[Federal Register Volume 88, Number 40 (Wednesday, March 1, 2023)]
[Rules and Regulations]
[Pages 12806-12810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04016]


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DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1710

[Docket No. RUS-22-ELECTRIC-0057]
RIN # 0572-AC60


Electric Program Coverage Ratios Clarification and Modifications

AGENCY: Rural Utilities Service, U.S. Department of Agriculture (USDA).

ACTION: Final rule; request for comment.

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SUMMARY: The Rural Utilities Service (RUS), a Rural Development (RD) 
agency of the United States Department of Agriculture (USDA), is 
issuing a final rule with comment. The intent of this rule is to modify 
its coverage ratio requirements, add an additional set of ratios, and 
update and add definitions. The effect of this action is to reduce the 
regulatory impact on RUS Electric Program borrowers, ensure that loan 
funds will be repaid in the time agreed upon, facilitate the lending 
for construction of rural electric infrastructure, and allow RUS to 
focus on feasibility and security issues while increasing customer 
efficiency, customer satisfaction and service.

DATES: This final rule is effective May 30, 2023.
    Comments must be submitted on or before May 1, 2023.

ADDRESSES: You may submit comments, identified by Docket Number (RUS-
22-ELECTRIC-0057) or the RIN #(0572-AC60).
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow instructions for sending comments. In the ``Search Documents'' 
box, enter the Docket Number (RUS-22-ELECTRIC-0057) or the RIN # (0572-
AC60), and click the ``Search'' button. 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 FAQ page.
    Instructions: All submissions received must include the agency name 
and docket number or Regulatory Information Number (RIN) for this 
rulemaking. All comments received will be posted without change to 
www.regulations.gov, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Mark Bartholomew, Rural Utilities 
Service Electric Program, Rural Development, United States Department 
of Agriculture, 1400 Independence

[[Page 12807]]

Avenue SW, STOP 1560, Washington, DC 20250; 704-544-4612 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    Rural Development (RD) is a mission area within the U.S. Department 
of Agriculture (USDA) comprising the Rural Utilities Service (RUS), 
Rural Housing Service, and Rural Business-Cooperative Service. RD's 
mission is to increase economic opportunity and improve the quality of 
life for all rural Americans. RD meets its mission by providing loans, 
loan guarantees, grants, and technical assistance through numerous 
programs aimed at creating and improving housing, business, and 
infrastructure throughout rural America. RUS loan, loan guarantee, and 
grant programs act as a catalyst for economic and community 
development. By financing improvements to rural electric, water and 
waste, and telecommunications and broadband infrastructure, RUS also 
plays a significant role in improving other measures of quality of life 
in rural America, including public health and safety, environmental 
protection, and cultural and historic preservation. The RUS Electric 
Program provides funding to maintain, expand, upgrade, and modernize 
America's rural electric infrastructure. The loans and loan guarantees 
finance the construction or improvement of electric distribution, 
transmission, and generation facilities in rural areas.
    This rulemaking is part of the RUS Electric Program's continuing 
effort to improve customer service for its borrowers and to create a 
more efficient work process for its staff. This rulemaking will 
continue to streamline RUS Electric Program procedures and revise 
regulations, including removing unnecessary and outdated regulations 
and simplifying other policies and procedures that impose burdensome 
requirements on borrowers and applicants.
    The intent of these proposed changes is to provide an additional 
method for complying with RUS's coverage ratio requirements. The goal 
is to (1) reduce the regulatory impact on RUS Electric Program 
borrowers, (2) ensure that loan funds will be repaid in the time agreed 
upon, and (3) that the RUS loans remain adequately secured. RUS expects 
that these actions will enhance RUS and customer efficiency, thereby 
increasing customer satisfaction and service. RUS uses these ratios as 
part of its loan application review and/or its annual review of the 
Financial and Operating Report data to monitor the financial stability 
of the borrowers to ensure loan security.
    There are no alternatives except to maintain the current RUS 
Electric Program ratio coverage regulations. The proposed changes will 
improve customer experience and customer service, and allow RUS to 
better focus on feasibility and security issues while lessening the 
burdens on the RUS Electric Program borrowers. These changes provide 
added flexibility to borrowers to be in complaince with mortgage 
requirements without increasing rates to meet their operating coverage 
ratios when the borrower has cash reserves to cover debt service 
payments. This action should not impose additional costs on applicants 
or on electric borrowers as the additional ratios are already 
calculated as part of a Borrower's Statistical Profile which is 
currently calculated utilizing the data provided on the borrower's RUS 
Financial and Operating Reports. These changes will positively affect 
the RUS Electric borrower experience and enhance RUS customer service 
by removing unnecessary and burdensome requirements for electric 
borrowers and applicants, minimizing the regulatory impact of applying 
for loans made or guaranteed by RUS, and facilitating lending for 
construction of rural electric infrastructure.

II. Summary of Changes to Rule

7 CFR 1710.2 Definitions and Rules of Construction

    The definitions MTIER (Modified Times Interest Earned Ratio) and 
MDSC (Modified Debt Service Coverage) are not currently in the 
regulation and are added to assist applicants in better understanding 
the program's requirements.
    The definitions of TIER (Times Interest Earned Ratio Debt Service 
Coverage), OTIER (Operating Times Interest Earned Ratio), DSC (Debt 
Service Coverage) and ODSC (Operating Debt Service Coverage) are 
updated to remove outdated sections and references and by reorganizing 
remaining sections accordingly and improving logical flow.

7 CFR 1710.114 TIER, DSC, OTIER and ODSC Requirements

    Paragraphs (a) and (b) will be modified to remove outdated language 
and to reflect RUS' current Financial and Operating Reports.
    Paragraph (b)1 will be modified to allow Modified Times Interest 
Earned Ratio (MTIER) and Modified Debt Service Coverage (MDSC) to be 
considered if a borrower does not meet the coverage requirements for 
Operating Times Interest Earned Ratio (OTIER) and Operating Debt 
Service Coverage (ODSC). This allows more flexibility to borrowers 
regarding the coverage requirements.

III. Executive Orders and Acts

Executive Order 12866--Classification

    This rule has been determined to be non-significant for purposes of 
Executive Order (E.O.) 12866 and, therefore, has not been reviewed by 
the Office of Management and Budget (OMB).

Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as not a major rule, as defined by 5 U.S.C. 804(2).

Assistance Listing Number (Formally Known as the Catalog of Federal 
Domestic Assistance)

    The Assistance Listing Number assigned to the Rural Electrification 
Loans and Loan Guarantees Program is 10.850. The Assistance Listings 
are available on the internet at https://sam.gov/.

Executive Order 12372, Intergovernmental Review of Federal Programs

    This rule is excluded from the scope of E.O. 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 E.O. 12372'' (50 FR 
47034) advising that RUS loans and loan guarantees were not covered by 
E.O. 12372.

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).

National Environmental Policy Act

    In accordance with the National Environmental Policy Act of 1969, 
Public Law 91-190, this final rule has been reviewed in accordance with 
7 CFR part 1970 (``Environmental Policies and Procedures''). RUS has 
determined that (i) this action meets the criteria established in 7 CFR 
1970.53(f); (ii) no extraordinary circumstances exist; and (iii) 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,

[[Page 12808]]

RUS 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.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 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 
Administrative Procedure Act 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)). This final rule is not subject to the APA under 5 U.S.C. 
553(a)(2) and 5 U.S.C. 553(b)(3)(A) nor any other statute.

Executive Order 12988--Civil Justice Reform

    This rule has been reviewed under E.O. 12988, Civil Justice Reform. 
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.

Unfunded Mandate Reform Act (UMRA)

    Title II of the UMRA, Public Law 104-4, establishes requirements 
for Federal Agencies to assess the effects of their regulatory actions 
on State, local, and Tribal governments and on the private sector. 
Under Section 202 of the UMRA, Federal Agencies generally must prepare 
a written statement, including cost-benefit analysis, for proposed and 
Final Rules with ``Federal mandates'' that may result in expenditures 
to State, local, or Tribal governments, in the aggregate, or to the 
private sector, of $100 million or more in any one year. When such a 
statement is needed for a rule, section 205 of the UMRA generally 
requires a Federal agency to identify and consider a reasonable number 
of regulatory alternatives and adopt the least costly, more cost-
effective, or least burdensome alternative that achieves the objectives 
of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, and Tribal 
governments or for the private sector. Therefore, this rule is not 
subject to the requirements of sections 202 and 205 of the UMRA.

Executive Order 13132--Federalism

    It has been determined, under E.O. 13132, Federalism, that 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 rule impose 
substantial direct compliance costs on State and local governments. 
Therefore, consultation with the States is not required.

Executive Order 13175--Consultation and Coordination With Indian Tribal 
Governments

    This executive order imposes requirements on RUS in the development 
of regulatory policies that have Tribal implications or preempt Tribal 
laws. RUS has determined that the rule does not have a substantial 
direct effect on one or more Indian Tribe(s) or on either the 
relationship or the distribution of powers and responsibilities between 
the Federal Government and Indian Tribes. Thus, this rule is not 
subject to the requirements of Executive Order 13175. If Tribal leaders 
are interested in consulting with RUS on this rule, they are encouraged 
to contact USDA's Office of Tribal Relations or RD's Native American 
Coordinator at: [email protected] to request such a consultation.

E-Government Act Compliance

    Rural Development is committed to the E-Government Act of 2002, 
Public Law 107-347, which requires government agencies in general to 
provide the public the option of submitting information or transacting 
business electronically to the maximum extent possible and to promote 
the use of the internet and other information technologies to provide 
increased opportunities for citizen access to government information 
and services, and for other purposes.

Civil Rights Impact Analysis

    Rural Development has reviewed this rule in accordance with USDA 
Regulation 4300-004, ``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, disability, 
marital or familial status. Based on the review and analysis of the 
rule and all available data, issuance of this final rule is not likely 
to negatively impact low and moderate-income populations, minority 
populations, women, Indian Tribes, or persons with disability, by 
virtue of their age, race, color, national origin, sex, disability, or 
marital or familial status.

USDA Non-Discrimination Statement

    In accordance with Federal civil rights laws and 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/oascr/how-to-file-a-program-discrimination-complaint 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:
    a. Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 
20250-9410; or
    b. Fax: (833) 256-1665 or (202) 690-7442; or
    c. Email: [email protected].

[[Page 12809]]

List of Subjects in 7 CFR Part 1710

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

    For the reason set forth in the preamble, RUS amends 7 CFR part 
1710 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.

Subpart A--General

0
2. Amend Sec.  1710.2 in paragraph (a) by:
0
a. Revising the definition of ``DSC'';
0
b. Adding definitions in alphabetical order for ``MDSC'' and ``MTIER''; 
and
0
c. Revising the definitions of ``DSC'', ``ODSC'', ``OTIER'', and 
``TIER''.
    The revisions and additions read as follows


Sec.  1710.2  Definitions and rules of construction.

    (a) * * *
    DSC means Debt Service Coverage of the borrower calculated as:
    [GRAPHIC] [TIFF OMITTED] TR01MR23.002
    
Where:

A = Depreciation and Amortization Expense of the borrower, which 
equals Part A, Line 13b of the RUS Financial and Operating Report 
Electric Distribution for distribution borrowers or Section A, Line 
22b of the RUS Financial and Operating Report Electric Power Supply 
for power supply borrowers;
B = Interest expense on total long-term debt of the borrower, which 
equals Part A, Line 16b of the RUS Financial and Operating Report 
Electric Distribution for distribution borrowers or Part A, Section 
A, Line 24b of the RUS Financial and Operating Report Electric Power 
Supply for power supply borrowers, except that interest expense 
shall be increased by \1/3\ of the amount, if any, by which 
restricted rentals of the borrower (Part L, Total Column c) of the 
RUS Financial and Operating Report Electric Distribution for 
distribution borrowers or Part H, Section K, Total Column c of the 
RUS Financial and Operating Report Electric Power Supply for power 
supply borrowers) exceed 2 percent of the borrower's equity (RUS 
Financial and Operating Report Electric Distribution for 
distribution borrowers, Part C, Line 36 [Total Margins & Equities] 
less Part C, Line 27 [Regulatory Assets] or RUS Financial and 
Operating Report Electric Power Supply for power supply borrowers, 
Part A, Section B, Line 39 [Total Margins & Equities] less Part A, 
Section B, Line 29 [Regulatory Assets]);
C = Patronage Capital or Margins of the borrower, which equals Part 
A, Line 29b of the RUS Financial and Operating Report Electric 
Distribution for distribution borrowers or Part A, Section A, Line 
38b of the RUS Financial and Operating Report Electric Power Supply 
for power supply borrowers; and
D = Debt Service Billed (RUS + other), which equals the sum of all 
payments of principal and interest required to be made on account of 
total long-term debt of the borrower during the calendar year from 
Total of Column D of Part N of the RUS Financial and Operating 
Report Electric Distribution for distribution borrowers or Total of 
Column D of Part H, Section H of the RUS Financial and Operating 
Report Electric Power Supply for power supply borrowers, plus \1/3\ 
of the amount, if any, by which restricted rentals of the borrower 
(Part L, Line 3c of the RUS Financial and Operating Report Electric 
Distribution for distribution borrowers or Part H, Section K, Line 
4c of the RUS Financial and Operating Report Electric Power Supply 
for power supply borrowers) exceed 2 percent of the borrower's 
equity (RUS Financial and Operating Report Electric Distribution for 
distribution borrowers, Part C, Line 36 [Total Margins & Equities] 
less Part C, Line 27 [Regulatory Assets] or RUS Financial and 
Operating Report Electric Power Supply for power supply borrowers, 
Part A, Section B, Line 39 [Total Margins & Equities] less Part A, 
Section B, Line 29 [Regulatory Assets]);
* * * * *
    MDSC means Modified Debt Service Coverage of the electric system 
calculated as:
[GRAPHIC] [TIFF OMITTED] TR01MR23.003

Where:

A = Depreciation and Amortization Expense of the borrower, which 
equals Part A, Line 13b of the RUS Financial and Operating Report 
Electric Distribution for distribution borrowers or Part A, Section 
A, Line 22b of the RUS Financial and Operating Report Electric Power 
Supply for power supply borrowers;
B = Interest expense on total long-term debt of the borrower, which 
equals Part A, Line 16b of the RUS Financial and Operating Report 
Electric Distribution for distribution borrowers or Part A, Section 
A, Line 24b of the RUS Financial and Operating Report Electric Power 
Supply for power supply borrowers, except that interest expense 
shall be increased by \1/3\ of the amount, if any, by which 
restricted rentals of the borrower (Part L, Line 3c of the RUS 
Financial and Operating Report Electric Distribution for 
distribution borrowers or Part H, Section K, Line 4c of the RUS 
Financial and Operating Report Electric Power Supply for power 
supply borrowers) exceed 2 percent of the borrower's equity (RUS 
Financial and Operating Report Electric Distribution for 
distribution borrowers, Part C, Line 36 [Total Margins & Equities] 
less Part C, Line 27 [Regulatory Assets] or RUS Financial and 
Operating Report Electric Power Supply for power supply borrowers, 
Part A, Section B, Line 39 [Total Margins & Equities] less Part A, 
Section B, Line 29 [Regulatory Assets]);
C = Patronage Capital or Margins of the borrower, which equals Part 
A, Line 29b of the RUS Financial and Operating Report Electric 
Distribution for distribution borrowers or Part A, Section A, Line 
38b of the RUS Financial and Operating Report Electric Power Supply 
for power supply borrowers; and
D = Generation and Transmission Capital Credits of the borrower, 
which equals Part A, Line 26b of the RUS Financial and Operating 
Report Electric Distribution for distribution borrowers or Part A, 
Section A, Line 35b of the RUS Financial and Operating Report 
Electric Power Supply for power supply borrowers;
E = Other Capital Credits and Patronage Dividends of the borrower, 
which equals Part A, Line 27b of the RUS Financial and Operating 
Report Electric Distribution for distribution borrowers or Part A, 
Section A, Line 36b of the RUS Financial and Operating Report 
Electric Power Supply for power supply borrowers; and
F = Total Long-Term Debt Service Billed (RUS + other), which equals 
the sum of all payments of principal and interest required to be 
made on account of total long-term debt of the electric system 
during the calendar year from Part N, Line 12d of the RUS Financial 
and Operating Report Electric Distribution for distribution 
borrowers or Part H, Section H, Line 12d of the RUS Financial and 
Operating Report Electric Power Supply for power supply borrowers.
* * * * *
    MTIER means Modified Times Interest Earned Ratio of the electric 
system calculated as:
[GRAPHIC] [TIFF OMITTED] TR01MR23.004

Where:

A = Patronage Capital or Margins of the borrower, which equals Part 
A, Line 29b of the RUS Financial and Operating Report Electric 
Distribution for distribution borrowers;
B = Interest expense on total long-term debt of the borrower, which 
equals Part A, Line 16b of the RUS Financial and Operating Report 
Electric Distribution for distribution borrowers, except that 
interest expense shall be increased by \1/3\ of the amount, if any, 
by which restricted

[[Page 12810]]

rentals of the borrower (Part L, Line 3c of the RUS Financial and 
Operating Report Electric Distribution for distribution borrowers) 
exceed 2 percent of the borrower's equity (RUS Financial and 
Operating Report Electric Distribution for distribution borrowers, 
Part C, Line 36 [Total Margins & Equities] less Part C, Line 27 
[Regulatory Assets];
C = Generation and Transmission Capital Credits of the borrower, 
which equals Part A, Line 26b of the RUS Financial and Operating 
Report Electric Distribution for distribution borrowers; and
D = Other Capital Credits and Patronage Dividends of the borrower, 
which equals Part A, Line 27b of the RUS Financial and Operating 
Report Electric Distribution for distribution borrowers.
* * * * *
    ODSC means Operating Debt Service Coverage of the electric system 
calculated as:
[GRAPHIC] [TIFF OMITTED] TR01MR23.005

Where:

A = Depreciation and Amortization Expense of the borrower, which 
equals Part A, Line 13b of the RUS Financial and Operating Report 
Electric Distribution for distribution borrowers;
B = Interest expense on total long-term debt of the borrower, which 
equals Part A, Line 16b of the RUS Financial and Operating Report 
Electric Distribution for distribution borrowers, except that 
interest expense shall be increased by \1/3\ of the amount, if any, 
by which restricted rentals of the borrower (Part L, Line 3c of the 
RUS Financial and Operating Report Electric Distribution for 
distribution borrowers) exceed 2 percent of the borrower's equity 
(RUS Financial and Operating Report Electric Distribution for 
distribution borrowers, Part C, Line 36 [Total Margins & Equities] 
less Part C, Line 27 [Regulatory Assets];
C = Patronage Capital & Operating Margins of the electric system, 
which equals Part A, Line 21b of the RUS Financial and Operating 
Report Electric Distribution for distribution borrowers, plus cash 
received from the retirement of patronage capital by suppliers of 
electric power and by lenders for credit extended for the Electric 
System from Part I, Line 2c of the RUS Financial and Operating 
Report Electric Distribution for distribution borrowers; and
D = Debt Service Billed (RUS + other), which equals the sum of all 
payments of principal and interest required to be made on account of 
total long-term debt of the electric system during the calendar year 
from Part N, Line 12d of the RUS Financial and Operating Report 
Electric Distribution for distribution borrowers, plus \1/3\ of the 
amount, if any, by which restricted rentals of the Electric System 
(Part L, Line 3c of the RUS Financial and Operating Report Electric 
Distribution for distribution borrowers) exceed 2 percent of the 
borrower's equity (RUS Financial and Operating Report Electric 
Distribution for distribution borrowers, Part C, Line 36 [Total 
Margins & Equities] less Part C, Line 27 [Regulatory Assets]).
* * * * *
    OTIER means Operating Times Interest Earned Ratio of the electric 
system calculated as:
[GRAPHIC] [TIFF OMITTED] TR01MR23.006

Where:

A = Interest expense on total long-term debt of the borrower, which 
equals Part A, Line 16b of the RUS Financial and Operating Report 
Electric Distribution for distribution borrowers, except that 
interest expense shall be increased by \1/3\ of the amount, if any, 
by which restricted rentals of the borrower (Part L, Line 3c of the 
RUS Financial and Operating Report Electric Distribution for 
distribution borrowers) exceed 2 percent of the borrower's equity 
(RUS Financial and Operating Report Electric Distribution for 
distribution borrowers, Part C, Line 36 [Total Margins & Equities] 
less Part C, Line 27 [Regulatory Assets]); and
B = Patronage Capital & Operating Margins of the electric system, 
which equals Part A, Line 21b of the RUS Financial and Operating 
Report Electric Distribution for distribution borrowers, plus cash 
received from the retirement of patronage capital by suppliers of 
electric power and by lenders for credit extended for the Electric 
System from Part I, Line 2c of the RUS Financial and Operating 
Report Electric Distribution for distribution borrowers.
* * * * *
    TIER means Times Interest Earned Ratio of the borrower calculated 
as:
[GRAPHIC] [TIFF OMITTED] TR01MR23.007

Where:

A = Interest expense on total long-term debt of the borrower, which 
equals Part A, Line 16b of the RUS Financial and Operating Report 
Electric Distribution for distribution borrowers or Part A, Section 
A, Line 24b of the RUS Financial and Operating Report Electric Power 
Supply for power supply borrowers, except that interest expense 
shall be increased by \1/3\ of the amount, if any, by which 
restricted rentals of the borrower (Part L, Line 3c of the RUS 
Financial and Operating Report Electric Distribution for 
distribution borrowers or Part H, Section K, Line 4c of the RUS 
Financial and Operating Report Electric Power Supply for power 
supply borrowers) exceed 2 percent of the borrower's equity (RUS 
Financial and Operating Report Electric Distribution for 
distribution borrowers, Part C, Line 36 [Total Margins & Equities] 
less Part C, Line 27 [Regulatory Assets] or RUS Financial and 
Operating Report Electric Power Supply for power supply borrowers, 
Part A, Section B, Line 39 [Total Margins & Equities] less Part A, 
Section B, Line 29 [Regulatory Assets]); and
B = Patronage Capital or Margins of the borrower, which equals Part 
A, Line 29b of the RUS Financial and Operating Report Electric 
Distribution for distribution borrowers or Part A, Section A, Line 
38b of the RUS Financial and Operating Report Electric Power Supply 
for power supply borrowers.
* * * * *

0
3. Amend Sec.  1710.114 by revising paragraphs (a), (b)(1), and (e)(2) 
to read as follows:


Sec.  1710.114  TIER, DSC, OTIER and ODSC requirements.

    (a) General. Requirements for coverage ratios are set forth in the 
borrower's mortgage, loan contract, or other contractual agreements 
with RUS. Nothing in this section, however, shall limit the 
Administrator's ability to contractually agree to a different ratio 
provided in this section when doing so would advance or protect the 
interests of the government.
* * * * *
    (b) * * *
    (1) The minimum coverage ratios required of distribution borrowers 
whether applied on an annual or average basis of the 2 best years out 
of the 3 most recent calendar years, are a TIER of 1.25, DSC of 1.25. 
Further, the minimum coverage ratios required of distribution borrowers 
whether applied on an annual or average basis of the 2 best years out 
of the 3 most recent calendar years are an OTIER and ODSC of 1.1 or an 
MTIER and MDSC of 1.1.
* * * * *
    (e) * * *
    (2) With respect to any outstanding loan approved by RUS if, based 
on actual or projected financial performance of the borrower, RUS 
determines that the borrower may not achieve its required coverage 
ratios in the current or future years, RUS may withhold the advance of 
loan funds until the borrower has taken remedial action satisfactory to 
RUS.

Andrew Berke,
Administrator, Rural Utilities Service.
[FR Doc. 2023-04016 Filed 2-28-23; 8:45 am]
BILLING CODE 3410-15-P