Bill amended section 2 of the RE Act 
to authorize, subject to availability of funding for such purposes, RUS 
to refinance loans made or guaranteed by the Secretary under the RE Act 
for rural electrification, furnishing and improving electric and 
telephone service in rural areas, and assisting electric borrowers in 
implementing demand side management, energy efficiency and conservation 
programs, and on-grid and off-grid renewable energy systems.
    RUS is amending Sec. Sec.  1710.1 and 1710.100 and is adding Sec.  
1710.53 to recognize its refinancing authority as authorized by section 
of 6501 of the 2018 Farm Bill. Through these amendments, RUS sets the 
parameters for exercising said authority. Section 1710.1 is updated to 
briefly summarize these changes. Specifically, Sec.  1710.1(b) includes 
additional language establishing refinancing policies. The new section, 
Sec.  1710.53, describes the refinancing of loans and the requirements 
of refinancing, including the information required of borrowers seeking 
refinancing. Section 1710.100 now expressly includes cybersecurity and 
grid security as eligible projects. RUS will be able to offer new loans 
to pay off previous RUS loans made or guaranteed pursuant to the RE 
Act. New loans made under this authority must be used to repay previous 
loans made by RUS when the Administrator determines that such action is 
in the interest of rural consumers, taxpayers, rural economic 
development or otherwise in the public interest.
    When funds become available for the refinancing of existing loans, 
RUS will issue a public notice specifying the amount of funds available 
under this authority. The notice will contain additional application 
procedures specific to the amount of funds available and new loan 
application periods related to the availability of funds. The notice 
may also include Administration priorities, such as directing benefits 
to disadvantaged communities and reducing greenhouse gas emissions. The 
Administrator, in setting funding priorities and application periods, 
may consider the amount of available funds, RUS resources, RUS 
priorities and policy goals, and any other factors related to the 
efficient operation of the agency. Such notices, at a minimum, will 
require applicants to provide the information set forth in Sec.  
1710.53.
Guarantees for Bonds and Notes Issued for Utility Infrastructure 
Purposes (Sec. Sec.  1720.1, 1720.2, 1720.3, 1720.4, 1720.5, 1720.6, 
1720.7, 1720.8, 1720.11, and 1720.12)
    RUS is amending part 1720 to incorporate the statutory amendments 
as provided by section 6505 of the 2018 Farm Bill. Part 1720 implements 
the provisions of section 313A of the RE Act, also known as the 313A 
Program. Section 1720.1 describes the purpose of the regulation. 
Section 1720.2 will be removed and reserved as the information 
contained in the section is no longer necessary. In Sec.  1720.3, 
definitions are added as a result of 2018 Farm Bill changes while some 
defined terms have been renamed for clarification. Section 1720.4 
describes the changes in the general standards and requirements as RUS 
is now authorized to guarantee bonds or notes issued to make utility 
infrastructure loans. This section also now contains other changes to 
terms of financing and refinancing RUS loans. Section 1720.5 is updated 
to reflect changes in eligibility requirements. Section 1720.6 updates 
the application process by including requirements for credit ratings. 
Section 1720.7 now has additions to the application process. Section 
1720.8 adds preconditions to RUS's issuance of guarantees and the 
release of loan funds, such as evidence of creditworthiness. Section 
1720.11 adds the requirement that the Secretary may inspect the assets 
and facilities of the guaranteed lenders. Section 1720.12 provides 
additional reporting requirements of the guaranteed lenders.
    Specifically, section 6505 of the 2018 Farm Bill amended section 
313A of the RE Act, which authorizes RUS to guarantee bonds or notes 
issued to make utility infrastructure loans or refinance bonds or notes 
for those purposes pursuant to section 313A of the RE Act, as amended, 
for a term of 30 years or for another term that the Secretary 
determines appropriate.
    RUS is also including regulatory changes that include guaranteed 
lenders' reporting requirements, such as the contact information for 
the borrowers whose notes have been pledged and terms and conditions 
for all notes pledged as collateral, and the development of an action 
plan by the guaranteed lender in the event of default. The amendments 
to part 1720 also allow the proceeds of bonds guaranteed under section 
313A of the RE Act to be used to make broadband loans, or to refinance 
broadband loans, made to a borrower that has received, or is eligible 
to receive, a broadband loan under Title VI of the RE Act. As a result, 
to the extent that the proceeds of bonds guaranteed under section 313A 
are to be used to fund or refinance broadband loans that were not made 
by RUS (``Non-RUS Broadband Loans''), such proceeds may only be used 
for Non-RUS Broadband Loans that would meet the amended eligibility 
requirements of Title VI of the RE Act pursuant to the 2018 Farm Bill. 
The 2018 Farm Bill also modified the 313A Program to allow the proceeds 
of guaranteed loans to be used by the Guaranteed Lender to fund 
projects for the generation of electricity. Furthermore, it has 
increased the maximum term of the bonds or notes that RUS can guarantee 
from 20 years to 30 years.
Cushion of Credit Payment Program (Sec. Sec.  1785.66, 1785.68, 
1785.69, and 1785.70)
    RUS is amending Sec. Sec.  1785.66 and 1785.68 through 1785.70 to 
discontinue cushion of credit accounts and make other changes to the 
existing accounts as specified in section 6503 of the 2018 Farm Bill. 
Section 1785.66 describes the discontinuation of the Cushion of Credit 
Payment Program, which occurred on the date of enactment of the 2018 
Farm Bill, December 20, 2018. Section 1785.68 provides specific 
information on the reduction of interest rates. Section 1785.69 shows 
the changes in the computations of the interest paid to these accounts. 
Section 1785.70 includes additional information about drawing down 
balances by the borrower and ending the Cushion of Credit Payment 
Program when all balances have reached zero.
    Prior to the 2018 Farm Bill, each borrower who made a payment after 
October 1, 1987, in excess of the required amount due on a RUS note was 
provided with a cushion of credit account. All payments on these notes 
which were in excess of required payments and not otherwise designated 
were deposited in the borrower's cushion of credit account. This 
account bore an interest rate of 5 percent per annum. Beginning on 
December 20, 2018, the date the 2018 Farm Bill became law, no new 
deposits to the program were allowed. From the date of enactment until 
September 30, 2020, cushion of credit balance holders were permitted to 
transfer money from their cushion of credit accounts for the purpose of 
prepaying their RUS debt or Federal Financing Bank debt without a

[[Page 74495]]

prepayment penalty. Existing balances continued to earn 5 percent 
interest until September 30, 2020. This interest rate decreased to 4 
percent on October 1, 2020. Beginning on October 1, 2021, interest paid 
on fund balances will be fixed at a floating 1-year Treasury rate. 
These changes were made to Sec.  1785.69. RUS will no longer have to 
maintain the cushion of credit accounts after the remaining balances 
are depleted. This change will result in savings to the Government in 
an amount equal to the amount of interest that would have been paid by 
the Government to the account holders had this section of the 2018 Farm 
Bill not been implemented.

Regulatory Analysis

Executive Order 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches to maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility.
    This rule has been determined to be significant and was reviewed by 
the Office of Management and Budget (OMB) under Executive Order 12866. 
In accordance with Executive Order 12866, an Economic Impact Analysis 
was completed, outlining the costs and benefits of implementing this 
program in rural America. The complete analysis is available from 
Regulations.gov by searching for Docket number RUS-21-ELECTRIC-0016.

Unfunded Mandates

    This final rule contains no Federal mandates (under the regulatory 
provision of Title II of the Unfunded Mandates Reform Act of 1995) for 
State, local, and tribal governments, or the private sector. Thus, this 
final rule is not subject to the requirements of section 202 and 205 of 
the Unfunded Mandates Reform Act.

National Environmental Policy Act

    This final rule has been reviewed in accordance with 7 CFR part 
1970 (``Environmental Policies and Procedures''). The Agency has 
determined that: (1) this action of implementing this rule meets the 
criteria established in 7 CFR 1970.53(f); (2) no extraordinary 
circumstances exist; and (3) the action is not ``connected'' to other 
actions with potentially significant impacts, is not considered a 
``cumulative action,'' and is not precluded by 40 CFR 1506.1. 
Therefore, the Agency has determined that the action does not have a 
significant effect on the human environment, and therefore neither an 
Environmental Assessment nor an Environmental Impact Statement is 
required. However, individual actions assisted with financing described 
in this rule are subject to the requirements of the National 
Environmental Policy Act, 7 CFR part 1970 (Rural Development's 
Environmental Policies and Procedures), and associated laws and 
authorities, including the National Historic Preservation Act.

Executive Order 12988, Civil Justice Reform

    This rule has been reviewed under Executive Order 12988. In 
accordance with this rule: (1) unless otherwise specifically provided, 
all State and local laws that conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule except 
as specifically prescribed in the rule; and (3) administrative 
proceedings of the National Appeals Division of the Department of 
Agriculture (7 CFR part 11) must be exhausted before bringing suit in 
court that challenges action taken under this rule.

Executive Order 13132, Federalism

    The policies contained in this rule do not have any substantial 
direct effect on states, on the relationship between the National 
Government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
final rule impose substantial direct compliance costs on state and 
local governments. Therefore, consultation with the states is not 
required.

Administrative Procedure Act and Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-602) (RFA) generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act (``APA'') or any other statute. The APA 
exempts from notice and comment requirements rules ``relating to agency 
management or personnel or to public property, loans, grants, benefits, 
or contracts'' (5 U.S.C. 553(a)(2)). Because this rule is a matter 
relating to public loans, it is exempt from the APA's notice and 
comment requirements and therefore from the RFA's analysis 
requirements. Accordingly, an RFA analysis has not been prepared for 
this rule.

Executive Order 12372, Intergovernmental Consultation

    This rule is excluded from the scope of Executive Order 12372, 
Intergovernmental Consultation, which may require a consultation with 
State and local officials. See the final rule related notice entitled 
``Department Programs and Activities Excluded from Executive Order 
12372'' (50 FR 47034) advising that RUS loans and loan guarantees were 
not covered by Executive Order 12372.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with Tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian Tribes, on the relationship between the Federal Government 
and Indian Tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian Tribes.
    The Office of Tribal Relations has reviewed this rule and finds 
that it does have tribal implications that require clarification under 
E.O. 13175. The Agency held Virtual Tribal Consultation events in March 
of 2021 and April of 2022 with tribal officials as to the need for 
Federal standards and any alternatives that would limit the scope of 
Federal standards or otherwise preserve the prerogatives and authority 
of Indian tribes, pursuant to E.O. 13175, sec. 3(c)(3). Comments on 
tribal implications received through consultations were deemed, after 
discussion with the Office of Tribal Relations (OTR), outside the 
purview of this regulation and OTR will coordinate with Rural Utilities 
Service to utilize the currently underway RUS Regulatory Streamlining 
process to clarify the concerns of tribal eligibility, necessary tribal 
permissions, and tribal law compliance that were raised during the two 
consultation sessions. Should a tribe request consultation in the 
future, Rural Utilities Service will work with the USDA Office of 
Tribal Relations to ensure that meaningful consultation occurs. If 
tribal leaders are interested in

[[Page 74496]]

consulting with RUS, they are encouraged to contact USDA's Office of
Tribal Relations at [email protected] or Rural Development's 
Native American Coordinator at: [email protected] to request such a 
consultation.

Assistance Listing

    The Assistance Listing (formerly Catalog of Federal Domestic 
Assistance or CFDA) number for the program impacted by this action is 
10.850, Rural Electrification Loans and Loan Guarantees. A complete 
list of Assistance Listings is available at https://sam.gov/content/assistance-listings.

Paperwork Reduction Act

    This rule contains no new reporting or recordkeeping burdens under 
OMB control number 0572-0032 that would require approval under the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

E-Government Act Compliance

    Rural Development is committed to the E-Government Act, which 
requires Government agencies in general to provide the public the 
option of submitting information or transacting business electronically 
to the maximum extent possible.

Civil Rights Impact Analysis

    Rural Development has reviewed this rule in accordance with USDA 
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify any 
major civil rights impacts the rule might have on program participants 
on the basis of age, race, color, national origin, sex, or disability. 
Based on the review and analysis of the rule and available data, 
application submission, and eligibility criteria, issuance of this 
final rule is not likely to adversely nor disproportionately impact low 
and moderate-income populations, minority populations, women, Indian 
Tribes, or persons with disability, by virtue of their race, color, 
national origin, sex, age, disability, or marital or familial status.

USDA Non-Discrimination Policy

    In accordance with Federal civil rights laws and U.S. Department of 
Agriculture (USDA) civil rights regulations and policies, the USDA, its 
Mission Areas, agencies, staff offices, employees, and institutions 
participating in or administering USDA programs are prohibited from 
discriminating based on race, color, national origin, religion, sex, 
gender identity (including gender expression), sexual orientation, 
disability, age, marital status, family/parental status, income derived 
from a public assistance program, political beliefs, or reprisal or 
retaliation for prior civil rights activity, in any program or activity 
conducted or funded by USDA (not all bases apply to all programs). 
Remedies and complaint filing deadlines vary by program or incident. 
Program information may be made available in languages other than 
English. Persons with disabilities who require alternative means of 
communication to obtain program information (e.g., Braille, large 
print, audiotape, American Sign Language) should contact the 
responsible Mission Area, agency, or staff office; the USDA TARGET 
Center at (202) 720-2600 (voice and TTY); or the 711 Relay Service.
    To file a program discrimination complaint, a complainant should 
complete a Form AD-3027, USDA Program Discrimination Complaint Form, 
which can be obtained online at https://www.usda.gov/sites/default/files/documents/usda-program-discrimination-complaint-form.pdf, from 
any USDA office, by calling (866) 632-9992, or by writing a letter 
addressed to USDA. The letter must contain the complainant's name, 
address, telephone number, and a written description of the alleged 
discriminatory action in sufficient detail to inform the Assistant 
Secretary for Civil Rights (ASCR) about the nature and date of an 
alleged civil rights violation. The completed AD-3027 form or letter 
must be submitted to USDA by:
    (1) Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 
20250-9410; or
    (2) Fax: (833) 256-1665 or (202) 690-7442; or
    (3) Email: [email protected].
    USDA is an equal opportunity provider, employer, and lender.

List of Subjects

7 CFR Part 1710

    Electric power, Energy, Grant program, Loan program-energy, 
Reporting and recordkeeping requirements, Rural areas.

7 CFR Part 1720

    Loan programs-energy, Reporting and recordkeeping requirements, 
Rural areas.

7 CFR Part 1785

    Electric power, Loan programs-communications, Loan programs-energy, 
Rural areas, Telephone.

    For the reasons set forth in the preamble, RUS amends 7 CFR parts 
1710, 1720, and 1785 as follows:

PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO 
ELECTRIC LOANS AND GUARANTEES

0
1. The authority citation for part 1710 continues to read as follows:

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


0
2. Revise Sec.  1710.1 to read as follows:


Sec.  1710.1  General statement.

    (a) This part establishes general and pre-loan policies and 
requirements that apply to both insured and guaranteed loans to finance 
the construction and improvement of electric facilities in rural areas, 
including generation, transmission, distribution facilities, and 
cybersecurity and grid security needs.
    (b) This part also establishes general and pre-loan refinancing 
policies and requirements that apply to the refinancing of loans made 
or guaranteed for the purpose of rural electrification, furnishing and 
improving electric service in rural areas, and assisting electric 
borrowers to implement demand side management, energy efficiency and 
conservation programs, on-grid, and off-grid renewable energy systems, 
and cybersecurity and grid security improvements.
    (c) Additional pre-loan policies, procedures, and requirements that 
apply specifically to guaranteed and 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.
    (d) This part supersedes those portions of the following RUS 
Bulletins and supplements that are in conflict with this part including 
but not necessarily limited to the following:
    (1) 20-5 Extensions of Payments of Principal and Interest.
    (2) 20-20 Deferment of Principal Repayments for Investment in 
Supplemental Lending Institutions.
    (3) 20-22 Guarantee of Loans for Bulk Power Supply Facilities.
    (4) 20-23 Section 12 Extensions for Energy Resources Conservation 
Loans.
    (5) 60-10 Construction Work Plans, Electric Distribution Systems.
    (6) 86-3 Headquarters Facilities for Electric Borrowers.
    (7) 105-5 Financial Forecast-Electric Distribution Systems.

[[Page 74497]]

    (8) 111-3 Power Supply Surveys.
    (9) 120-1 Development, Approval, and Use of Power Requirements 
Studies.
0
3. Amend Sec.  1710.2 by adding to paragraph (a) the definition 
``Cybersecurity and grid security improvements'' in alphabetical order 
to read as follows:


Sec.  1710.2  Definitions and rules of construction.

    (a) * * *
    Cybersecurity and grid security improvements means:
    (i) Investment in the development, expansion, and modernization of 
rural utility infrastructure that addresses known and emerging 
cybersecurity and grid security risks. This definition incorporates 
both cybersecurity and grid security as one concept. The cybersecurity 
component of the definition includes measures and investments designed 
to prevent damage to, otherwise protect, or restore computers and 
computer systems, industrial control systems/operational technology, 
electronic communications systems, electronic communications services, 
wire, and all other forms electronic communication including 
information contained therein. Rural utilities often utilize 
cybersecurity measures and investments to ensure service availability, 
system integrity, user authentication, confidentiality, and 
nonrepudiation, related to the services.
    (ii) The grid security component of this definition, includes 
measures and investments made to protect a utility's infrastructure 
reliability and resiliency against both natural impacts and man-made 
physical attacks or intrusions by individuals or groups intent on 
damaging, destroying, disrupting, or removing components of utility 
infrastructure or threatening to damage utility infrastructure. 
Measures considered for RUS financing include, but are not limited to, 
fire prevention, physical barriers, remote sensing equipment, 
monitoring physical assets, security cameras, security vehicles, 
information and operational technology cybersecurity measures, control 
systems cybersecurity monitoring technologies, fire prevention devices 
and sensors and other investments which serve the purpose of protecting 
assets and maintaining the reliability of rural utility systems.
* * * * *
0
4. Add Sec.  1710.53 to read as follows:


Sec.  1710.53  Refinancing.

    (a) General. (1) Subject to the availability of funds for such 
purpose, RUS may use loan funds to refinance prior loans made or 
guaranteed under the RE Act, as amended, (7 U.S.C. 902(a)). Such 
refinancing must be in the interest of rural consumers, taxpayers, 
rural economic development or otherwise in the public interest, as 
determined by the Administrator.
    (2) The Secretary's authority to make loans for refinancing under 
this section is in addition to any other authority granted to the 
Secretary to make or modify loans under the RE Act or any other 
statutory authority.
    (3) Nothing in this section changes the policies or standards set 
forth in 7 CFR part 1717, subpart Y, or the terms and conditions of the 
agreements entered into between RUS and FFB or the notes issued to RUS 
or FFB in connection with RUS or FFB loans.
    (4) When funds are made available under this section, RUS will 
issue a public notice in the Federal Register specifying the amount of 
funds available under this section. The notice will contain additional 
application procedures specific to the amount and type of funding 
available and new loan application periods related to the availability 
of funds. The notice may also include Administration priorities, such 
as directing benefits to disadvantaged communities and reducing 
greenhouse gas emissions. The Administrator, in setting funding 
priorities and application periods, may consider the amount of 
available funds, RUS resources, RUS priorities and policy goals, and 
any other factors related to the efficient operation of the agency.
    (b) Definitions. For the purpose of this section, the following 
terms have the following meanings. Terms not defined here are defined 
in Sec.  1710.2. When the definitions provided in this section conflict 
with any other definition applicable to RUS Electric Program 
regulations in this chapter, including Sec.  1710.2, the definition of 
this section will control only as it relates to refinancing under this 
section.
    Advance means advance or advances of loan funds made by RUS to the 
borrower pursuant to the terms and conditions in the loan documents.
    Agency means the Rural Utilities Service or its successor.
    Conditional commitment letter means the notification issued by the 
Administrator to an eligible entity advising it of the estimated terms, 
conditions, and amount of the new loan.
    Eligible entity means an RUS Electric Program borrower with an 
unpaid and outstanding FFB loan or RUS loan.
    FFB means the Federal Financing Bank.
    FFB loan means a loan made by FFB and guaranteed by RUS pursuant to 
the RE Act for electric purposes.
    RUS loan means a loan made by the RUS under the RE Act for electric 
purposes.
    (c) Loan purpose. Proceeds of loans made under this section may be 
used to:
    (1) Prepay all outstanding amounts owed on an FFB or RUS loan or 
one or more advances made under such loan; and
    (2) Pay any applicable prepayment premium, fee, or expense related 
to the eligible RUS or FFB loan being refinanced.
    (d) Eligibility requirements--(1) Eligible entity. Loans under this 
section may only be made to an eligible entity for the purposes 
indicated in paragraph (c) of this section.
    (2) Eligible loans for refinancing. Only FFB loans and RUS loans as 
defined in this section are eligible for refinancing under this 
section.
    (e) Allocation of funds under this section. Unless prohibited by 
congressional appropriation or statute, in allocating the funds 
available to RUS under its lending authority, the Administrator may 
determine, on a programmatic or case by case basis, that other RE Act 
loan purposes take priority over refinancing. The Administrator may, 
but is not limited to, consider the following factors in making this 
determination:
    (1) The overall availability of funding compared to anticipated 
loan demand;
    (2) The best interests of rural consumers;
    (3) The protection of the Government's financial interest in 
existing loans and collateral; and
    (4) Broader policy objectives, including directing benefits to 
disadvantaged communities, reducing greenhouse gas emissions, and other 
priorities of the Secretary of Agriculture.
    (f) Application process. (1) When funds are available, the RUS will 
publish a notice identifying the amount and type of funds available for 
refinancing for the funding period in total and per applicant. The 
notice will identify the priorities established by the Agency for the 
use of the available funds. Borrowers seeking to refinance RUS loans or 
FFB loans will be required to submit, at a minimum, the following 
information:
    (i) Borrower reference number;
    (ii) Note designation;
    (iii) Rural Electric Telephone (RET) Advance loan account number;
    (iv) FFB complete identifier for an FFB loan;
    (v) Date(s) of advance;
    (vi) Interest rate;

[[Page 74498]]

    (vii) Principal outstanding;
    (viii) Current final maturity date;
    (ix) Short narrative explaining how the proposed refinancing would 
be in the interest of rural consumers, taxpayers, rural economic 
development or otherwise in the public interest; and
    (x) The requested final maturity date for the new loan. The 
requested final maturity date must be for a period not to exceed the 
maximum maturity date allowed by statute, regulation, or applicable 
notice. An eligible entity must submit a certification that the 
remaining useful life of its electric system is equal to or exceeds the 
new requested final maturity date and, that the requested final 
maturity date does not exceed the term of its wholesale power contract 
with its members or with its generation and transmission supplier 
(where applicable).
    (2) The Agency reserves the right to offer a loan under this 
section with a maturity date that varies from the requested date. 
Unless the Administrator makes a specific determination to the 
contrary, the Electric Program will not approve a new loan that 
includes a final maturity date that exceeds the remaining useful life 
of its electric system or any applicable wholesale power contract term.
    (3) On a case-by-case basis, as necessary, the Administrator may 
approve a new loan that includes a final maturity that exceeds the 
remaining useful life of the applicant's electric system or applicable 
wholesale power contract term provided the Administrator finds that the 
requirements contained in Sec.  1710.151 are satisfied, the new loan is 
feasible under Sec.  1710.151(b), and such action addresses critical 
environmental or consumer needs.
    (g) Loan requirements. (1) All refinancing loans made under this 
section must be in the interest of rural consumers, taxpayers, rural 
economic development, or otherwise in the public interest.
    (2) All refinancing loans made under this section must be feasible 
as determined by RUS based on the financial condition of the borrower 
and the borrower's ability to repay and all loans must be adequately 
secured, as determined by RUS.
    (3) Borrowers will be required to execute new legal documents, 
including a new note, loan contract, and security documents as 
necessary.
    (4) Refinancing loans made under this section will generally be 
considered categorical exclusions for the purpose of environmental 
reviews because environmental reviews have previously been completed 
for the FFB loans or RUS loans being refinanced.
    (h) New loan terms. (1) Interest on advances made on loans made 
under this section will be at the interest rate available on the date 
of the advance for the new loan used to refinance the prior outstanding 
loan and any related premium, fee, or expense.
    (2) An eligible entity must propose a maturity date for the new 
loan not to exceed the maturity prescribed by this section, a funding 
notice, or thirty-five (35) years, whichever is shortest.
    (3) An eligible entity may be given the option of applying the 
proceeds of an advance made on the new loan to cover any applicable 
prepayment premium, fee, or other expense.
    (4) If the prepayment premiums are to be financed by the new loan, 
the maximum principal amount of the note will be increased in an amount 
sufficient to cover such prepayment premiums in full.
    (5) Provided such waiver is not inconsistent with applicable law or 
the terms and conditions of the notes previously issued to RUS or FFB, 
the Administrator may, on a case-by-case basis, waive or modify the 
requirements set forth in this paragraph (h), if in the Administrator's 
judgment, it is necessary to implement the intent of the authorizing 
statute and is in the best financial interest of the Government.
0
5. Revise Sec.  1700.100 to read as follows:


Sec.  1710.100  General.

    (a) RUS makes loans and loan guarantees to finance the construction 
of electric distribution, transmission, and generation facilities, 
including system improvements and replacements, and cybersecurity and 
grid security improvements, required to furnish and improve electric 
service in rural areas, and for demand side management, efficiency, and 
energy conservation programs, and on-grid and off-grid renewable energy 
systems. In certain limited circumstances, and at the discretion of the 
Administrator, RUS may finance selected operating expenses of its 
borrowers. Loans made or guaranteed by the Administrator will be made 
in conformance with the RE Act, as amended (7 U.S.C. 901 et seq.), and 
this chapter. The Administrator's decision to provide financing for 
selecting operating expenses may include, but is not limited to the 
following factors:
    (1) The overall availability of funding compared to anticipated 
loan demand;
    (2) The best interests of rural consumers;
    (3) The protection of the Government's financial interest in 
existing loans and collateral; and
    (4) Broader policy objectives, including directing benefits to 
disadvantaged communities, reducing greenhouse gas emissions, and other 
priorities of the Secretary of Agriculture.
    (b) RUS provides technical assistance to borrowers to aid the 
development or improvement of rural electric service and to protect 
RUS' loan security. Additional information is available at https://rd.usda.gov/programs-services/electric-programs.
    (c) Provided funds are available for such purpose, RUS may 
refinance, as provided in Sec.  1710.53, RUS Electric Program loans 
made or guaranteed for the purpose of furnishing and improving electric 
service in rural areas, and for the purpose of assisting electric 
borrowers to implement demand side management, energy efficiency and 
conservation programs, on-grid and off-grid renewable energy systems, 
and cybersecurity and grid security improvements.
0
6. Amend Sec.  1710.106 by adding paragraphs (a)(7) and (8) and 
revising paragraphs (c)(1) and (e) to read as follows:


Sec.  1710.106  Uses of loan funds.

    (a) * * *
    (7) Cybersecurity and grid security. Eligible cybersecurity and 
grid security improvements.
    (8) Smart grid infrastructure. The purchase, installation, 
improvements, and investments in assets needed for a robust smart grid 
infrastructure capability that enables the utility to operate 
efficiently, improve its reliability, and enhance its ability to 
recover from disasters, physical or cyber-attacks, carry out energy 
efficiency and demand side management activities, and implement 
renewable energy technologies and cybersecurity and grid security 
strategies.
    (i) Smart grid, grid security, or cybersecurity infrastructure 
financed under this section must relate to one or more electric utility 
or energy efficiency purpose. Loan proceeds under this section may not 
be used to solely finance retail broadband services.
    (ii) Notwithstanding paragraph (a)(8)(i) of this section, a 
borrower is permitted to use up to 10 percent of the amount provided 
under this subpart to construct, improve, or acquire broadband 
infrastructure related to the project financed, subject to the 
requirements of 7 CFR part 1980, subpart M.
* * * * *

[[Page 74499]]

    (c) * * *
    (1) Electric facilities, equipment, appliances, or wiring located 
inside the premises of the consumer, except for measures related to 
grid security, cybersecurity, or assets financed pursuant to an 
eligible EE Program, and qualifying items included in a loan for demand 
side management or energy resource conservation programs, or renewable 
energy systems.
* * * * *
    (e)(1) If, in the sole discretion of the Administrator, the amount 
authorized for lending for municipal rate loans, hardship rate loans, 
and loan guarantees in a fiscal year is substantially less than the 
total amount eligible for RUS financing, RUS may limit the size, type, 
or purpose of loans approved during the fiscal year. Depending on the 
amount of the shortfall between the amount authorized for lending and 
the loan application inventory on hand for each type of loan, RUS may 
either reduce the amount on an equal proportion basis for all 
applicants for that type of loan based on the amount of funds for which 
the applicant is eligible or may shorten the loan period for which 
funding will be approved to less than the maximum of 4 years. All 
applications for the same type of loan approved during a fiscal year 
will be treated in the same manner, except that RUS will not limit 
funding to any borrower requesting a RUS loan or loan guarantee of $1 
million or less. Should a shortfall or urgent need related to 
cybersecurity, grid security, or statutory preference become evident 
during a fiscal year, the Administrator may announce priorities in a 
public notice for utilizing available funds for the balance of the 
fiscal year.
    (2) If RUS limits the amount of loan funds approved for borrowers, 
the Administrator shall provide public notice to all electric borrowers 
as early as possible in the fiscal year of the manner in which funding 
will be limited. The portion of the loan application that is not funded 
during that fiscal year may, at the borrower's option, be treated as a 
second loan application received by RUS at a later date. This date will 
be determined by RUS in the same manner for all affected loans and will 
be based on the availability of loan funds. The second loan application 
shall be considered complete except that the borrower must submit a 
certification from a duly authorized corporate official stating that 
funds are still needed for loan purposes specified in the original 
application and must notify RUS of any changes in its circumstances 
that materially affects the information contained in the original loan 
application or the primary support documents. See Sec.  1710.401(f).
* * * * *

PART 1720--GUARANTEES FOR BONDS AND NOTES ISSUED FOR UTILITY 
INFRASTRUCTURE PURPOSES

0
7. The authority citation for part 1720 continues to read as follows:

    Authority:  7 U.S.C. 901 et seq.; 7 U.S.C. 940C.


0
8. Revise the heading for part 1720 to read as set forth above.

0
9. Revise Sec.  1720.1 to read as follows:


Sec.  1720.1  Purpose.

    This part prescribes policies and procedures implementing a 
guarantee program for bonds and notes issued for utility infrastructure 
purposes authorized by section 313A of the Rural Electrification Act of 
1936 (7 U.S.C. 940c-1).


Sec.  1720.2  [Removed and Reserved]

0
10. Remove and reserve Sec.  1720.2.

0
11. Revise Sec.  1720.3 to read as follows:


Sec.  1720.3  Definitions.

    For the purpose of this part:
    Administrator means the Administrator of RUS.
    Applicant means a bank or other lending institution organized as a 
private, not-for-profit cooperative association, or otherwise on a non-
profit basis, that is applying for RUS to guarantee a bond or note 
under this part.
    Bond documents means the guarantee, guarantee agreement, Pledge 
Agreement, and all other instruments and documentation pertaining to 
the issuance of the guaranteed bonds.
    Criticized loan means a loan that has borrower risk ratings that 
have been categorized as ``special mention,'' substandard,'' 
``doubtful'', or ``loss'', or any comparable categorization as 
described in the guaranteed lender's most recent audited financial 
statements.
    Eligible instrument means a note or bond of a borrower payable or 
registered to, or to the order of, the guaranteed lender and for which:
    (1) No default has occurred in the payment of principal or interest 
in accordance with the terms of such note or bond that is continuing 
beyond the contractual grace period (if any) provided in such note or 
bond for such payment;
    (2) No ``event of default'', as defined in such note or bond (or in 
any instrument creating a security interest in favor of the guaranteed 
lender, in respect of such note or bond), shall exist that has resulted 
in the exercise of any right or remedy described in such note or bond 
(or in any such instrument);
    (3) Such note or bond is not classified by the guaranteed lender as 
``non-performing, criticized or impaired'' (or any comparable 
classification, as determined by RUS) under generally accepted 
accounting principles in the United States or this part;
    (4) Such note or bond is free and clear of all liens other than the 
lien created by the guaranteed lender's pledge of such security to RUS 
under the Pledge Agreement;
    (5) Such note or bond is not a restructured loan;
    (6) Such note or bond is not unsecured debt; and
    (7) The amount of generation or transmission loans does not exceed 
the maximum amount allowed by RUS based on RUS's sole determination of 
certain factors including, but not limited to, account risk, collateral 
quality, and collateral quantity.
    Eligible loan means a loan that a guaranteed lender extends to a 
borrower for up to 100 percent of the cost of eligible utility 
infrastructure purposes consistent with the RE Act.
    Federal Financing Bank (FFB) refers to the Government corporation 
and instrumentality of the United States of America under the general 
supervision of the Secretary of the Treasury established by the Federal 
Financing Bank Act of 1973 (12 U.S.C. 2281 et seq.).
    Guarantee means the written agreement between the Secretary and a 
guaranteed lender, pursuant to which the Secretary guarantees full 
repayment of the principal, interest, and call premium, if any, on a 
guaranteed bond.
    Guarantee agreement means the written agreement between the 
Secretary and the guaranteed lender which sets forth the terms and 
conditions of the guarantee.
    Guaranteed bond means any bond, note, debenture, or other debt 
obligation issued by a guaranteed lender on a fixed or variable rate 
basis, and approved by the Secretary for a guarantee under this part.
    Guaranteed bondholder means any investor in a guaranteed bond.
    Guaranteed lender means an applicant that has been approved for a 
guarantee under this part.
    Leveraging data means the cumulative change in the guaranteed 
lender's outstanding loans since the filing of the guaranteed lender's 
last Form 10-Q or Form 10-K or financial statements, as applicable.

[[Page 74500]]

    Loan means any credit instrument that the guaranteed lender extends 
to a borrower for any utility infrastructure purpose eligible under the 
RE Act, including loans as set forth in section 4 of the RE Act for 
electricity transmission lines and distribution systems, loans as set 
forth in section 201 of the RE Act for telephone lines, facilities, and 
systems, and loans as set forth in Title VI of the RE Act for broadband 
systems.
    Loan documents means the loan agreement and all other instruments 
and documentation between the guaranteed lender and the borrower 
evidencing the making, disbursing, securing, collecting, or otherwise 
administering of a loan.
    Pledge Agreement means the written agreement among the Secretary, 
the guaranteed lender, and a collateral agent, which sets forth the 
terms and conditions of the guaranteed lender's pledge of eligible 
instruments as collateral.
    Pledged collateral means the following items pledged to RUS by the 
guaranteed lender as security for the guaranteed lender's repayment of 
a guaranteed bond:
    (1)(i) The pledged instruments and the certificates representing 
the pledged instruments;
    (ii) All payments of principal or interest, cash, instruments, and 
other property from time to time received, receivable, or otherwise 
distributed in respect of, in exchange for, and all other proceeds 
received in respect of, the pledged instruments;
    (iii) All rights and privileges of the guaranteed lender with 
respect to the pledged instruments; and
    (iv) All other proceeds of any of the foregoing; and
    (2) Any property, including cash and certain permitted investments, 
that are pledged by the guaranteed lender as security for the repayment 
of a guaranteed bond.
    Pledged instruments means the eligible instruments pledged by the 
guaranteed lender to RUS as security for the repayment of a guaranteed 
bond.
    Program or 313A Program means the guarantee program for bonds and 
notes issued for utility infrastructure purposes authorized by section 
313A of the RE Act as amended.
    Rating agency means a bond rating agency identified by the 
Securities and Exchange Commission as a nationally recognized 
statistical rating organization.
    RE Act means the Rural Electrification Act of 1936 (7 U.S.C. 901 et 
seq.) as amended.
    RUS means the Rural Utilities Service, a Rural Development agency 
of the U.S. Department of Agriculture.
    Secretary means the Secretary of Agriculture acting through the 
Administrator of RUS.
    Subsidy amount means the amount of budget authority sufficient to 
cover the estimated long-term cost to the Federal Government of a 
guarantee, calculated on a net present value basis, excluding 
administrative costs and any incidental effects on Government receipts 
or outlays, in accordance with the provisions of the Federal Credit 
Reform Act of 1990 (2 U.S.C. 661 et seq.).
    Utility infrastructure means equipment, systems, facilities, or 
other assets used to deliver electric, telephone, or broadband related 
services to consumers or to entities serving consumers.

0
12. Amend Sec.  1720.4 by revising paragraphs (a)(1), (b), (c), and (e) 
to read as follows:


Sec.  1720.4  General standards.

    (a) * * *
    (1) The proceeds of the guaranteed bonds will be used by the 
guaranteed lender to make loans to borrowers for utility infrastructure 
purposes eligible for assistance under this chapter, or to refinance, 
subject to certain limitations, bonds or notes previously issued by the 
guaranteed lender for such purposes to a borrower that has at any time 
received, or is eligible to receive, a loan under the RE Act;
* * * * *
    (b) During the term of the guarantee, the guaranteed lender shall:
    (1) Limit cash patronage refunds for guaranteed lenders having a 
credit rating below the level proscribed by the agency in its funding 
notice or below investment grade or comparable level on its senior 
secured debt without regard to the guarantee. For such guaranteed 
lenders, cash patronage refunds are limited to five percent of the 
total patronage refund eligible. The limit on patronage refunds must be 
maintained until the credit rating is restored to the level proscribed 
by RUS in its funding notice or to investment grade or above. For those 
guaranteed lenders subject to patronage limitations, equity securities 
issued as part of the patronage refund shall not be redeemable in cash 
during the term of any part of the guarantee, and the guaranteed lender 
shall not issue any dividends on any class of equity securities during 
the term of the guarantee.
    (2) Maintain sufficient collateral secured by a perfected lien 
equal to the principal amount outstanding. Collateral shall be in the 
form of specific and identifiable unpledged securities equal to the 
value of the guaranteed amount plus sufficient margin to cover 
potential costs, fees, and expenses which may arise in the event of a 
default. In the case of a guaranteed lender's default, the U.S. 
Government's claim shall not be subordinated to the claims of other 
creditors, and the indenture must provide that in the event of default, 
the Government has the sole right to the pledged instruments. The 
Secretary has discretion to require additional collateral at any time 
should circumstances warrant.
    (c) The final maturity of the guaranteed bonds shall not exceed 30 
years.
* * * * *
    (e) The Secretary shall guarantee payments on guaranteed bonds in 
such forms and on such terms and conditions and subject to such 
covenants, representations, warranties, and requirements (including 
requirements for audits) as determined appropriate for satisfying the 
requirements of this part. The Secretary shall require the guaranteed 
lender to enter into a guarantee agreement to evidence its acceptance 
of the foregoing. Any guarantee issued under this part shall be made in 
a separate and distinct offering.

0
13. Amend Sec.  1720.5 by revising paragraphs (a)(2) and (b)(2) to read 
as follows:


Sec.  1720.5  Eligibility criteria.

    (a) * * *
    (2) Able to demonstrate to the Secretary that it possesses the 
appropriate expertise, experience, and qualifications to make loans for 
utility infrastructure purposes.
    (b) * * *
    (2) The guaranteed bonds to be issued by the guaranteed lender must 
receive an underlying investment grade rating from a rating agency, 
without regard to the guarantee. If an applicant has no outstanding RUS 
guarantees or has outstanding aggregate guarantees of less than $25 
million, the Administrator may prescribe in advance by notice an 
alternate method for the guaranteed lender to demonstrate 
creditworthiness.
* * * * *

0
14. Amend Sec.  1720.6 by revising paragraphs (a)(4), (6), and (7) to 
read as follows:


Sec.  1720.6  Application process.

    (a) * * *
    (4) A pro-forma financial statement and cash flow projection or 
business plan including detailed assumptions for the next five years, 
demonstrating that there is reasonable assurance that the applicant 
will be able to repay the

[[Page 74501]]

guaranteed bonds in accordance with their terms;
* * * * *
    (6) Evidence of having been assigned an investment grade rating on 
the debt obligations for which it is seeking the guarantee, without 
regard to the guarantee or such other evidence of creditworthiness as 
required by the Administrator under Sec.  1720.5(b)(2);
    (7) Evidence of a credit rating, from a rating agency, on its 
senior secured debt, its corporate credit rating, or such other 
evidence of creditworthiness as required by the Administrator under 
Sec.  1720.5(b)(2); and
* * * * *

0
15. Amend Sec.  1720.7 by revising paragraphs (b)(4) through (6), 
adding paragraph (b)(7), and revising paragraph (c) to read as follows:


Sec.  1720.7  Application evaluation.

* * * * *
    (b) * * *
    (4) The extent to which the applicant is subject to supervision, 
examination, and safety and soundness regulation by an independent 
Federal or state agency;
    (5) The extent of concentration of financial risk that RUS may have 
resulting from previous guarantees made under section 313A of the RE 
Act;
    (6) The extent to which providing the guarantee to the applicant 
will help reduce the cost and/or increase the supply of credit to rural 
America, or generate other economic benefits, including the amount of 
fee income available to be deposited into the Rural Economic 
Development Subaccount, maintained under section 313(b)(2)(A) of the RE 
Act (7 U.S.C. 940c(b)(2)(A)), after payment of the subsidy amount; and
    (7) The geographic or economic distribution of funds made available 
through this program or use of such funds to advance rural development 
infrastructure goals.
    (c) Independent assessment. Before a guarantee decision is made by 
the Secretary, the Secretary shall request that the Federal Financing 
Bank review the adequacy of the determination by the rating agency 
required under Sec.  1720.5(b)(2) as to whether the bond or note to be 
issued would be below investment grade without the guarantee, or such 
other evidence of creditworthiness as may be required by the 
Administrator under Sec.  1720.5(b)(2).
* * * * *

0
16. Amend Sec.  1720.8 by:
0
a. Redesignating paragraphs (a)(6) through (9) as paragraphs (a)(7) 
through (10);
0
b. Adding a new paragraph (a)(6);
0
c. Revising newly redesignated paragraphs (c)(9) and (10); and
0
d. Adding paragraph (c).
    The additions and revisions read as follows:


Sec.  1720.8  Issuance of the guarantee.

    (a) * * *
    (6) Outside legal counsel to the applicant, satisfactory to the 
Secretary, must furnish an opinion satisfactory to the Secretary that 
the Pledge Agreement creates in RUS's favor a valid perfected and 
enforceable security interest in the eligible securities pledged to RUS 
under the Pledge Agreement;
* * * * *
    (9) The applicant will provide evidence of a credit rating on its 
senior secured debt or its corporate credit rating, as applicable, 
without regard to the guarantee and satisfactory to the Secretary; and
    (10) Certification by the Chairman of the Board and the Chief 
Executive Officer of the applicant (or other senior management 
acceptable to the Secretary), acknowledging the applicant's commitment 
to submit to the Secretary, an annual credit assessment of the 
applicant by a rating agency, an annual review and certification of the 
security of the Government guarantee that is audited by an independent 
certified public accounting firm or Federal banking regulator, annual 
consolidated financial statements audited by an independent certified 
public accountant each year during which the guaranteed bonds are 
outstanding, and other such information requested by the Secretary.
* * * * *
    (c) The Secretary may condition the release of funds related to a 
guarantee bond on the guaranteed lender's provision of additional or 
supplemental information related to agency underwriting, regulatory 
compliance, program policy objectives, or collateral valuation.

0
17. Revise Sec.  1720.11 to read as follows:


Sec.  1720.11  Servicing.

    The Secretary, or other agent of the Secretary on his or her 
behalf, shall have the right to service the guaranteed bond, and 
periodically inspect the facilities, assets, books, and accounts of the 
guaranteed lender or the collateral agent to ascertain compliance with 
the provisions of the RE Act and the bond documents.

0
18. Amend Sec.  1720.12 by revising paragraphs (a)(3) through (5) and 
(b) and adding paragraphs (c) through (e) to read as follows:


Sec.  1720.12  Reporting requirements.

    (a) * * *
    (3) Pro forma projection of the guaranteed lender's balance sheet, 
income statement, and statement of cash flows with detailed assumptions 
over the ensuing five years;
    (4) Credit assessment issued by a rating agency, or such other 
evidence of creditworthiness as may be required by the Administrator 
under Sec.  1720.5(b)(2);
    (5) Credit rating, by a rating agency on its senior secured debt or 
its corporate credit rating, as applicable, without regard to the 
guarantee and satisfactory to the Secretary, or such other evidence of 
creditworthiness as may be required by the Administrator under Sec.  
1720.5(b)(2); and
* * * * *
    (b) As long as any guaranteed bonds remain outstanding, the 
guaranteed lender will provide the Secretary with the following items 
each quarter within seven (7) business days of the guaranteed lender's 
quarter end:
    (1) A list of pledged collateral which includes borrowers' billing 
information, and other information reasonably requested by RUS.
    (2) A list of the guaranteed lender's criticized loans within 30 
days of the end of each calendar quarter.
    (c) The bond documents shall specify such bond monitoring, and 
financial and internal audit reporting requirements relating to the 
pledged collateral as deemed appropriate by the Secretary.
    (d) Leveraging data must be submitted to RUS within five (5) 
business days after the guaranteed lender publishes its 10-K or 10-Q 
form or financial statements, as applicable.
    (e) The use of the proceeds of the guaranteed bonds for the 
construction of new projects is subject to the environmental review 
requirements in accordance with 7 CFR part 1970. Prior to the 
guaranteed lender using the proceeds of the guaranteed bonds to make 
loans to borrowers for the construction of new projects, the guaranteed 
lender must provide sufficient details about the proposed construction 
to RUS so it can comply with the environmental requirements of 7 CFR 
part 1970. The guaranteed lender is prohibited from using the proceeds 
of guaranteed bonds to fund loans to borrowers for new construction 
projects without RUS's written acknowledgment that the environmental 
requirements of 7 CFR part 1970 have been met with respect to each such 
project.

[[Page 74502]]

PART 1785--LOAN ACCOUNT COMPUTATIONS, PROCEDURES AND POLICIES FOR 
ELECTRIC AND TELEPHONE BORROWERS

0
19. The authority citation for part 1785 continues to read as follows:

    Authority:  7 U.S.C. 901 et seq.; Title I, Subtitle D, sec. 
1403, Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-203; 
Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).


0
20. Revise Sec.  1785.66 to read as follows:


Sec.  1785.66  General.

    This subpart sets forth policies and procedures on the Rural 
Utilities Service (RUS) cushion of credit payments program. The cushion 
of credit payments program will be maintained only for accounts in 
existence on December 20, 2018. Once an account has been closed, it may 
not be reopened. Deposits in the borrower's cushion of credit account 
may only be used as described in this subpart and applicable law.

0
21. Revise Sec.  1785.68 to read as follows:


Sec.  1785.68  RUS cushion of credit payment accounts.

    Effective December 20, 2018, no new cushion of credit accounts may 
be established. Deposits remaining in the cushion of credit accounts 
will bear an interest rate equal to the one-year Treasury interest rate 
in effect on October 1st for each year thereafter.

0
22. Revise Sec.  1785.69 to read as follows:


Sec.  1785.69  Cushion of credit payment account computations.

    (a) Deposits. Cushion of credit deposits are credited to the 
borrowers' cushion of credit accounts as of December 20, 2018, with no 
further deposits accepted after that date.
    (b) Interest. Interest at the rate provided for in Sec.  1785.68 
will be credited on a quarterly basis to cushion of credit accounts. 
Interest earned will appear as a reduction in the interest billed on 
the borrower's RUS notes and will be separately shown on RUS Form 694, 
``Statement of Interest and Principal Due.''

0
23. Revise Sec.  1785.70 to read as follows:


Sec.  1785.70  Application of Rural Electric and Telephone Revolving 
Fund (RETRF) cushion of credit payments.

    (a) If a maturing installment on an RUS note or a note which has 
been guaranteed by RUS is not received by its due date, funds will be 
withdrawn from the borrower's cushion of credit account and applied as 
of the installment due date beginning with the oldest of such notes as 
follows: first, to current interest then due on all notes; second, to 
the accumulated interest due, if any, on all notes; and third, to the 
principal then due on all notes.
    (b) A borrower may reduce the balance of its cushion of credit 
account only if the amount obtained from the reduction is used to make 
scheduled payments on loans made or guaranteed under the Act.
    (c) The Administrator of RUS may, consistent with law, authorize 
the requested release of cushion of credit deposits to a borrower when 
the cushion of credit balance will exceed the total value of the 
borrower's outstanding loans made or guaranteed by RUS.
    (d) Once the balance in an individual cushion of credit account 
reaches zero, that cushion of credit account shall be closed. Once 
balances in all cushion of credit accounts reach zero, the cushion of 
credit program will be terminated.
    (e) As the Rural Utilities Service phases out the cushion of credit 
program, the Agency may from time to time publish announcements in the 
Federal Register, or on its website related to the efficient 
administration of the cushion of credit program.

Andrew Berke,
Administrator, Rural Utilities Service.
[FR Doc. 2022-25788 Filed 12-5-22; 8:45 am]
BILLING CODE 3410-15-P