Section

[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1710.2]

[Page 92-97]

TITLE 7--AGRICULTURE

CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE

PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO ELECTRIC LOANS AND GUARANTEES--Table of Contents

Subpart A--General

Sec. 1710.2 Definitions and rules of construction.

(a) Definitions. For the purpose of this part, the following terms
shall have the following meanings:
Administrator means the Administrator of RUS or his or her designee.
Approved load forecast means a load forecast that RUS has determined
is current for RUS purposes and has been approved by RUS pursuant to 7
CFR part 1710, subpart E.
Approved load forecast work plan means a load forecast work plan
that RUS has determined is current for RUS' purposes and has been
approved pursuant to 7 CFR part 1710, subpart E.
APRR means Average Adjusted Plant Revenue Ratio calculated as a
simple average of the adjusted plant revenue ratios for 1978, 1979 and
1980 as follows:
[GRAPHIC] [TIFF OMITTED] TC16SE91.000

where:

A=Distribution (plant), which equals Part E, Line 14(e) of RUS Form 7;
B=General Plant, which equals Part E, Line 24(e) of RUS Form 7;
C=Operating Revenue and Patronage Capital, which equals Part A, Line 1
of RUS Form 7; and
D=Cost of Power, which equals the sum of Part A, Lines 2, 3, and 4 of
RUS Form 7.

Area Coverage means the provision of adequate electric service to
the widest practical number of rural users in the borrower's service
area during the life of the loan.
Borrower means any organization that has an outstanding loan made or
guaranteed by RUS for rural electrification, or that is seeking such
financing.
Bulk Transmission Facilities means the transmission facilities
connecting power supply facilities to the subtransmission facilities,
including both the high and low voltage sides of the transformer used to
connect to the subtransmission facilities, as well as related
supervisory control and data acquisition systems.
Call provision has the same meaning as ``prepayment option''.
Consolidation means the combination of 2 or more borrower or
nonborrower organizations, pursuant to state law, into a new successor
organization that

[[Page 93]]

takes over the assets and assumes the liabilities of those
organizations.
Consumer means a retail customer of electricity, as reported on RUS
Form 7, Part R, Lines 1-7.
Demand side management (DSM) means the deliberate planning and/or
implementation of activities to influence consumer use of electricity
provided by a distribution borrower to produce beneficial modifications
to the system load profile. Beneficial modifications to the system load
profile ordinarily improve load factor or otherwise help in utilizing
electric system resources to best advantage consistent with acceptable
standards of service and lowest system cost. Load profile modifications
are characterized as peak clipping, valley filling, load shifting,
strategic conservation, strategic load growth, and flexible load
profile. (See, for example, publications of the Electric Power Research
Institute (EPRI), 3412 Hillview Avenue, Palo Alto, CA 94304, especially
``Demand-Side Management Glossary'' EPRI TR-101158, Project 1940-25,
Final Report, October 1992.) DSM includes energy conservation programs.
It does not include sources of electrical energy such as renewable
energy systems, fuel cells, or traditionally fueled generation, such as
fossil or nuclear fueled generators.
Distribution Borrower means a borrower that sells or intends to sell
electric power and energy at retail in rural areas.
Distribution Facilities means all electrical lines and related
facilities beginning at the consumer's meter base, and continuing back
to and including the distribution substation.
DSC means Debt Service Coverage of the borrower calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.000

Where:

All amounts are for the same calendar year and are based on the RUS
system of accounts and RUS Forms 7 and 12. References to line numbers in
the RUS Forms 7 and 12 refer to the June 1994 version of RUS Form 7 and
the December 1993 version of RUS Form 12, and will apply to
corresponding information in future versions of the forms;
A=Depreciation and Amortization Expense of the borrower, which equals
Part A, Line 12 of RUS Form 7 (distribution borrowers) or Section A,
Line 20 of RUS Form 12a (power supply borrowers);
B=Interest expense on total long-term debt of the borrower, which equals
Part A, Line 15 of RUS Form 7 or Section A, Line 22 of RUS Form 12a,
except that interest expense shall be increased by \1/3\ of the amount,
if any, by which restricted rentals of the borrower (Part M, Line 3 of
RUS Form 7 or Section K, Line 4 of RUS Form 12h) exceed 2 percent of the
borrower's equity (RUS Form 7, Part C, Line 36 [Total Margins &
Equities] less Line 26 [Regulatory Assets] or RUS Form 12a, Section B,
Line 38 [Total Margins & Equities] less Line 28 [Regulatory Assets]);
C=Patronage Capital or Margins of the borrower, which equals Part A,
Line 28 of RUS Form 7 or Section A, Line 35 of RUS Form 12a; and
D=Debt Service Billed (RUS + other), which equals the sum of all
payments of principal and interest required to be made on account of
total long-term debt of the borrower during the calendar year, plus \1/
3\ of the amount, if any, by which restricted rentals of the borrower
(Part M, Line 3 of RUS Form 7 or Section K, Line 4 of RUS Form 12h)
exceed 2 percent of the borrower's equity (RUS Form 7, Part C, Line 36
[Total Margins & Equities] less Line 26 [Regulatory Assets] or RUS Form
12a, Section B, Line 38 [Total Margins & Equities] less Line 28
[Regulatory Assets]);

DSM activities means activities of the type referred to in
Sec. 1710.354(f).
DSM plan means a plan that describes the implementation at the
distribution level of the DSM activities identified in the integrated
resource plan as having positive net benefits. See Sec. 1710.357.
Electric system means all of the borrower's interests in all
electric production, transmission, distribution, conservation, load
management, general plant and other related facilities, equipment or
property and in any mine, well, pipeline, plant, structure or other
facility for the development, production, manufacture, storage,
fabrication or processing of fossil, nuclear, or other fuel or in any
facility or rights with respect to the supply of water, in each case for
use, in whole or in major part, in any of the borrower's generating
plants, including any interest or participation of the borrower in any
such facilities or any rights to the output or capacity thereof,
together with

[[Page 94]]

all lands, easements, rights-of-way, other works, property, structures,
contract rights and other tangible and intangible assets of the borrower
in each case used or useful in such electric system.
Equity means total margins and equities, which equals Part C, Line
33 of RUS Form 7 (distribution borrowers) or Section B, Line 34 of RUS
Form 12a (power supply borrowers).
Final maturity means the final date on which all outstanding
principal and accrued interest on an electric loan is due and payable.
Five percent hardship rate means an interest rate of 5 percent
applicable to a hardship rate loan.
Fund advance period means the period of time during which the
Government may advance loan funds to the borrower. See 7 CFR 1714.56.
Generation Facilities means the generating plant and related
facilities, including the building containing the plant, all fuel
handling facilities, and the stepup substation used to convert the
generator voltage to transmission voltage, as well as related energy
management (dispatching) systems.
Hardship rate loan means a loan made at the 5 percent hardship rate
pursuant to 7 CFR 1714.8.
Insured Loan means a loan made pursuant to Section 305 of the RE
Act, and may include a direct loan made under Section 4 of the RE Act.
Integrated Resources Plan (IRP) means a plan resulting from the
planning and selection process for new energy resources that evaluates
the benefits and costs of the full range of alternatives, including new
generating capacity, power purchases, DSM programs, system operating
efficiency, and renewable energy systems.
Interest rate cap means a maximum interest rate of 7 percent
applicable to certain municipal rate loans as set forth in Sec. 1710.7.
Interest rate term means a period of time selected by the borrower
for the purpose of determining the interest rate on an advance of funds.
See 7 CFR 1714.6.
Load forecast means the thorough study of a borrower's electric
loads and the factors that affect those loads in order to determine, as
accurately as practicable, the borrower's future requirements for energy
and capacity.
Load forecast work plan means the plan that contains the resources,
methods, schedules, and milestones to be used in the preparation and
maintenance of a load forecast.
Loan means any loan made or guaranteed by RUS.
Loan Contract means the agreement, as amended, supplemented, or
restated from time to time, between a borrower and RUS providing for
loans made or guaranteed pursuant to the RE Act.
Loan Feasibility means that the borrower has the capability of
repaying the loan in full as scheduled, in accordance with the terms of
the mortgage, note, and loan contract.
Loan Guarantee means a loan guarantee made by RUS pursuant to the RE
Act.
Loan period means the period of time during which the facilities
included in a loan application will be constructed. It commences with
the date shown on page 1, in the block headed ``Cost Estimates as of,''
of RUS Form 740c, Cost Estimates and Loan Budget for Electric Borrowers,
which is the same as the date on the Financial and Statistical Report
submitted with the loan application. The loan period may be up to 4
years for distribution borrowers and, except in the case of a loan for
new generating and associated transmission facilities, up to 4 years for
the transmission facilities and improvements or replacements of
generation facilities for power supply borrowers. The loan period for
new generating facilities is determined on a case by case basis.
Merger means the combining, pursuant to state law, of borrower or
nonborrower organizations into an existing survivor organization that
takes over the assets and assumes the liabilities of the merged
organizations.
Mortgage means any and all instruments creating a lien on or
security interest in the borrower's assets in connection with loans or
guarantees under the RE Act.
Municipal rate loan means a loan made at a municipal interest rate
pursuant to 7 CFR 1714.5.

[[Page 95]]

ODSC means Operating Debt Service Coverage of the electric system
calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.001

Where:

All amounts are for the same calendar year and are based on the RUS
system of accounts and RUS Form 7. References to line numbers in the RUS
Form 7 refer to the June 1994 version of the form, and will apply to
corresponding information in future versions of the form;
A=Depreciation and Amortization Expense of the electric system, which
usually equals Part A, Line 12 of RUS Form 7;
B=Interest expense on total long-term debt of the electric system, which
usually equals Part A, Line 15 of RUS Form 7, except that such interest
expense shall be increased by \1/3\ of the amount, if any, by which
restricted rentals of the electric system (usually Part M, Line 3 of RUS
Form 7) exceed 2 percent of the borrower's equity (RUS Form 7, Part C,
Line 36 [Total Margins & Equities] less Line 26 [Regulatory Assets]);
C=Patronage Capital & Operating Margins of the electric system, which
usually equals Part A, Line 20 of RUS Form 7, plus cash received from
the retirement of patronage capital by suppliers of electric power and
by lenders for credit extended for the Electric System; and
D=Debt Service Billed (RUS + other), which equals the sum of all
payments of principal and interest required to be made on account of
total long-term debt of the electric system during the calendar year,
plus \1/3\ of the amount, if any, by which restricted rentals of the
Electric System (usually Part M, Line 3 of RUS Form 7) exceed 2 percent
of the borrower's equity (RUS Form 7, Part C, Line 36 [Total Margins &
Equities] less Line 26 [Regulatory Assets]).

Off-grid renewable energy system means an energy source which is not
electrically attached to the grid. Off-grid systems are operated as an
island and will have no direct impact on a utility system's physical
operations. An off-grid system need not meet electric utility power
quality standards.
On-grid renewable energy system means an energy source electrically
attached to an existing grid. It can be attached on either side of a
consumer's meter. On-grid systems are operated as part of the overall
utility system and have a direct impact on a utility system's
operations. An on-grid system must meet electric utility power quality
and safety standards.
Ordinary Replacement means replacing one or more units of plant,
called ``retirement units'', with similar units when made necessary by
normal wear and tear, damage beyond repair, or obsolescence of the
facilities.
OTIER means Operating Times Interest Earned Ratio of the electric
system calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.002

Where:

Power requirements study (PRS) has the same meaning as load
forecast.
Power Supply Borrower means a borrower that sells or intends to sell
electric power at wholesale to distribution or power supply borrowers
pursuant to RUS wholesale power contracts.
Prepayment option means a provision included in the loan documents
to allow the borrower to prepay all or a portion of an advance on a
municipal rate loan on a date other than a rollover maturity date. See 7
CFR 1714.9.
PRR means Plant Revenue Ratio calculated as:
[GRAPHIC] [TIFF OMITTED] TC16SE91.001

where:

[[Page 96]]

A = Total Utility Plant, which equals Part C, Line 3 of RUS Form 7;
B = Operating Revenue and Patronage Capital, which equals Part A, Line 1
of RUS Form 7; and
C = Cost of Power, which equals the sum of Part A, Lines 2, 3, and 4 of
RUS Form 7.

PRS work plan has the same meaning as load forecast work plan.
RE Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et seq.).
RE Act beneficiary means a person, business, or other entity that is
located in a rural area.
REA means the Rural Electrification Administration formerly an
agency of the United States Department of Agriculture and predecessor
agency to RUS with respect to administering certain electric and
telephone loan programs.
Renewable energy system means a source of energy (kWh) used to meet
borrower electric load that is fueled by any of the following
technologies: Hydropower, geothermal, biomass, municipal waste, solar
thermal, photovoltaic, wind, fuel cells not fueled by fossil fuels. See,
for example, ``Renewable Resources in U.S. Electricity Supply,''
February 1993, Publication number DOE/EIA 0561, published by the
Department of Energy, Energy Information Administration, Forrestal
Building, EI-231, Washington, DC 20585.
Retirement Unit means a substantial unit of property, which when
retired, with or without being replaced, is accounted for by removing
its book cost from the plant account.
Rollover maturity date means the last day of an interest rate term.
Rural area means any area of the United States, its territories and
insular possessions (including any area within the Federated States of
Micronesia, the Marshall Islands, and the Republic of Palau) not
included within the boundaries of any urban area, as defined by the
Bureau of the Census. For purposes of the ``rural area'' definition, the
character of an area is determined at the time of the initial loan to
furnish or improve service in the area.
(i) For initial RUS loans made prior to November 1, 1993, the RE Act
defined ``rural area'' to mean any area of the United States not
included within the boundaries of any city, village, or borough having a
population exceeding 1500. An area determined to be a ``rural area'' for
the purposes of an initial loan made prior to November 1, 1993, shall
continue to be considered a ``rural area.''
(ii) For initial RUS loans made on or after November 1, 1993, this
definition shall apply. In determining the character of the area, RUS
will rely on the Bureau of the Census designation.
RUS means the Rural Utilities Service, an agency of the United
States Department of Agriculture established pursuant to Section 232 of
the Federal Crop Insurance Reform and Department of Agriculture
Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor
to REA with respect to administering certain electric and telephone
programs. See 7 CFR 1700.1.
Subtransmission Facilities means the transmission facilities that
connect the high voltage side of the distribution substation to the low
voltage side of the bulk transmission or generating facilities, as well
as related supervisory control and data acquisition facilities.
System Improvement means the change or addition to electric plant
facilities to improve the quality of electric service or to increase the
quantity of electric power available to RE Act beneficiaries.
TIER means Times Interest Earned Ratio of the borrower calculated
as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.003

Where:

[[Page 97]]

Line 38 [Total Margins & Equities] less Line 28 [Regulatory Assets]);
and
B=Patronage Capital or Margins of the borrower, which equals Part A,
Line 28 of RUS Form 7 or Section A, Line 35 of RUS Form 12a.

Total Assets means Part C, Line 26 of RUS Form 7 (distribution
borrowers) or Section B, Line 27 of RUS Form 12a (power supply
borrowers).
Total Utility Plant means Part C, Line 3 of RUS Form 7 (distribution
borrowers) or Section B, Line 27 of RUS Form 12a (power supply
borrowers).
Transmission Facilities means all electrical lines and related
facilities, including certain substations, used to connect the
distribution facilities to generation facilities. They include bulk
transmission and subtransmission facilities.
Urban area is defined by the Bureau of the Census as an area
comprising all territory, population, and housing units in urbanized
areas and in places of 2500 or more persons outside urbanized areas.
More specifically, ``urban'' consists of territory, persons, and housing
units in:
(i) Places of 2500 or more persons incorporated as cities, villages,
boroughs (except in Alaska and New York), and towns (except in the six
New England States, New York, and Wisconsin), but excluding the rural
portions of ``extended cities.''
(ii) Census designated places of 2500 or more persons.
(iii) Other territory, incorporated or unincorporated, included in
urbanized areas.
Urbanized area means an urbanized area as defined by the Bureau of
the Census in notices published periodically in the Federal
Register.Generally an urbanized area is characterized as an area that
comprises a place and the adjacent densely settled territory that
together have a minimum population of 50,000 people.
(b) Rules of Construction. Unless the context otherwise indicates,
``includes'' and ``including'' are not limiting, and ``or'' is not
exclusive. The terms defined in paragraph (a) of this part include the
plural as well as the singular, and the singular as well as the plural.

[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 58 FR
66263, Dec. 20, 1993; 59 FR 495, Jan. 4, 1994; 59 FR 66440, Dec. 27,
1994; 60 FR 3730, Jan. 19, 1995; 60 FR 67400, Dec. 29, 1995; 65 FR
14786, Mar. 20, 2000]