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Electronic Code of Federal Regulations

e-CFR data is current as of January 16, 2020

Title 7Subtitle BChapter XVII → Part 1721


Title 7: Agriculture


PART 1721—POST-LOAN POLICIES AND PROCEDURES FOR INSURED ELECTRIC LOANS


Contents

Subpart A—Advance of Funds

§1721.1   Advances.

Subpart B—Extensions of Payments of Principal and Interest

§1721.100   Purpose.
§1721.101   General.
§1721.102   Definitions.
§1721.103   Policy.
§1721.104   Eligible purposes.
§1721.105   Application documents.
§1721.106   Repayment of deferred payments.
§1721.107   Agreement.
§1721.108   Commencement of the deferment.
§1721.109   OMB control number.

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

Source: 50 FR 5368, Feb. 8, 1985, unless otherwise noted. Redesignated at 64 FR 72489, Dec. 28, 1999.

Subpart A—Advance of Funds

§1721.1   Advances.

(a) Purpose and amount. With the exception of minor projects, loan funds will be advanced only for projects which are included in an RUS approved construction work plan (CWP), EE Program work plan (EEWP), or approved amendment, and in an approved loan as amended. Loan fund advances can be requested in an amount representing actual costs incurred.

(b) Minor project. Minor project means a project costing $100,000 or less. Such a project qualifies for advance of loan funds even though it may not have been included in an RUS-approved borrower's CWP, amendment to such CWP, or approved loan. Total advances requested shall not exceed the total loan amount. All projects for which loan fund advances are requested must be constructed to achieve purposes permitted by terms of the loan contract between the borrower and RUS.

(c) Certification. Pursuant to the applicable provisions of the RUS loan contract, borrowers must certify with each request for funds to be approved for advance that such funds are for projects in compliance with this section and shall also provide for those that cost in excess of $100,000, a contract or work order number as applicable and a CWP cross-reference project coded identification number. For a minor project not included in a RUS approved borrower's CWP or CWP amendment, the Borrower shall describe the project and do one of the following to satisfy RUS' environmental review requirements in accordance with 7 CFR part 1970:

(1) If applicable, state that the project is a categorical exclusion of a type described in §1970.53 of this title; or

(2) If applicable, state that the project is a categorical exclusion of a type that normally requires the preparation of an environmental report (see §1970.54 of this title) and then submit the environmental report with the request for funds to be approved for advance.

(d) Noncompliance. Where insured loan funds are found to have been advanced in noncompliance with this section, borrowers will be required to deposit the appropriate amount of the over-advance in the construction fund-trustee account and pay any accrued and unpaid interest to RUS. The Administrator will require borrowers, in order to remedy such noncompliance, to pay an additional amount equal to the interest on the funds over-advanced for the period such funds were outstanding, calculated at a rate equal to the difference between the RUS loan interest rate and the most recent rate at which RUS sold Certificates of Beneficial Ownership (CBO's). While RUS will generally permit the amount of over-advance deposited in the construction fund-trustee account to be subsequently used by the borrower for RUS approved projects, nothing in this section shall be construed to preclude RUS from exercising any rights or remedies which RUS may have pursuant to the loan contract.

[64 FR 72489, Dec. 28, 1999, as amended at 78 FR 73370, Dec. 5, 2013; 81 FR 11026, Mar. 2, 2016]

Subpart B—Extensions of Payments of Principal and Interest

Source: 67 FR 485, Jan. 4, 2002, unless otherwise noted.

§1721.100   Purpose.

This subpart contains RUS procedures and conditions under which Borrowers of loans made by RUS may request RUS approval for extensions for the payment of principal and interest.

§1721.101   General.

(a) The procedures in this subpart are intended to provide Borrowers with the flexibility to request an extension of principal and interest as authorized under section 12(a) of the RE Act and section 236 of the Disaster Relief Act of 1970 (Public Law 91-606).

(b) The total amount of interest that has been deferred, including interest on deferred principal, will be added to the principal balance, and the total amount of principal and interest that has been deferred will be reamortized over the remaining life of the applicable note beginning in the first year the deferral period ends.

(c) Payment of principal and interest will not be extended more than 5 years after such payment is due as originally scheduled. However, in cases where the extension is being granted because, at the sole discretion of the Administrator, a severe hardship has been experienced, the Administrator may grant a longer extension provided that the maturity date of any such loan does not extend to a date beyond forty (40) years from the date of the note.

[67 FR 485, Jan. 4, 2002, as amended at 68 FR 37953, June 26, 2003]

§1721.102   Definitions.

The definitions contained in 7 CFR 1710.2 are applicable to this subpart unless otherwise stated.

§1721.103   Policy.

(a) In reviewing requests for extension of payment of principal and interest, consideration shall be given to the effect of such extensions on the security of the Government's loans, and on the ability of the Borrower to achieve program objectives. It is the policy of RUS to extend the time for payment of principal and interest on the basis of findings that such extension does not impair the security and feasibility of the Government's loans and:

(1) Is essential to the effectiveness of the Borrower's operations in achieving RUS program objectives which include providing reliable, affordable electricity to RE Act beneficiaries;

(2) Is necessary to help a Borrower place its operations on a more stable financial basis and thereby provide assurance of repayment of loans within the time when payments of such loans are due under the terms of the note or notes as extended; or

(3) Is otherwise in the best interest of the Government.

(b) Extensions will be given in the minimum amount to achieve the purpose of the extension.

(c) The maximum interest rate a RUS Borrower can charge on deferments for programs relating to consumer loans, e.g., energy resource conservation (ERC) program, contribution-in-aid of construction (CIAC), etc., will not be more than 300 basis points above the average interest rate on the note(s) being deferred. For example, if the RUS Borrower's average interest rate on the note(s) being deferred is 5 percent, the RUS Borrower can charge a maximum interest rate of 8 percent.

[67 FR 485, Jan. 4, 2002, as amended at 68 FR 37953, June 26, 2003]

§1721.104   Eligible purposes.

(a) Deferments for financial hardship. (1) In cases of financial hardship, a Borrower may request that RUS defer principal or interest or both. RUS will consider whether the deferral will help a Borrower place its operations on a more stable financial basis and thereby provide assurance of repayment of loans within the time when payment of such loans are due under the terms of the note or notes as extended.

(2) RUS will determine whether a Borrower qualifies for the deferment on a case-by-case basis, considering such factors as the following:

(i) Substantial unreimbursed or uninsured expenses relating to storm damage;

(ii) Loss of large power load (as defined in §1710.7(c)(6)(ii) of this chapter, Large retail power contracts); or

(iii) Substantial loss of consumers or load due to hostile annexations and condemnations, without adequate compensation.

(b) Deferments for energy resource conservation (ERC) loans. (1) A Borrower may request that RUS defer principal payments to make funds available to the Borrower's consumers to conserve energy. Amounts deferred under this program can be used to cover the cost of labor and materials for the following energy conservation measures:

(i) Caulking;

(ii) Weather-stripping;

(iii) Heat pump systems (including water source heat pumps);

(iv) Heat pumps, water heaters, and central heating or central air conditioning system replacements or modifications, which reduce energy consumption;

(v) Ceiling insulation;

(vi) Wall insulation;

(vii) Floor insulation;

(viii) Duct insulation;

(ix) Pipe insulation;

(x) Water heater insulation;

(xi) Storm windows;

(xii) Thermal windows;

(xiii) Storm or thermal doors;

(xiv) Electric system coordinated customer-owned devices that reduce the maximum kilowatt demand on the electric system;

(xv) Clock thermostats; or

(xvi) Attic ventilation fans.

(2) ERC loans will be amortized over not more than 84 months, without penalty for prepayment of principal.

(c) Deferments for renewable energy projects. (1) A Borrower may request that RUS defer principal payments to enable the Borrower to finance renewable energy projects. Amounts deferred under this program can be used to cover costs to install all or part of a renewable energy system including, without limitation:

(i) Energy conversion technology;

(ii) Electric power system interfaces;

(iii) Delivery equipment;

(iv) Control equipment; and

(v) Energy consuming devices.

(2) A Borrower may request that RUS defer principal payments for the purpose of enabling the Borrower to provide its consumers with loans to install all or part of customer-owned renewable energy systems up to 5kW.

(3) A renewable energy system is defined in §1710.2 of this chapter.

(4) For the purpose of this subpart, a renewable energy project consists of one or more renewable energy systems.

(d) Deferments for distributed generation projects. (1) A Borrower may request that RUS defer principal payments to enable the Borrower to finance distributed generation projects. Amounts deferred under this program can be used to cover costs to install all or part of a distributed generation system that:

(i) The Borrower will own and operate, or

(ii) The consumer owns, provided the system owned by the consumer does not exceed 5KW.

(2) A distributed generation project may include one or more individual systems.

(e) Deferments for contributions-in-aid of construction. (1) A Borrower may request RUS to defer principal payments to enable the Borrower to make funds available to new full time residential consumers to assist them in paying their share of the construction costs (contribution-in-aid of construction) needed to connect them to the Borrower's system.

(2) Amounts available for this purpose will be limited to the amount of the construction costs that are in excess of the average cost per residential consumer incurred by the Borrower to connect new full time residential consumers during the last calendar year for which data are available. The average cost per residential consumer is the total cost incurred by the Borrower and will not be reduced by the amounts received as a contribution-in-aid of construction.

[67 FR 485, Jan. 4, 2002, as amended at 68 FR 37954, June 26, 2003]

§1721.105   Application documents.

(a) Deferments for financial hardship. A Borrower requesting a section 12 deferment because of financial hardship must submit the following:

(1) A summary of the financial position of the Borrower, based on the latest information available (usually less than 60 days old).

(2) A copy of the board resolution requesting an extension due to financial hardship.

(3) A 10-year financial forecast of revenues and expenses on a cash basis, by year, for the period of the extension and 5 years beyond to establish that the remaining payments can be made as rescheduled.

(4) A listing of notes or portions of notes to be extended, the effective date for the beginning of the extension, and the length of the extension.

(5) A narrative description of the nature and cause of the hardship and the strategy that will be instituted to mitigate or eliminate the effects of the hardship.

(b) Deferments for energy resource conservation loans. A Borrower requesting principle deferments for an ERC loan program must submit a letter from the Borrower's General Manager requesting an extension of principle payments for the purpose of offering an ERC loan program to its members and describing the details of the program.

(c) Deferments for renewable energy projects. A Borrower requesting principle deferments for its renewable energy project must submit a letter from the Borrower's General Manager requesting an extension of principle payments for the purpose of offering an ERC loan program to its members and describing the details of the program.

(d) Deferments for distributed generation projects. A Borrower requesting principle deferments for distributed generation projects must submit a letter from the Borrower's General Manager requesting an extension of principle payments for the purpose of offering an ERC loan program to its members and describing the details of the program and approval is also subject to any applicable terms and conditions of the Borrower's loan contract, mortgage, or indenture.

(e) Deferments for contribution-in-aid of construction. A Borrower requesting principle deferments for contribution-in-aid of construction must submit the following:

(1) A letter from the Borrower's General Manager requesting an extension of principle payments for the purpose of offering an ERC loan program to its members and describing the details of the program.

(2) A summary of the calculations used to determine the average cost per residential customer. (See §1721.104(e)(2)).

[67 FR 485, Jan. 4, 2002, as amended at 68 FR 37954, June 26, 2003; 84 FR 32616, July 9, 2019]

§1721.106   Repayment of deferred payments.

(a) Deferments relating to financial hardship. The total amount of interest that has been deferred, including interest on deferred principal, will be added to the principal balance, and the total amount of principal and interest that has been deferred will be reamortized over the remaining life of the applicable note beginning in the first year the deferral period ends. For example: the amount of interest deferred in years 2003, 2004, 2005, 2006, and 2007, will be added to the principal balance and reamortized over the life of the applicable note for repayment starting in year 2008.

(b) Deferments relating to the ERC loan program, renewable energy project(s), distributed generation project(s), and the contribution(s)-in-aid of construction. An extension agreement is for a term of two (2) years. The installment will be recalculated each time the Borrower defers the payment of principal and recognition of the deferred amount will begin with the next payment. For example: the amount deferred in the October payment will be reamortized over a 84 month period starting with the next payment (November if paying on a monthly basis). When a Borrower defers principal under any of these programs the scheduled payment on the account will increase by an amount sufficient to pay off the deferred amount, with interest, by the date specified in the agreement (usually 84 months (28 quarters)).

[67 FR 485, Jan. 4, 2002, as amended at 68 FR 37954, June 26, 2003]

§1721.107   Agreement.

After approval of the Borrower's request for a deferment of principal and interest, an extension agreement, containing the terms of the extension, together with associated materials, will be prepared and forwarded to the Borrower by RUS. The extension agreement will then be executed and returned to RUS by the Borrower.

§1721.108   Commencement of the deferment.

The deferment of principal and interest will not begin until the extension agreement and other supporting materials, in form and substance satisfactory to RUS, have been executed by the Borrower and returned to RUS. Examples of other supporting materials are items such as approving legal opinions from the Borrower's attorney and approvals from the relevant regulatory body for extending the maturity of existing debt and for the additional debt service payment incurred.

§1721.109   OMB control number.

The information collection requirements in this part are approved by the Office of Management and Budget and assigned OMB control number 0572-0123.

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