[Code of Federal Regulations]
[Title 7 Volume 11]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1721]
[Page 253-257]
TITLE 7--AGRICULTURE
CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
PART 1721_POST-LOAN POLICIES AND PROCEDURES FOR INSURED ELECTRIC LOANS--Table
of Contents
Subpart A_Advance of Funds
Sec.
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.
Subpart A_Advance of Funds
Sec. 1721.1 Advances.
(a) Purpose and amount. With the exception of minor projects,
insured loan funds will be advanced only for projects which are included
in an RUS approved borrower's construction work plan (CWP) 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 shall 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 an RUS approved borrower's CWP, the Borrower shall describe
the project and do one of the following to satisfy RUS' environmental
requirements (see 7 CFR part 1794).
(1) If applicable, state that the project is a categorical exclusion
of a type described in Sec. 1794.21(b), which normally does not require
preparation of an Environmental Report (ER); or
(2) If applicable, state that the project is a categorical exclusion
of a type that normally requires an ER and then:
(i) Submit the ER with the request for funds to be approved for
advance, or
(ii) If applicable, certify that it has analyzed the minor project
with respect to a comprehensive service area environmental map and data
base collected and used in preparing the ER for its RUS-approved
borrower's CWP, and that on the basis of that information, the minor
project will not be located in an environmentally sensitive area or
location.
(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
[[Page 254]]
RUS from exercising any rights or remedies which RUS may have pursuant
to the loan contract.
[64 FR 72489, Dec. 28, 1999]
Subpart B_Extensions of Payments of Principal and Interest
Source: 67 FR 485, Jan. 4, 2002, unless otherwise noted.
Sec. 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.
Sec. 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]
Sec. 1721.102 Definitions.
The definitions contained in 7 CFR 1710.2 are applicable to this
subpart unless otherwise stated.
Sec. 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]
Sec. 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:
[[Page 255]]
(i) Substantial unreimbursed or uninsured expenses relating to storm
damage;
(ii) Loss of large power load (as defined in Sec. 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 Sec. 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]
Sec. 1721.105 Application documents.
(a) Deferments for financial hardship. A Borrower requesting a
section 12
[[Page 256]]
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 principal deferments for an ERC loan program must submit the
following information:
(1) A letter from the Borrower's General Manager requesting an
extension of principal payments for the purpose of offering an ERC loan
program to its members and describing the details of the program.
(2) A copy of the board resolution establishing the ERC loan
program.
(c) Deferments for renewable energy projects. A Borrower requesting
principal deferments for its renewable energy project must submit the
following information:
(1) A letter from the Borrower's General Manager requesting an
extension of principal payments for the purpose of financing a renewable
energy project and describing the details of the project.
(2) A copy of the board resolution establishing the renewable energy
project.
(d) Deferments for distributed generation projects. A Borrower
requesting principal deferments for distributed generation projects must
submit the following information and approval is also subject to any
applicable terms and conditions of the Borrower's loan contract,
mortgage, or indenture:
(1) A letter from the Borrower's General Manager requesting an
extension of principal payments for the purpose of financing distributed
generation projects and describing the details of the project, and
(2) A copy of the board resolution establishing the distributed
generation projects program.
(e) Deferments for contribution-in-aid of construction. A Borrower
requesting principal deferments for contribution-in-aid of construction
must submit the following information:
(1) A letter from the Borrower's General Manager requesting an
extension of principal payments for the purpose of offering a
contribution-in-aid of construction program and describing the details
of the program.
(2) A copy of the board resolution establishing the contribution-in-
aid of construction program.
(3) A summary of the calculations used to determine the average cost
per residential consumer. (See Sec. 1721.104 (e)(2)).
[67 FR 485, Jan. 4, 2002, as amended at 68 FR 37954, June 26, 2003]
Sec. 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
[[Page 257]]
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]
Sec. 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.
Sec. 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.
Sec. 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.