[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: 7CFR1717.301]

[Page 144]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1717--POST-LOAN POLICIES AND PROCEDURES COMMON TO INSURED AND GUARANTEED ELECTRIC LOANS--Table of Contents
 
 Subpart G--Federal Pre-emption in Rate Making in Connection With Power 
                            Supply Borrowers
 
Sec. 1717.301  Policy.

    (a) RUS makes and guarantees loans to borrowers to bring electric 
service to persons in rural areas. RUS requires, as a condition to 
making or guaranteeing any loans to power supply borrowers, that the 
borrower enter into RUS wholesale power contracts with its several 
members and assign and pledge such contracts as security for the 
repayment of loans made or guaranteed by RUS and for other loans which, 
pursuant to the RE Act, RUS has permitted to be secured pursuant to the 
RUS mortgage. The RUS wholesale power contract requires, among other 
matters, that the rates charged for power and energy sold thereunder 
produce revenues sufficient to enable the power supply borrower to make 
payments on account of all indebtedness of the power supply borrower. 
The Administrator relies upon the RUS wholesale power contracts together 
with other RUS documents to find and certify, as required in section 4 
of the RE Act (7 U.S.C. 904), that the security for the loan is 
reasonably adequate and the loan will be repaid within the time agreed.
    (b) RUS requires power supply borrowers to take such actions as may 
be necessary to charge rates for the sale of electric power and energy 
which are sufficient to pay the principal and interest on loans made or 
guaranteed by RUS in a timely manner and to meet the requirements of the 
RUS wholesale power contract and other RUS documents.
    (c) With respect to power supply borrowers which are not subject to 
rate regulation by a state regulatory authority, RUS requires that such 
borrowers establish rates and obtain RUS approval of such rates as 
required by the terms of the RUS wholesale power contract and other RUS 
documents.
    (d) With respect to power supply borrowers which are subject to 
regulation by a state regulatory authority, RUS does not make or 
guarantee a loan for the construction, operation or enlargement of any 
generating plant or transmission facility unless the consent of the 
state regulatory authority having jurisdiction in the premises is first 
obtained.
    (e) Pursuant to applicable provisions of state law state regulatory 
authorities regulate many aspects of a power supply borrowers business 
activities, including such matters as the setting of wholesale electric 
rates, the borrowing of money, and the mortgaging of property. A state 
regulatory authority's jurisdiction over the rates charged by a power 
supply borrower shall be pre-empted where the Administrator has 
determined that such jurisdiction has compromised Federal interests, 
including without limitation, the ability of the borrower to repay its 
secured loans in accordance with the terms of the RUS documents. 
Thereupon, RUS shall, pursuant to the RUS documents, exercise exclusive 
jurisdiction over the rates charged by a power supply borrower.

[55 FR 38646, Sept. 19, 1990; 55 FR 53100, Dec. 26, 1990]