Rule2022-25788
Implementing Provisions of the Agriculture Improvement Act of 2018
Primary source
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Published
December 6, 2022
Effective
December 6, 2022
Issuing agencies
Agriculture DepartmentRural Utilities Service
Abstract
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.
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<title>Federal Register, Volume 87 Issue 233 (Tuesday, December 6, 2022)</title>
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[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 [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-25788]
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Rules and Regulations
Federal Register
________________________________________________________________________
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having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
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The Code of Federal Regulations is sold by the Superintendent of Documents.
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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.
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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 <a href="https://www.regulations.gov">https://www.regulations.gov</a> 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
<a href="http://Regulations.gov">Regulations.gov</a>, 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
<a href="/cdn-cgi/l/email-protection#cfaea3aab7a6bce1bca0a3aea1a08fbabcabaee1a8a0b9"><span class="__cf_email__" data-cfemail="84e5e8e1fcedf7aaf7ebe8e5eaebc4f1f7e0e5aae3ebf2">[email protected]</span></a>.
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
<a href="http://Regulations.gov">Regulations.gov</a> 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 <a href="/cdn-cgi/l/email-protection#bde9cfd4dfdcd193efd8d1dcc9d4d2d3cefdc8ced9dc93dad2cb"><span class="__cf_email__" data-cfemail="6034120902010c4e32050c0114090f0e1320151304014e070f16">[email protected]</span></a> or Rural Development's
Native American Coordinator at: <a href="/cdn-cgi/l/email-protection#e4a5ada5aaa491978085ca838b92"><span class="__cf_email__" data-cfemail="3c7d757d727c494f585d125b534a">[email protected]</span></a> 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 <a href="https://sam.gov/content/assistance-listings">https://sam.gov/content/assistance-listings</a>.
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 <a href="https://www.usda.gov/sites/default/files/documents/usda-program-discrimination-complaint-form.pdf">https://www.usda.gov/sites/default/files/documents/usda-program-discrimination-complaint-form.pdf</a>, 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: <a href="/cdn-cgi/l/email-protection#0272706d6570636f2c6b6c7663696742777166632c656d74"><span class="__cf_email__" data-cfemail="d4a4a6bbb3a6b5b9fabdbaa0b5bfb194a1a7b0b5fab3bba2">[email protected]</span></a>.
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 <a href="https://rd.usda.gov/programs-services/electric-programs">https://rd.usda.gov/programs-services/electric-programs</a>.
(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
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</html>Indexed from Federal Register on December 6, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.