Reliable, affordable electricity is essential to rural

Americans for their economic well-being and quality

of life. The USDA Rural Development electric program provides leadership and capital to upgrade,

expand, maintain, and replace America's vast rural

electric infrastructure. Under the authority of the

Rural Electrification Act of 1936, USDA makes

direct loans and loan guarantees to electric utilities

to serve customers in rural areas. 

The Electric Program makes loans and loan guarantees to finance the construction of electric distribution, transmission and generation facilities --

including system improvements and replacements

required to furnish and import electric service in

rural areas -- and for demand-side management,

energy conservation programs, and on- and off-grid

renewable energy systems. 

USDA Rural Development makes loans to corporations, states, territories and subdivisions, and agencies such as municipalities, people's utility districts,

and cooperative, nonprofit, limited-dividend, or

mutual associations that provide retail electric service to rural areas or supply the power needs of

distribution borrowers in rural areas. USDA Rural

Development also provides financial assistance to

rural communities with extremely high energy costs

to acquire, construct, extend, upgrade, and otherwise improve energy generation, transmission, or

distribution facilities. USDA Rural Development services approximately 700 active electric borrowers in

47 states. 

Most USDA-financed systems have a two-tiered

organizational structure. Retail consumers are

members of the distribution cooperative that provides electricity directly to their homes and businesses. Most distribution cooperatives, in turn, are

members of power supply cooperatives, also called

"generation and transmission" or "G&T" cooperatives, which generate and/or procure electricity and

transmit it to the distribution member systems. 

Rural Electrification Direct and

Guaranteed Loans and Grants 

The USDA Rural Development Electric Program

offers the following sources of financing assistance:

Hardship Loans, Municipal Rate Loans, Treasury

Rate Loans, Guaranteed Loans, and Assistance to

Rural Communities with Extremely High Energy

Costs (loans and grant assistance). The primary differences between the programs are the qualifying

criteria and the interest rate for each type of financing. 

Hardship Loans are used to finance electric distribution and sub-transmission facilities at the 5 percent hardship rate to qualified borrowers. These

direct loans are made to applicants that meet ratedisparity thresholds and whose consumers fall

below average per-capita and household income

thresholds. In addition, Hardship loans can be made

to qualified applicants if the Administrator determines that the borrower has suffered a severe

unavoidable hardship, such as a natural disaster. 

Municipal Rate Loans are used to finance distribution and subtransmission facilities of both distribution and power supply borrowers, including, under

certain circumstances, the implementation of

demand-side management and energy conservation programs. The interest rate is based on interest

rates available in the municipal bond market for similar maturities. In most cases, borrowers are

required to seek supplemental financing for 30 percent of their capital requirements under this program. Borrowers may choose from several loan

maturity alternatives with associated varying interest rates, which track investment securities and

change quarterly. 

Assistance for Rural Electric Utilities

Rural Utilities Programs
Treasury Rate Loans are used to finance distribution and subtransmission facilities of both distribution and power supply borrowers, including, under

certain circumstances, the implementation of

demand-side management and energy conservation programs. The standard interest rate on direct

Treasury rate loans is established daily by the

United States Treasury. Borrowers may select interest rate terms for each advance of funds. The minimum interest rate term is 1 year. Interest rate terms

are limited to terms published by the United States

Treasury. 

Guaranteed Loans are provided by USDA Rural

Development primarily through the Federal

Financing Bank (FFB), National Rural Utilities

Cooperative Finance Corporation (CFC), and the

National Bank for Cooperatives (CoBank). The FFB

is an agency within the Treasury Department, providing funding in the form of loans for various government lending programs, including the guaranteed loan program. FFB loans are guaranteed by

USDA and are available to all electric borrowers.

FFB interest rates are fixed to the prevailing cost of

money to the United States Treasury, plus an

administrative fee of one-eighth of 1 percent. Under

this program, loans are executed by the borrower

and FFB, CFC, or CoBank, with payment of principal and interest guaranteed by USDA. CFC and

CoBank rates are negotiated between the lender

and the borrower.

Assistance to Rural Communities with

Extremely High Energy Costs provides grants

and loans to be used to acquire, construct, extend,

upgrade, and otherwise improve energy generation,

transmission, or distribution facilities serving communities in which the average residential energy

expenditure for home energy is at least 275 percent

of the national average. Eligible entities are persons, State and local governments, and federally

recognized Indian tribes and tribal entities. As of this

printing only grant assistance has been appropriated. 

In addition, grants and loans may be provided to the

Denali Commission, a State-Federal rural development entity, to improve energy facilities serving

high-energy-cost communities in Alaska. Interested

communities may apply to the Denali Commission. 

There is a statutory cap of 4 percent on planning

and administrative expenses for funds made available under these programs. 

Renewable Energy Projects, including renewable energy systems, such as solar, wind,

hydropower, biomass, or geothermal, can be

financed through Guaranteed Loans. 

Applying for assistance

Further information and assistance in applying for

USDA Rural Development electric program assistance is available from Rural Development's two

regional offices:

Northern Regional Division -- (202) 720-1420

Southern Regional Division -- (202) 720-0848

Or write to:

USDA Rural Development

STOP 0705

1400 Independence Avenue, SW

Washington, DC 20250-0705

Information is also available on our Website at

http://www.usda.gov/rus/electric/index.htm

PA 1789

November 2004 

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities

on the basis of race, color, national origin, sex, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited

bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print,

audiotape, etc.) should contact USDA's TARGET

Center at (202) 720-2600 (voice and TDD). 

To file a complaint of discrimination write USDA,

Director, Office of Civil Rights, Room 326-W,

Whitten Building, 14th and Independence Avenue,

SW, Washington, DC 20250-9410 or call (202) 720-

5964 (voice and TDD). USDA is an equal opportunity provider and employer.