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Frequently Asked Questions

Question: May Rural Utilities Service (RUS) loans be used for the cost share required for Smart Grid grants?

Answer: Yes, RUS loans may be used to satisfy the cost share requirement under the Smart Grid program. In fact, funds from any Federal direct loan or loan guarantee may be used to satisfy the requirements under the Smart Grid program, program statutes do not prohibit this use. Please let us know if you have any futher questions. This can be found in the DE-FOA-0000058 Amendment 9, Updated Answers to Questions located here.


Question: My electric/telephone/water bill is more than I can pay. Do you have a program to help me?

Answer: Unfortunately, we do not. Payment of bills or the level of charges is a matter between the individual and the utility. The USDA Rural Development Utilities Programs are structured by statute to provide service to rural and small community residents at an affordable cost. Loans are made to the utility for construction of the infrastructure. USDA Rural Development does not have programs or authority to provide grants to individuals for monthly payment of bills.


Question: I want to build a house out in the country where I have bought some land, but the electric cooperative/utility wants to charge $20,000-$50,000 to get a line out to me. Does USDA Rural Development have a program to help pay for the connection?

Answer: The cost for connection to a home or business is an issue between the utility and the individual concerned. Working with neighbors and the utility concerned may be the best approach to resolving the connection problem. If it can be demonstrated to the utility that there is growth potential that will level out the fixed costs, the utility may be willing to share more of the initial outlay for connection.


Question: The electric cooperative says I have to die to be paid my capital credits (cooperative stock dividends). Is that true?

Answer: Not necessarily. The cooperative capital credit retirement policy varies by cooperative. A cooperative generally establishes a retirement cycle, normally 10-15 years, for the retirement of capital credits. Under a 15 year retirement cycle, capital credits that were assigned in 1990 would be retired in 2005. It should be noted, however, that before capital credits are retired, the cooperative management is required to insure that the cooperative has the financial ability to make such retirements. In addition to the normal retirement cycle, capital credits of a deceased member are normally paid. This payment may be a full value or at a discounted value. The policy varies by cooperative. To determine what your cooperative's policies are with respect to the retirement of capital credits you can ask the management of your cooperative or you could check the cooperative bylaws.


Question: I want to build a wind generation system (or some other type of renewable energy source) and sell it to my local utility.

Answer: USDA Rural Development Electric Programs can and will make renewable energy loans to rural electric providers. Individual loans and grants may be available through the USDA Rural Development Business Programs. You may want to check with the USDA Rural Development office in your state. A list of state offices may be found at http://www.rurdev.usda.gov/recd_map.html.


Question: Who can apply for an USDA Rural Development electric loan or loan guarantee?

Answer: Any entity that provides electric service to rural consumers. It should be noted, however, that the project must be feasible both from an engineering and a financial perspective.


Question: Does the USDA Rural Development Electric Programs finance start up costs?

Answer: No. The USDA Rural Development Electric Programs will only finance construction costs (bricks and mortar).


Question: Will USDA Rural Development Electric Programs finance merchant plants?

Answer: No. USDA Rural Development Electric Programs can only finance facilities that will serve rural consumers. Since the power generated from merchant plants is not specifically targeted to any specific group, we cannot finance such a project.


Question: What type of loan programs does the USDA Rural Development Electric Programs have?

Answer: The USDA Rural Development Electric Programs have three loan programs (hardship rate, municipal rate, and Treasury rate) and a loan guarantee program.


Question: What are the differences between the loan programs?

Answer: The hardship rate loan program provides loans at 5 percent, the municipal rate loan programs provides funds at the municipal rate, which changes quarterly, and the Treasury rate program provides funds at the Treasury rate, which changes daily. Loan funds from these programs are restricted to providing funds for the construction and acquisition of distribution plant. The criteria for qualifying for the hardship rate program are set by Congress. See 7 CFR Part 1714 for details.


Question: Does USDA Rural Development provide 100 percent of the funding?

Answer: USDA Rural Development will provide 100 percent financing for hardship rate and treasury rate loans. Municipal rate loans require the entity to obtain 10 to 30 percent of the financing from outside sources. See 7 CFR Part 1714 for details.


Question: What is the loan guarantee program used for?

Answer: The loan guarantee program is primarily used to finance the construction and acquisition of generation and transmission projects. These funds can, however, also be used to finance the construction and acquisition of distribution facilities.


Question: Who provides the funds under the loan guarantee program?

Answer: Most of the funds (over 99 percent) provided under the loan guarantee program are provided by the Federal Financing Bank (a Federal Agency). However, entities are free to obtain the loan guarantee funds from outside sources if they desire.


Question: How do I find out about the current interest rates?

Answer: The current interest rates are posted on our Interest Rates page.


Question: What type of security does the USDA Rural Development Utilities Programs require for its loans and loan guarantee?

Answer:In most cases (Indian tribes, Public Utility Districts, and municipals are the exceptions), the current assets and all future assets of the entity are pledged as security for the debt. This pledge of assets is secured by a loan contract and mortgage. The standard loan contract and mortgage is outlined in 7 CFR Part 1718. Loans for Indian Tribes, Public Utility Districts, and municipals are generally secured by a lien on the entity's revenue.


Question: As part of its standards setting function, the USDA Rural Development Electric Programs maintain a standard list of materials. How do I get my electric product listed on the standard list of materials?

Answer: Specific questions concerning the acceptance process may be directed to the Chair of the Technical Standards Committee "A" at Norris.Nicholson@wdc.usda.gov.


Question: I have an electric utility that is interested in purchasing my product but they tell me that I must be on the list of materials. How long does it take to get my product on the list of materials?

Answer: The time varies but in most cases where we have all of the necessary information, including test reports, drawings and certifications, processing should be completed within two to three months.


Question: What is an "eligible country"? Where can I find a list of eligible countries?

Answer: As defined in the "Buy American" provision of the Rural Electrification Act of 1936, as amended, an "eligible country" is any country that applies with respect to the United States an agreement ensuring reciprocal access for United States products and services and United States suppliers to the markets of that country, as determined by the United States Trade Representative. The current list of eligible countries for the Electric Programs can be found on the List of Materials page.


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Last Modified:11/29/2012 
 
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