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e-CFR data is current as of October 29, 2020

Title 7Subtitle BChapter XVIIPart 1710 → Subpart H

Title 7: Agriculture

Subpart H—Energy Efficiency and Conservation Loan Program

§1710.400   Purpose.
§1710.401   RUS policy.
§1710.402   Scope.
§1710.403   General.
§1710.404   Definitions.
§1710.405   Eligible energy efficiency and conservation programs.
§1710.406   Eligible activities and investments.
§1710.407   Business plan.
§1710.408   Quality assurance plan.
§1710.409   Loan provisions.
§1710.410   Application documents.
§1710.411   Analytical support documentation.
§1710.412   Borrower accounting methods, management reporting, and audits.
§1710.413   Compliance with other laws and regulations.
§§1710.414-1710.499   [Reserved]

Source: 78 FR 73366, Dec. 5, 2013, unless otherwise noted.

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§1710.400   Purpose.

(a) This subpart establishes policies and requirements that apply to loans and loan guarantees to finance Energy Efficiency and Conservation programs (EE Programs) undertaken by an eligible utility system to finance Demand side management, energy efficiency and conservation, or on-grid and off-grid renewable energy system programs that will result in the better management of their system load growth, a more beneficial load profile, or greater optimization of the use of alternative energy resources in their service territory. These programs may be considered an essential utility service.

(b)(1) The goals of an eligible Energy Efficiency project eligible for funding under this program and Subpart H include:

(i) Increasing energy efficiency at the end user level;

(ii) Modifying electric load such that there is a reduction in overall system demand;

(iii) Effecting a more efficient use of existing electric distribution, transmission and generation facilities;

(iv) Attracting new businesses and creating jobs in rural communities by investing in energy efficiency; and

(v) Encouraging the use of renewable energy fuels for either Demand side management or the reduction of conventional fossil fuel use within the service territory.

(2) Although not a goal, RUS recognizes that there will be a reduction of green house gases with energy efficiency improvements.

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§1710.401   RUS policy.

EE Programs under this subpart may be financed at the distribution level or by an electric generation and transmission provider. RUS encourages borrowers to coordinate with the relevant member systems regarding their intention to implement a program financed under this subpart. RUS also encourages borrowers to leverage funds available under this subpart with State, local, or other funding sources that may be available to implement such programs.

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§1710.402   Scope.

This subpart adapts and modifies, but does not supplant, the requirements for all borrowers set forth elsewhere where the purpose of the loan is to finance an approved EE program. In the event there is overlap or conflict between this subpart and the provisions of this part 1710 or other parts of the Code of Federal Regulations, the provisions of this subpart will apply for loans made or guaranteed pursuant to this subpart.

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§1710.403   General.

EE Programs financed under this subpart may be directed at all forms of energy consumed within a utility's service territory, not just electricity, where the electric utility is in a position to facilitate the optimization of the energy consumption profile within its service territory and do so in a way that enhances the financial or physical performance of the rural electric system and enables the repayment of the energy efficiency loan.

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§1710.404   Definitions.

For the purpose of this subpart, the following terms shall have the following meanings. In the event there is overlap or conflict between the definitions contained in §1710.2, the definitions set forth below will apply for loans made or guaranteed pursuant to this subpart.

British thermal unit (Btu) means the quantity of heat required to raise one pound of water one degree Fahrenheit.

Certified energy auditor for commercial and industrial energy efficiency improvements. (1) An energy auditor shall meet one of the following criteria:

(i) An individual possessing a current commercial or industrial energy auditor certification from a national, industry-recognized organization;

(ii) A Licensed Professional Engineer in the State in which the audit is conducted with at least 1 year experience and who has completed at least two similar type Energy Audits;

(iii) An individual with a four-year engineering or architectural degree with at least 3 years experience and who has completed at least five similar type Energy Audits; or

(iv) Beginning in calendar year 2015, an energy auditor certification recognized by the Department of Energy through its Better Buildings Workforce Guidelines project.

(2) For residential energy efficiency improvements, an energy auditor shall meet one of the following criteria: The workforce qualification requirements of the Home Performance with Energy Star Program, as outlined in Section 3 of the Home Performance with Energy Star Sponsor Guide; or an individual possessing a current residential energy auditor or building analyst certification from a national, industry-recognized organization.

Cost effective means the aggregate cost of an EE Program is less than the financial benefit of the program over time. The cost of a program for this purpose shall include the costs of incentives, measurement and verification activity and administrative costs, and the benefits shall include, without limitation, the value of energy saved, the value of corresponding avoided generation, transmission or distribution and reserve investments as may be displaced or deferred by program activities, and the value of corresponding avoided greenhouse gas emissions and other pollutants.

Demand means the electrical load averaged over a specified interval of time. Demand is expressed in kilowatts, kilovolt amperes, kilovars, amperes, or other suitable units. The interval of time is generally 15 minutes, 30 minutes, or 60 minutes.

Demand savings means the quantifiable reduction in the load requirement for electric power, usually expressed in kilowatts (kW) or megawatts (MW) such that it reduces the cost to serve the load.

Eligible borrower means a utility system that has direct or indirect responsibility for providing retail electric service to persons in a rural area. This definition includes existing borrowers and utilities who meet current RUS borrower requirements.

Energy audit means an inspection and analysis of energy flows in a building, process, or system with the goal of identifying opportunities to enhance energy efficiency. The activity should result in an objective standard-based technical report containing recommendations for improving the energy efficiency. The report should also include an analysis of the estimated benefits and costs of pursuing each recommendation and the simple payback period.

Energy efficiency and conservation measures means equipment, materials and practices that when installed and used at a Consumer's premises result in a verifiable reduction in energy consumption, measured in Btus, or demand as measured in Btu-hours, or both, at the point of purchase relative to a base level of output. The ultimate goal is the reduction of utility or consumer energy needs.

Energy efficiency and conservation program (EE Program) means a program of activities undertaken or financed by a utility within its service territory to reduce the amount or rate of energy used by Consumers relative to a base level of output.

HVAC means heating, ventilation, and air conditioning.

Load means the Power delivered to power utilization equipment performing its normal function.

Load factor means the ratio of the average load over a designated period of time to the peak load occurring in the same period.

Peak demand (or maximum demand) means the highest demand measured over a selected period of time, e.g., one month.

Peak demand reduction means a decrease in electrical demand on an electric utility system during the system's peak period, calculated as the reduction in maximum average demand achieved over a specified interval of time.

Power means the rate of generating, transferring, or using energy. The basic unit is the watt, where one Watt is approximately 3.41213 Btu/hr.

Re-lamping means the initial conversion of bulbs or light fixtures to more efficient lighting technology but not the replacement of like kind bulbs or fixtures after the initial conversion.

SI means the International System of Units: the modern metric system.

Smart Grid Investments means capital expenditures for devices or systems that are capable of providing real time, two way (utility and Consumer) information and control protocols for individual Consumer owned or operated appliances and equipment, usually through a Consumer interface or smart meter.

Ultimate recipient means a Consumer that receives a loan from a borrower under this subpart.

Utility Energy Services Contract (UESC) means a contract whereby a utility provides a Consumer with comprehensive energy efficiency improvement services or demand reduction services.

Utility system means an entity in the business of providing retail electric service to Consumers (distribution entity) or an entity in the business of providing wholesale electric supply to distribution entities (generation entity) or an entity in the business of providing transmission service to distribution or generation entities (transmission entity), where, in each case, the entities provide the applicable service using self-owned or controlled assets under a published tariff that the entity and any associated regulatory agency may adjust.

Watt means the SI unit of power equal to a rate of energy transfer (or the rate at which work is done), of one joule per second.

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§1710.405   Eligible energy efficiency and conservation programs.

(a) General. Eligible EE Programs shall:

(1) Be developed and implemented by an Eligible borrower and applied within its service territory;

(2) Consist of eligible activities and investments as provided in §1710.406

(3) Provide for the use of State and local funds where available to supplement RUS loan funds;

(4) Incorporate the applicant's policy applicable to the interconnection of distributed resources;

(5) Incorporate a business plan that meets the requirements of §1710.407;

(6) Incorporate a quality assurance plan that meets the requirements of §1710.408;

(7) Demonstrate that the program can be expected to be Cost effective;

(8) Demonstrate that the program will have a net positive or neutral cumulative impact on the borrower's financial condition over the time period contemplated in the analytical support documents demonstrating that the net present value of program costs incurred by the borrower are positive, pursuant to §1710.411;

(9) Demonstrate energy savings or peak demand reduction for the service territory overall; and

(10) Be approved in writing by RUS prior to the investment of funds for which reimbursement will be requested.

(b) Financial Structures. Eligible EE Programs may provide for direct recoupment of expenditures for eligible activities and investment from Ultimate Recipients as follows:

(1) Loans made to Ultimate Recipients located in a rural area where —

(i) The Ultimate Recipients may be wholesale or retail;

(ii) The loans may be secured or unsecured;

(iii) The loan receivables are owned by the Eligible Borrower;

(iv) The loans are made or serviced directly by the Eligible Borrower or by a financial institution pursuant to a contractual relationship between the Eligible Borrower and the financial institution;

(v) Due diligence is performed to confirm the repayment ability of the Ultimate Recipient;

(vi) Loans are funded only upon completion of the project financed or to reimburse startup costs that have been incurred;

(vii) The rate charged the Ultimate Recipient is less than or equal to the direct Treasury rate established daily by the United States Treasury pursuant to §1710.51(a)(1) or §1710.52, as applicable, plus the borrower's interest rate from RUS and 1.5 percent . Exceptions will be made on a case-by-case basis to ensure repayment of the government's loan and must be clearly articulated in the business plan RUS will not accept an exception request if the loan is feasible at 1.5 percent; and

(viii) Loans are not used to refinance a preexisting loan.

(2) A tariff that is specific to an identified rural Consumer, premise or class of ratepayer; or

(3) On bill repayment and other financial recoupment mechanisms as may be approved by RUS.

(c) Period of performance—(1) Performance standards. (i) Eligible EE Programs activities that are listed under §1710.406(b) should be designed to achieve the applicable operating performance standards within one year of the date of installation of the facilities.

(ii) All activities other than those included in paragraph (c)(1)(i) of this section should be designed to achieve the applicable operating performance targets within the time period contemplated by the analytic support documents for the overall EE Program as approved by RUS.

(2) Cost effectiveness. Eligible EE Programs must demonstrate that Cost effectiveness as measured for the program overall will be achieved within ten years of initial funding, except in cases where the useful life of the technology on an aggregate basis can be demonstrated to be longer than the ten year period. RUS will evaluate the useful life assumption on a case-by-case basis.

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§1710.406   Eligible activities and investments.

(a) General. Eligible program activities and investments:

(1) Shall be designed to improve energy efficiency and/or reduce peak demand on the customer side of the meter;

(2) Shall be Cost effective in the aggregate after giving effect to all activities and investments contemplated in the approved EE Program; and

(3) May apply to all Consumer classes.

(b) Eligible activities and investments. Eligible program activities and investments may include, but are not limited to, the following:

(1) Energy efficiency and conservation measures where assets financed at an Ultimate Recipient premises can be characterized as an integral part of the real property that would typically transfer with the title under applicable state law. Where applicable, it is anticipated that the loan obligation would also be expected to transfer with ownership of the metered account serving that property.

(2) Renewable Energy Systems, including —

(i) On or Off Grid Renewable energy systems;

(ii) Fuel cells;

(3) Demand side management (DSM) investments including Smart Grid Investments;

(4) Energy audits;

(5) Utility Energy Services Contracts;

(6) Consumer education and outreach programs;

(7) Power factor correction equipment on the Ultimate Recipient side of the meter;

(8) Re-lamping to more energy efficient lighting; and

(9) Fuel Switching as in:

(i) The replacement of existing fuel consuming equipment using a particular fuel with more efficient fuel consuming equipment that uses another fuel but which does not increase direct greenhouse gas emissions; or

(ii) The installation of non-electric fuel consuming equipment to facilitate management of electric system peak loads. Fuel switching to fossil or biomass fueled electric generating equipment is expressly excluded.

(10) Other activities and investments as approved by RUS as part of the EE Program such as, but not limited to, pre-retrofit improvements.

(c) Intermediary lending. EE Program loan funds may be used for direct re-lending to Ultimate Recipients where the requirements of §1710.405(b) are met.

(d) Performance standards. Borrowers are required to use Energy Star qualified equipment where applicable or meet or exceed efficiency requirements designated by the Federal Energy Management Program.

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§1710.407   Business plan.

An Eligible EE Program must have a business plan for implementing the program. The business plan is expected to have a global perspective on the borrower's energy efficiency plan. Therefore, energy efficiency upgrades should be identified in aggregate. The business plan must have the following elements:

(a) Executive summary. The executive summary shall capture the overall objectives to be met by the Eligible EE Program and the timeframe in which they are expected to be achieved.

(b) Organizational background. The background section shall include descriptions of the management team responsible for implementing the Eligible EE Program.

(c) Marketing plan. The marketing section should identify the target Consumers, promotional activities to be pursued and target penetration rates by Consumer category and investment activity.

(d) Operations plan. The operations plan shall include but is not limited to:

(1) A list of the activities and investments to be implemented under the EE Program and the Btu savings goal targeted for each category;

(2) An estimate of the dollar amount of investment by the utility for each category of activities and investments listed under paragraph (d)(1) of this section;

(3) A staffing plan that identifies whether and how outsourced contractors or subcontractors will be used to deliver the program;

(4) A description of the process for documenting and perfecting collateral arrangements for Ultimate Recipient loans, if applicable; and

(5) The overall Btu savings to be accomplished over the life of the EE Program.

(e) Financial plan. The financial plan shall include but is not limited to:

(1) A schedule showing sources and uses of funds for the program;

(2) An itemized budget for each activity and investment category listed in the operations plan;

(3) An aggregate Cost effectiveness forecast;

(4) Where applicable, provision for Ultimate Recipient loan loss reserves. These loan loss reserves will not be funded by RUS. Loan loss reserves are not required when a utility will not be relending RUS funds.

(5) Identify expected Ultimate Recipient loan delinquency and default rates and report annually on deviations from the expected rates.

(f) Risk analysis. The business plan shall include an evaluation of the financial and operational risk associated with the program, including an estimate of prospective Consumer loan losses consistent with the loan loss reserve to be established pursuant to paragraph (e)(4) of this section.

(g) The borrowers are strongly encouraged to follow a bulletin or such other publication as RUS deems appropriate that contains and describes best practices for energy efficiency business plans. RUS will make this bulletin or publication publicly available and revise it from time-to-time as RUS deems it necessary.

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§1710.408   Quality assurance plan.

An eligible EE program must have a quality assurance plan as part of the program. The quality assurance plan is expected to have a global perspective on the borrower's energy efficiency plan. Therefore, energy efficiency upgrades should be identified in aggregate. Every effort is made to fund only EE programs that are administered in accordance with quality assurance plans meeting standards designed to achieve the purposes of this subpart. However, RUS and its employees assume no legal liability for the accuracy, completeness or usefulness of any information, product, service, or process funded directly or indirectly with financial assistance provided under this subpart. Nothing in the loan documents between RUS and the energy efficiency borrower shall confer upon any other person any right, benefit or remedy of any nature whatsoever. Neither RUS nor its employees makes any warranty, express or implied, including the warranties of merchantability and fitness for a particular purpose, with respect to any information, product, service, or process available from an energy efficiency borrower. The approval by RUS and its employees of an energy efficiency borrower's quality assurance plan is solely for the benefit of RUS. Approval of the quality assurance plan does not constitute an RUS endorsement. The quality assurance plan must have the following elements:

(a) Quality assurance assessments shall include the use of qualified energy managers or professional engineers to evaluate program activities and investments;

(b) Where applicable, program evaluation activities should use the protocols for determining energy savings as developed by the U.S. Department of Energy in the Uniform Methods Project.

(c) Energy audits shall be performed for energy efficiency investments involving the building envelope at an Ultimate Recipient premises;

(d) Energy audits must be performed by certified energy auditors; and

(e) Follow up audits shall be performed within one year after installation on a sample of investments made to confirm whether efficiency improvement expectations are being met.

(f) In cases involving energy efficiency upgrades to a single system (such as a ground source heat pump) the new system must be designed and installed by certified and insured professionals acceptable to the utility.

(g) Industry or manufacturer standard performance tests, as applicable, shall be required on any system upgraded as a result of an EE Program. This testing shall indicate the installed system is meeting its designed performance parameters.

(h) In some programs the utility may elect to recommend independent contractors who can perform energy efficiency related work for their customers. In these cases utilities shall monitor the work done by the contractors and confirm that the contractors are performing quality work. Utilities should remove substandard contractors from their recommended lists if the subcontractors fail to perform at a satisfactory level. RUS does not endorse or recommend any particular independent contractors.

(i) Contractors not hired by the utility may not act as agents of the utility in performing work financed under this subpart.

(j) The borrowers are strongly encouraged to follow a bulletin or other publication that RUS deems appropriate and contains and describes best practices for energy efficiency quality assurance plans. RUS will make this bulletin or publication publicly available and revise it from time-to-time as RUS deems it necessary.

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§1710.409   Loan provisions.

(a) Loan term. The maximum term for loans under this subpart shall be 15 years unless the loans relate to ground source loop investments or technology on an aggregate basis that has a useful life greater than 15 years. Ground source loop investments as the term is used in this paragraph do not include ancillary equipment related to ground source heat pump systems.

(b) Loan feasibility. Loan feasibility must be demonstrated for all loans made under this subpart. Loans made under this subpart shall be secured.

(c) Reimbursement for completed projects. (1) A borrower may request an initial advance not to exceed five percent of the total loan amount for working capital purposes to implement an eligible EE Program;

(2) Except for the initial advance provided for in paragraph (c)(1) of this section, all advances under this subpart shall be used for reimbursement of expenditures relating to a completed activity or investment; and

(3) Advances shall be in accordance with RUS procedures.

(d) Loan amounts. (1) Cumulative loan amounts outstanding under this subpart will be determined by the Assistant Administrator of the Electric Program and based an applicant's business plan; and

(2) Financing for administrative costs may not exceed 5 percent of the total loan amount.

(3) The Rural Utilities Service reserves the right to place a cap on both the total amount of funds an eligible entity can apply for, as well as a cap on the total amount of funds the Energy Efficiency and Conservation Program can utilize in the appropriations.

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§1710.410   Application documents.

The required application documentation listed in this section is not all inclusive but is specific to Eligible borrowers requesting a loan under this subpart and in most cases is supplemental to the general requirements for loan applications provided for in this part 1710:

(a) A letter from the Borrower's General Manager requesting a loan under this subpart.

(b) A copy of the statement establishing the EE Program that reflects an undertaking that funds collected in excess of then current amortization requirements for the related RUS loan will be redeployed for EE Program purposes or used to prepay the RUS loan.

(c) Current RUS-approved EE Program documentation that includes:

(1) A Business Plan that meets the requirements of §1710.407;

(2) A Quality Assurance Plan that meets the requirements of §1710.408;

(3) Analytical support documentation that meets the requirements of §1710.411;

(4) A copy of RUS' written approval of the EE Program.

(d) An EE program work plan that meets the requirements of §1710.255;

(e) A statement of whether an initial working capital advance pursuant to §1710.409(c)(1) is included in the loan budget together with a schedule of how these funds will be used.

(f) A proposed draft Schedule C pursuant to 7 CFR part 1718 that lists assets to be financed under this subpart as excepted property under the RUS mortgage, as applicable.

[78 FR 73366, Dec. 5, 2013, as amended at 84 FR 32613, July 9, 2019]

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§1710.411   Analytical support documentation.

Applications for loans under this subpart may only be made for eligible activities and investments included in an RUS-approved EE Program. In addition to a business plan and operations plan, a request for EE program approval must include analytical support documentation that demonstrates the program meets the requirements of §1710.303 and assures RUS of the operational and financial integrity of the EE Program. This documentation must include, but is not necessarily limited to, the following:

(a) A comparison of the utility's projected annual growth in demand after incorporating the EE Program together with an updated baseline forecast on file with RUS, where each includes an estimate of energy consuming devices used by customers in the service territory and a specific time horizon as determined by the utility for meeting the performance objectives established by them for the EE Program;

(b) Demonstration that the required periods of performance under §1710.405(c) can reasonably be expected to be met;

(c) A report of discussions and coordination conducted with the power supplier, where applicable, issues identified as a result, and the outcome of this effort.

(d) An estimate of the amount of direct investment in utility-owned generation that will be deferred as a result of the EE Program;

(e) A description of efforts to identify state and local sources of funding and, if available, how they are to be integrated in the financing of the EE Program; and

(f) Copies of sample documentation used by the utility in administering its EE Program.

(g) Such other documents and reports as the Administrator may require.

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§1710.412   Borrower accounting methods, management reporting, and audits.

Nothing in this subpart changes a Borrower's obligation to comply with RUS's accounting, monitoring and reporting requirements. In addition thereto, the Administrator may also require additional management reports that provide the agency with a means of evaluating the extent to which the goals and objectives identified in the EE Plan are being accomplished.

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§1710.413   Compliance with other laws and regulations.

Nothing in this subpart changes a Borrower's obligation to comply with all laws and regulations to which it is subject.

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§§1710.414-1710.499   [Reserved]

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