The Rural Utilities Service recently amended its regulations for electric borrowers. These amendments affect the loan application requirements, approvals of work plans, contract bidding and approval procedures, system operation and maintenance reviews, long-range engineering, and system-design procedures.
Here is a summary from the Federal Register:[1]
(a) Changes to 7 CFR part 1710 “General and Pre-Loan Policies and Procedures Common to Electric Loans and Guarantees” include:
(1) Section 1710.109(c)(1) was updated to remove outdated language and to increase the general fund reimbursement period from 24 to 48 months. This will provide borrowers with more flexibility for when they can submit a loan application. It also parallels with the construction workplan period which is typically 48 months.
(2) Section 1710.251 was updated to make conforming changes from prior rulemakings. Paragraph (c)(7) was changed to “Outdoor Lights” for more flexibility and paragraph (c)(13) was added to provide borrowers with more clarification on eligible items approved for RUS financing.
(3) Section 1710.252(b) was revised to change the coverage period of construction workplans to typically 4 years. This is a conforming change from a prior rulemaking that streamlined when construction workplans must be approved.
(4) Section 1710.501(a)(3) was updated to clarify that the RUS Form 740c will be used to justify the loan amount and not be an exclusive list of projects which could be financed. This change will provide greater financing flexibility to the borrowers.
(b) Changes to 7 CFR part 1714—“Pre-Loan Policies and Procedures for Insured Electric Loans” include removing outdated language and updating information on the fund advance period. The updated language will clarify the loan fund advance period to conform to the requirements of the Antideficiency Act, 31 U.S.C. 1341.
(c) Changes to 7 CFR part 1717—“Post-Loan Policies and Procedures Common to Insured and Guaranteed Electric Loans include:
(1) Section 1717.154(c) was amended to increase the general funds reimbursement period to 48 months. This is a conforming change to go with the modification made to § 1710.109(c)(1).
(2) Section 1717.604(b) was revised to removed outdated language that references the requirement that long- *36194 range engineering plans must be approved by RUS. This is a conforming change to a prior rulemaking.
(3) Section 1717.608(b) was amended to change the current approval requirement to a notification and to increase the threshold for the notification. This change will reduce the amount of oversight for the borrower. Paragraph (c) was amended to change the RUS approval of Power Supply Arrangements and any amendments to a term of 5 years. This will decrease the wait time for borrowers. Both of these changes will allow the Agency to focus resources on contracts with potentially higher risks.
(4) Section 1717.616 introductory text was revised to apply to all borrowers and different coverage ratios will be reviewed on a case by case basis. Paragraph (b) was revised to remove the specific ratios with a cross reference to § 1710.114(b) and “other financial requirements as established by their Mortgages, Loan Contracts and/or other Security Agreements” was added. These changes provide the borrowers with more flexibility on ratios they are required to meet to sell property.
(5) Section 1717.854(c)(2) was amended to reduce the equity requirement related to RUS advance approval for lien sharing from 27 to 20 percent. This will reduce the number of borrowers that need to obtain prior approval before borrowing funds from an outside lender.
(d) Changes to 7 CFR part 1718—“Loan Security Documents for Electric Borrowers” include removing appendix A to subpart B and appendix A to subpart C. These were removed because copies of the model mortgage and loan contract are available upon request as noted in §§ 1718.54 and 1718.104. Also, in § 1718.54, the reference to Administrative Services Division was removed for consistency.
(e) Changes to 7 CFR part 1721—“Post-Loan Policies and Procedures for Insured Electric Loans” include revising § 1721.1(a) to identify those projects for which loan funds may be advanced and remove the requirement to amend an approved loan. This change provides greater financing flexibility for borrowers.
(f) Changes to 7 CFR part 1726—“Electric System Construction Policies and Procedures” include:
(1) Section 1726.35 was revised to remove outdated references, allow a borrower to submit a certification statement in lieu of three copies of each contract (conforming change to prior rulemaking) and to provide for electronic submission of documents.
(2) Sections 1726.51(b) and 1726.77(b) were revised to increase the contract procurement limits and to allow for some Cost-Plus/Hourly contracts. These changes will provide greater flexibility to the borrowers related to contracting as well as reduce the number of requests submitted to the Agency for review and action.
(3) Section 1726.77(c) was revised to increase the limits for requiring contract approval and to set the contract approval threshold to be the same for all borrowers. This change simplifies the program regulation and potentially minimizes misinterpretation.
(4) Section 1726.150(b) was revised to increase contract procurement limits for headquarters buildings. This change is expected to create flexibility for the borrower.
(5) Section 1726.176 introductory text was revised to add Automated Meter Reading/Automated Metering Infrastructure to the list of items covered in the regulation. Paragraph (b)(3) was revised to set contract approval thresholds to be the same for all borrowers to simplify the program regulation and potentially minimize misinterpretation.
(6) Section 1726.403(c)(2)(ii) was revised to provide that a borrower may now submit a certification statement in lieu of closeout documents. It was also modified to remove the instruction that the closeout documents are to be submitted through the General Field Representative. These changes are intended to create process efficiency for the borrower.
(g) Changes to 7 CFR part 1730—“Electric System Operations and Maintenance” include removing appendix A to subpart B and revising § 1730.23 to read “The RUS Form 300 is available from RUS and shall be used when required by this part.” RUS seeks to remove appendix A to subpart B to adapt program rules so that the program can be delivered effectively, efficiently and consistent with the current industry developments and technology changes.
(h) Changes to 7 CFR part 1767—“Accounting Requirements for RUS Electric Borrowers” include modifications to § 1767.41 Number 119 “Special Equipment” to provide clarification and additional guidance related to the treatment of Special Equipment.
[1] 86 F.R. 36193-01 (Jul. 9, 2021).