II

104TH CONGRESS

1ST SESSION S. 805

To improve the rural electrification programs under the Rural Electrification

Act of 1936, to improve Federal rural development programs administered by the Department of Agriculture, to provide for exclusive State

jurisdiction over retail electric service areas, to prohibit certain practices

in the restraint of trade, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 15, 1995

Mr. SIMPSON introduced the following bill; which was read twice and referred

to the Committee on Agriculture, Nutrition, and Forestry

A BILL

To improve the rural electrification programs under the

Rural Electrification Act of 1936, to improve Federal

rural development programs administered by the Department of Agriculture, to provide for exclusive State jurisdiction over retail electric service areas, to prohibit certain practices in the restraint of trade, and for other

purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Rural Electrification

3 and Rural Economic Development Improvement Act of

4 1995’’.

5 SEC. 2. FINDINGS.

6 Congress finds that—

7 (1) the Rural Electrification Administration

8 was created to facilitate the electrification of rural

9 America by providing low-interest loans to electric

10 cooperative associations and other entities for the

11 purpose of constructing and improving rural electric

12 systems;

13 (2) more than 99 percent of the residents in

14 rural areas of the United States now have affordable

15 and reliable electric service;

16 (3) a large volume of loans, at subsidized inter17 est rates, continue to be made under the Rural Elec18 trification Act of 1936 to electric cooperative bor19 rowers who could obtain financing at reasonable

20 rates and terms from a source other than the Fed21 eral Government and these borrowers have become

22 significant and successful participants in an increas23 ingly competitive electric utility industry;

24 (4) the Federal Government should make elec25 tric loans only to entities that cannot otherwise ob26 tain funding at reasonable rates and terms;
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1 (5) the Rural Electrification Act of 1936 au2 thorizes low-interest and zero-interest loans and

3 grants to be made to borrowers under the Act for

4 the purpose of rural economic development;

5 (6) these rural economic development programs

6 do not provide benefits to most rural Americans

7 since the majority of these residents receive electric

8 utility service from entities that do not receive fi9 nancing under the Rural Electrification Act of 1936;

10 (7) borrowers under the Rural Electrification

11 Act of 1936 are directly eligible for some rural de12 velopment programs under the Consolidated Farm

13 and Rural Development Act of 1972;

14 (8) the limited funds made available each year

15 for all rural economic development programs should

16 not favor those individuals who reside in rural areas

17 that are served by borrowers under the Rural Elec18 trification Act of 1936; and

19 (9) borrowers under the Rural Electrification

20 Act of 1936 should not have a competitive advantage

21 in serving customers in rural areas of the United

22 States.
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1 TITLE I—IMPROVEMENTS TO THE RURAL

2 ELECTRIFICATION LOAN PROGRAMS

3 SEC. 101. REFERENCES TO THE RURAL ELECTRIFICATION

4 ACT OF 1936.

5 As used in this title, the term ‘‘the Act’’ shall mean

6 ‘‘the Rural Electrification Act of 1936’’ (7 U.S.C. 901 et

7 seq.).

8 SEC. 102. CONFORMING AMENDMENT.

9 The Act is amended by striking ‘‘TITLE I—RURAL

10 ELECTRIFICATION’’ immediately prior to section 1 (7

11 U.S.C. 901).

12 SEC. 103. OBJECTIVE OF THE ACT; INVESTIGATIONS AND

13 REPORTS.

14 Effective October 1, 1995, section 2 of the Act (7

15 U.S.C. 902) is amended to read as follows:

16 ‘‘SEC. 2. OBJECTIVE OF THE ACT; INVESTIGATIONS

17 AND REPORTS.—(a) The objective of this Act is to author18 ize and empower the Secretary to make loans for the pur19 poses of—

20 (1) furnishing and improving electric energy

21 services in rural areas of the several States and Ter22 ritories of the United States,

23 (2) assisting rural electric borrowers to imple24 ment demand side management practices, energy
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1 conservation programs, and on-grid and off-grid re2 newable energy systems, and

3 (3) furnishing and improving telephone service

4 in such areas.

5 ‘‘(b) The Secretary may make, or cause to be made,

6 studies, investigations, and reports concerning the avail7 ability of adequate electric and telephone services in rural

8 areas of the United States and its Territories and to pub9 lish and disseminate information with respect thereto.’’.

10 SEC. 104. APPLICATION OF STATE LAWS OR ORDINANCES

11 CONCERNING ELECTRIC SERVICE.

12 The Act is amended by adding, after section 2 (7

13 U.S.C. 902), the following new sections:

14 ‘‘SEC. 2A. STATE REGULATION OF ELECTRIC UTIL15 ITY SERVICE.—Nothing contained in this Act shall be con16 strued to deprive any State commission, board, or other

17 agency of jurisdiction, under any State law, now or here18 after effective, to regulate electric service.

19 ‘‘SEC. 2B. APPLICATION OF STATE LAW.—(a) Noth20 ing in this Act is intended to prevent a State or political

21 subdivision thereof from enacting and enforcing a law or

22 ordinance concerning the curtailment, limitation, or geo23 graphic area of service provided by an electric borrower

24 under this Act if such law or ordinance provides for the

25 just compensation of the borrower for any condemnation,
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1 forfeiture, or involuntary sale of a facility, property, right,

2 or franchise of the borrower that secures a loan made

3 under this Act. Any such condemnation, forfeiture, or in4 voluntary sale shall not be construed as interfering with

5 the purposes of this Act.

6 ‘‘(b)(1) Not later than 30 days after a borrower re7 ceives such compensation, the Secretary shall require the

8 borrower to use the proceeds of such compensation to pre9 pay, without penalty, all or any portion of the outstanding

10 balance on any loan that was made or guaranteed under

11 this Act for which the Secretary holds a mortgage to, or

12 other security interest in, the facility, property, right, or

13 franchise for which the compensation was provided.

14 ‘‘(2) The Secretary shall also permit the borrower to

15 use any proceeds of such compensation, in excess of the

16 amount needed to prepay a loan under paragraph (1), to

17 prepay, without penalty, all or any portion of any other

18 loan of the borrower made under this Act.’’.

19 SEC. 105. REPEAL OF AUTHORITY FOR TREASURY LOANS.

20 Section 3 of the Act (7 U.S.C. 903) is repealed.

21 SEC. 106. REPEAL OF AUTHORIZATION FOR 2 PERCENT IN22 TEREST RATE ELECTRIC LOANS.

23 Section 4 of the Act (7 U.S.C. 904) is repealed.
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1 SEC. 107. REPEAL OF AUTHORIZATION FOR 2 PERCENT

2 ELECTRICAL AND PLUMBING EQUIPMENT

3 LOANS.

4 Section 5 of the Act (U.S.C. 905) is repealed.

5 SEC. 108. AUTHORIZATION OF APPROPRIATIONS; REPEAL

6 OF REQUIREMENT FOR TESTIMONY; FEES

7 FOR NON-FINANCIAL ASSISTANCE AND SERV8 ICES.

9 Section 6 of the Act (7 U.S.C. 906) is amended to

10 read as follows:

11 ‘‘SEC. 6. AUTHORIZATION OF APPROPRIATIONS:

12 USER FEES FOR NON-FINANCIAL ASSISTANCE AND SERV13 ICES.—(a)(1) Except as provided for in paragraph (2),

14 there are hereby authorized to be appropriated, out of any

15 money in the Treasury not otherwise appropriated, such

16 funds as necessary for the purpose of administering this

17 Act and for the purpose of making the studies, investiga18 tions, publications, and reports provided for in section 2.

19 ‘‘(2) For each of the fiscal years 1996 through 2000,

20 the amount authorized to be appropriated under para21 graph (1), or otherwise made available pursuant to this

22 Act, for the purpose of administering the rural electric

23 program, shall not exceed $15,000,000.

24 ‘‘(b)(1) Effective October 1, 1995, the Secretary shall

25 establish a schedule of fees to be charged for non-financial

26 assistance and services provided by the Secretary to loan
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1 applicants, borrowers, and others pursuant to this Act.

2 Such assistance and services shall include, but not be lim3 ited to, those relating to accounting, personnel training,

4 engineering, management, auditing, data processing and

5 information system support, duplication of documents,

6 consolidations, and compliance with the provisions of other

7 Federal laws or State laws.

8 ‘‘(2) In establishing the schedule of fees under para9 graph (1), the Secretary shall ensure that the amount of

10 each fee shall be sufficient to cover the reasonable cost

11 of the assistance or service provided, as determined by the

12 Secretary.

13 ‘‘(3) The recipient of any non-financial service or as14 sistance provided by the Secretary shall pay to the Sec15 retary the amount of the fee as established in the fee

16 schedule for such service or assistance at such time as the

17 Secretary may require. All fees paid to the Secretary pur18 suant to this subsection shall be deposited in the Treasury

19 and shall be available to the Secretary, without fiscal year

20 limitation, to pay the cost of providing such non-financial

21 assistance and services pursuant to this Act.’’.

22 SEC. 109. CONFORMING AMENDMENTS.

23 Section 7 of the Act (7 U.S. C. 907) is amended by—

24 (a) in the first sentence, striking out ‘‘from the

25 sums authorized in section 3 of this Act’’, and in-
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1 serting in lieu thereof ‘‘from funds made available

2 for the purposes of this Act’’; and

3 (b) in the second sentence, by striking out ‘‘No

4 borrower of funds under sections 4 or 201’’ and in5 serting in lieu thereof ‘‘No borrower liable for the

6 repayment of any telephone loan made under section

7 201, and, except as otherwise provided for in section

8 2B or any other provision of this Act, no borrower

9 who is liable on any rural electric loan made under

10 this Act’’.

11 SEC. 110. REPEAL OF OBSOLETE PROVISION RELATING TO

12 TRANSFER OF CERTAIN FUNCTIONS.

13 (a) Section 8 of the Act (7 U.S. C. 908) is repealed.

14 (b) Any action made pursuant to section 8 prior to

15 its repeal by subsection (a) shall remain valid and in effect

16 unless otherwise revoked.

17 SEC. 111. EXPENDITURES FOR PERSONAL SERVICES, SUP18 PLIES, AND EQUIPMENT.

19 Section 11 of the Act (7 U.S.C. 911) is amended by

20 adding after ‘‘from sums appropriated pursuant to section

21 6’’ the following: ‘‘or from funds otherwise made available

22 for the purposes of administering this Act’’.

23 SEC. 112. PAYMENT DEFERRAL AUTHORITY.

24 Section 12 of the Act (7 U.S.C. 912) is amended to

25 read as follows:
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1 ‘‘SEC. 12. EXTENSION OF TIME FOR REPAYMENT OF

2 LOANS.—The Secretary may extend the payment of inter3 est or principal of any loan made under this Act if the

4 Secretary determines that the borrower is experiencing a

5 financial hardship. Any payment of interest or principal

6 shall not be extended for more than 5 years after the date

7 on which such was originally due, and interest shall accrue

8 on the amount of any such payment at the rate of interest

9 on the underlying loan, which interest shall become due

10 and payable at the same time as the payment for which

11 the extension was made.’’.

12 SEC. 113. DEFINITION OF RURAL AREA.

13 Section 13 of the Act (7 U.S.C. 913) is amended by

14 adding at the end thereof the following: ‘‘Any determina15 tion with respect to whether an area is a rural area, under

16 the preceding sentence, shall be made at the time the ap17 plication is filed, and, under no circumstance, shall any

18 previous determination that the area was rural for the

19 purposes of this Act be used to make such determina20 tion.’’.

21 SEC. 114. GENERAL PROHIBITIONS; ORIGINATION FEES;

22 USE OF CONSULTANTS.

23 Section 18 of the Act (7 U.S.C. 918) is amended

24 by—
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1 (a) in subsection (a), striking out ‘‘reduce any

2 loan or loan advance’’ and inserting in lieu thereof

3 ‘‘reduce any rural telephone loan or loan advance’’;

4 (b) in subsection (b), after ‘‘connection with

5 any’’, inserting ‘‘telephone’’; and

6 (c) striking out subsection (c).

7 SEC. 115. AUTHORIZATION OF LOANS TO RURAL ELECTRIC

8 PROVIDERS.

9 Effective October 1, 1995, the Act is amended by

10 adding after section 18 (7 U.S.C. 918) a new title I as

11 follows:

12 ‘‘TITLE I—RURAL ELECTRIFICATION LOANS.

13 ‘‘SEC. 101. LIMITATION ON AUTHORITY TO MAKE,

14 INSURE, AND GUARANTEE ELECTRIC LOANS.—No elec15 tric loan shall be made, insured, or guaranteed, under this

16 Act after September 30, 1995, except as authorized in sec17 tions 102 and 103.

18 ‘‘SEC. 102. DIRECT ELECTRIC LOANS.—(a) The Sec19 retary is authorized and empowered to make loans to cor20 porations, States, Territories, and subdivisions and agen21 cies thereof, municipalities, people’s utility districts, and

22 cooperative, nonprofit, or limited-dividend associations, or23 ganized under the laws of any State or Territory of the

24 United States, for the purpose of financing the construc25 tion and operation of generating plants, electric trans-
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1 mission and distribution lines or systems for the furnish2 ing of electric energy to persons in rural areas and for

3 furnishing and improving electric service to persons in

4 rural areas, including assisting electric borrowers to imple5 ment demand side management, energy conservation pro6 grams, and on-grid and off-grid renewable energy systems.

7 ‘‘(b) Loans made under this section shall be on such

8 terms and conditions relating to the expenditure of the

9 money loaned and the security therefore as the Secretary

10 shall determine.

11 ‘‘(c)(1) The Secretary shall prioritize the making of

12 loans authorized by this section to ensure that eligible ap13 plicants with the greatest need for Federal assistance shall

14 have the highest priority for available loan funds.

15 ‘‘(2) In establishing such priorities, the Secretary

16 shall consider the following indicators of need:

17 ‘‘(A) The net income before interest of the ap18 plicant.

19 ‘‘(B) The weighted average of per capita per20 sonal income for the area served or to be served by

21 the applicant.

22 ‘‘(C) The weighted average unemployment rate

23 of the area served or to be served by the applicant.

24 ‘‘(D) An average annual rate of growth in the

25 total kilowatt hour sales of the applicant during the
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1 five year period preceding the date on which the ap2 plication is made.

3 ‘‘(E) The rate of disparity, measured as the dif4 ference between the residential rate of the applicant

5 and the average residential rate in the State for all

6 electric utilities, including utilities that are not bor7 rowers under this Act.

8 ‘‘(F) The rate level, measured by the average

9 revenue per kilowatt hour that is sold by the appli10 cant to residential and farm consumers.

11 ‘‘(G) The cost of power per kilowatt hour pur12 chased or generated by the applicant.

13 ‘‘(H) The total kilowatt hour sales per mile of

14 distribution and transmission line, excluding large

15 commercial and industrial consumers and sales for

16 resale.

17 ‘‘(I) The value of distribution and transmission

18 plants in service per kilowatt hours of electricity

19 sold.

20 ‘‘(d)(1)(A) The Secretary shall not make any loan

21 under this section if the Secretary determines that the ap22 plicant is capable of producing net income before interest

23 of more than 500 percent of the interest requirements on

24 all of the outstanding and proposed loans of the applicant

25 for which the final maturity is greater than one year.
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1 ‘‘(B) If the Secretary determines that the applicant

2 is capable of producing net income before interest of more

3 than 200 percent of the interest requirement of all of the

4 outstanding and proposed loans of the applicant for which

5 the final maturity is greater than one year, the Secretary

6 shall require the applicant to secure at least 10 percent

7 of the total financing required for the proposed project

8 with a loan from a commercial, cooperative, or other le9 gally organized non-governmental lending institution,

10 which loan may not be guaranteed under section 103.

11 ‘‘(2) The Secretary shall not make a loan under this

12 section unless the Secretary determines that the applicant

13 is capable of producing income sufficient to repay the loan

14 in accordance to its terms within the agreed time, pay in15 terest on the loan as it becomes due, and repay all other

16 outstanding and proposed indebtedness of the applicant,

17 together with any interest thereon, as payments become

18 due.

19 ‘‘(3)(A) The Secretary shall not make any loan under

20 this section unless the Secretary determines that the appli21 cant is unable to obtain all or any part of the funds needed

22 by the applicant elsewhere, including from (i) general

23 funds of the applicant that are in excess of an amount

24 needed for a reasonable reserve, or (ii) loans (with or with25 out a guarantee under section 103) from commercial, co-
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1 operative, or other legally organized lending institutions

2 at reasonable rates and terms for loans for similar pur3 poses and periods of time.

4 ‘‘(B) The Secretary shall require the applicant to cer5 tify in writing that the applicant is unable to obtain suffi6 cient credit elsewhere to finance all or any part of the ac7 tual needs of the applicant at reasonable rates and terms,

8 taking into consideration prevailing rates for loans and ob9 ligations for similar purposes and periods of time.

10 ‘‘(4) The Secretary shall not make a loan under this

11 section unless the Secretary determines that the security

12 for the loan will be adequate to ensure full payment of

13 the loan.

14 ‘‘(5) The Secretary shall not make any loan under

15 this section unless the applicant has agreed to comply with

16 the requirements of the graduation program established

17 under section 105.

18 ‘‘(6) The Secretary shall not make any loan under

19 this section unless all additional requirements of section

20 104 have been met.

21 ‘‘(e) The term of each loan made under this section

22 shall be determined by the Secretary and shall not exceed

23 35 years, or the expected useful life of the assets being

24 financed, whichever is less.
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1 ‘‘(f)(1) Except as provided for in paragraph (2), the

2 rate of interest on loans under this section shall be equal

3 to the then current cost of money to the Government of

4 the United States for obligations of comparable maturity.

5 ‘‘(2)(A) If the Secretary determines that the appli6 cant is not capable of producing net income before interest

7 of more than 200 percent of the interest requirements on

8 all of the outstanding and proposed loans of the applicant

9 for which the final maturity is greater than one year, the

10 rate of interest on the loan shall be the rate established

11 under paragraph (1) but not more than 5 percent per

12 year, except as provided under subparagraph (B).

13 ‘‘(B) For any loan whose term is 10 years or more

14 and whose interest rate is limited to 5 percent per year

15 under subparagraph (A), the Secretary shall review the

16 financial status of the borrower every 2 years, and, if the

17 Secretary determines that the borrower is capable of pro18 ducing net income before interest of more than 200 per19 cent of the interest requirements on all of the outstanding

20 and proposed loans of the applicant for which the final

21 maturity is greater than one year, the 5 percent limitation

22 shall no longer apply to the loan and the rate for the re23 maining term of the loan shall be the original rate estab24 lished under paragraph (1).
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1 ‘‘(g) The Secretary shall charge a loan origination fee

2 of one percent of the amount of the loan if the Secretary

3 determines that the applicant is capable of producing net

4 income before interest of more than 200 percent of the

5 interest requirements on all of the outstanding and pro6 posed loans of the applicant for which the final maturity

7 is greater than one year.

8 ‘‘(h) The Secretary may provide a borrower the right

9 to make payment in full on a loan made under this section

10 in advance of final maturity on terms consistent with those

11 provided for commercial loans for similar purposes and

12 maturities.

13 ‘‘SEC. 103. GUARANTEES OF ELECTRIC LOANS

14 FROM NON-GOVERNMENTAL SOURCES OF CREDIT; LIEN

15 ACCOMMODATIONS.—(a)(1) To the extent set out in para16 graph (2), the Secretary is authorized and empowered, to

17 guarantee loans that are made by commercial, cooperative,

18 or other legally-organized non-governmental lending insti19 tutions to any entity, and for any purpose, described in

20 section 102(a).

21 ‘‘(2) The Secretary shall guarantee only the payment

22 of that portion of the principal of the loan, and that por23 tion of the interest thereon, that the lender requires as

24 a condition for making the loan. The amount of any such
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1 guarantee shall not exceed 90 percent of the principal of

2 the loan and the interest thereon.

3 ‘‘(3) The Secretary shall not guarantee any loan to

4 an entity that the Secretary determines is capable of pro5 ducing income before interest of more than 600 percent

6 of the interest requirements on all of the outstanding and

7 proposed loans of the entity for which the final maturity

8 is greater than one year.

9 ‘‘(4) The Secretary shall impose such fees and

10 charges to cover the administrative expense related to any

11 guarantee made under this section as the Secretary deter12 mines reasonable.

13 ‘‘(5) Any contract of guarantee executed by the Sec14 retary under this section shall be an obligation supported

15 by the full faith and credit of the United States and incon16 testable except for fraud or misrepresentation of which the

17 holder of the guarantee had actual knowledge at the time

18 it become a holder.

19 ‘‘(6) The Secretary shall not guarantee any loan

20 under this section unless all additional requirements of

21 section 104 have been met.

22 ‘‘(b) In order to encourage non-governmental lenders

23 to make loans to eligible entities, or to provide a greater

24 portion of the credit needs of an applicant for a loan under

25 section 102, the Secretary is authorized to share the Gov-
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1 ernment’s lien on the loan applicant’s or borrower’s assets

2 or to subordinate the Government’s lien on the property

3 to be financed by the lender. The Secretary shall not offer

4 such accommodation or subordination unless the Secretary

5 determines that the security for all loans made or guaran6 teed under this Act, the payment of which the borrower

7 is liable, will remain reasonably adequate.

8 ‘‘SEC. 104. ADDITIONAL REQUIREMENTS AND PRO9 VISIONS RELATING TO LOANS AND GUARANTEES.—(a)

10 The Secretary shall not make any loan under section 102

11 or guarantee any loan under section 103—

12 ‘‘(1) if all or any part of the loan to be made

13 or guaranteed will be used to expand the service ter14 ritory of the applicant or borrower, as the case may

15 be, into an area in which consumers are being served

16 by another utility;

17 ‘‘(2) if the applicant or the borrower, as the

18 case may be, has not agreed to follow generally ac19 cepted accounting procedures and management prac20 tices;

21 ‘‘(3) if the applicant or borrower, as the case

22 may be, is prohibited by a charter, bylaw, statute, or

23 regulation, or is otherwise prohibited, from disposing

24 of any or all of the property of the applicant or bor25 rower by a vote greater than a majority of the mem-
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1 bership of the applicant or borrower voting in person

2 or by proxy; and

3 ‘‘(4) if the applicant or borrower fails to agree

4 to provide to the Secretary a complete and current

5 set of all residential, commercial, or industrial tariffs

6 or rate schedules, power sale agreements, and trans7 mission agreements, and any subsequent changes

8 made thereto, and any additional power sale and

9 transmission agreements entered into by the bor10 rower, during the term of the loan; any such tariffs,

11 schedules, and agreements provided to the Secretary

12 shall be deemed public information and shall be

13 made available within 10 working days of receipt of

14 a verbal, written or electronically transmitted re15 quest reasonably describing the information sought.

16 ‘‘(b) The Secretary shall ensure that funds shall not

17 be advanced under any loan made under section 102 or

18 guaranteed under section 103 unless the approval of any

19 State or Federal agency required with respect to the

20 project to be financed by the loan, or its financing, has

21 been obtained and remains in effect.

22 ‘‘(c) If the Secretary determines that the level of gen23 eral funds of an applicant or borrower is in excess of that

24 needed for a reasonable reserve, the Secretary shall reduce

25 (A) the amount of the loan request in the case of an appli-
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1 cant under section 102, (B) the amount of any advance

2 on a loan made under section 102, or (C) the amount of

3 any guarantee under section 103.

4 ‘‘(d) Loans may be made under section 102, or guar5 anteed under section 103, only to the extent that electrical

6 service to consumers in rural areas will be provided or im7 proved by the facility being financed.

8 ‘‘SEC. 105. GRADUATION PROGRAM.—(a) The Sec9 retary shall establish a program under which at least once

10 every 2 years each loan made under section 102 shall be

11 reviewed to determine whether the borrower (1) is able

12 to repay all or any part of the loan with general funds

13 in excess of that needed for a reasonable reserve, or (2)

14 may be able to obtain credit from a commercial, coopera15 tive, or other legally organized non-governmental lending

16 institution in an amount sufficient to meet all or any part

17 of the credit needs of the borrower at reasonable rates and

18 terms, taking into consideration prevailing rates for loans

19 and obligations for similar purposes and periods of time.

20 ‘‘(b)(1) To the extent that the Secretary determines

21 that the borrower is able to repay all or any part of the

22 loan from general funds, the borrower shall make the pay23 ment in full or in part on the loan, without penalty, at

24 such time as the Secretary may require prior to the final

25 maturity date of the loan.
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1 ‘‘(2) If the Secretary determines that the borrower

2 may be able to meet all or any part of its credit needs

3 from other lenders, with or without a loan guarantee

4 under section 103, the borrower shall be required to—

5 ‘‘(A) apply for and accept credit from such

6 lenders, and purchase any stock necessary in connec7 tion with the loan if the source is a cooperative lend8 ing institution; and

9 ‘‘(B) use the proceeds of such credit to make

10 payment, in full or in part, without penalty, on any

11 loan made to the borrower under section 102 at such

12 time as the Secretary may require prior to the final

13 maturity date of such loan.

14 ‘‘SEC. 106. FAILURE TO COMPLY WITH THE ACT.—

15 If a borrower of a loan made under section 102 fails to

16 comply with any provision of this Act, or any agreement

17 between the borrower and the Secretary made pursuant

18 thereto, including, but not limited to, the provisions of sec19 tion 104(a)(6) and section 105, the amount outstanding

20 on the loan shall become due and payable upon receipt

21 of a written notice of such failure issued by the Secretary

22 to the borrower. Such notice shall be given to the borrower

23 as soon as possible after such failure to comply with the

24 Act occurs.
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1 ‘‘SEC. 107. LIMITATION ON AUTHORIZATION FOR AP2 PROPRIATIONS.—In the case of each fiscal year 1996

3 through 2000, there are authorized to be appropriated to

4 the Secretary for the cost, as defined in section 502 of

5 the Congressional Budget Act of 1974, of loans made and

6 guaranteed under this title, $25,000,000.’’.

7 SEC. 116. CONFORMING AMENDMENT.

8 Section 201 of the Act (7 U.S.C. 921) is amended,

9 in the first sentence, by—

10 (a) striking out ‘‘section 3 of’’; and

11 (b) striking out ‘‘as are provided in section 4 of

12 this Act’’ and inserting ‘‘as was provided in section

13 4 of this Act prior to its repeal.’’.

14 SEC. 117. RURAL ELECTRIFICATION AND TELEPHONE RE15 VOLVING FUND.

16 Section 301 of the Act (7 U.S.C. 931) is amended

17 by—

18 (a) redesignating subsection (a) as subsection

19 (b);

20 (b) adding a new subsection (a) as follows:

21 ‘‘(a) The provisions of this title shall be applicable

22 only to rural electric loans made prior to October 1, 1995,

23 and to rural telephone loans.’’; and

24 (c) in subsection (b), as redesignated,
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1 (1) in paragraph (1), by striking out

2 ‘‘under sections 4, 5, and 201 of this Act’’ and

3 inserting in lieu thereof ‘‘under sections 4 and

4 5, prior to their repeal, and section 201 of this

5 Act’’;

6 (2) in paragraph (2), striking out ‘‘under

7 sections 4, 5, and 201’’ and inserting in lieu

8 thereof ‘‘under sections 4 and 5, prior to their

9 repeal, and section 201 of this Act’’; and

10 (3) in paragraph (3)—

11 (A) striking out ‘‘notwithstanding sec12 tion 3(a) of title I’’; and

13 (B) striking out ‘‘held under titles I

14 and II of this Act’’ and inserting in lieu

15 thereof ‘‘held under sections 2 through 18

16 of this Act, prior to the amendments made

17 thereto by the Rural Electrification and

18 Rural Economic Development Improve19 ment Act of 1995, and title II of this Act’’.

20 SEC. 118. CONFORMING AMENDMENTS.

21 Section 302 of the Act (7 U.S.C. 932) is amended

22 by—

23 (a) in subsection (a), striking out ‘‘under sec24 tions 4, 5, and 201 of this Act’’ and inserting in lieu
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1 thereof ‘‘under sections 4 and 5, prior to their re2 peal, and section 201 of this Act’’; and

3 (b) in subsection (b)—

4 (1) in paragraph (1), striking out ‘‘under

5 sections 4, 5, and 201 of this Act’’ and insert6 ing in lieu thereof ‘‘under sections 4 and 5,

7 prior to their repeal, and section 201 of this

8 Act’’; and

9 (2) in paragraph (2), adding after ‘‘pursu10 ant to section 3(a) of this Act’’ the following:

11 ‘‘prior to its repeal’’.

12 SEC. 119. COST OF MONEY RATES FOR CERTAIN ELECTRIC

13 BORROWERS.

14 Section 305(c)(2) of the Act (7 U.S.C. 935(c)(2)) is

15 amended to read as follows:

16 ‘‘(2) COST OF MONEY LOANS.—The Secretary

17 shall make insured electric loans, to the extent of

18 qualifying applications, to eligible applicants that do

19 not meet the requirements for hardship loans under

20 paragraph (1) at the rate of interest equal to the

21 then current cost of money to the Government of the

22 United States for loans of similar maturity.’’.
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1 SEC. 120. LIMITATION OF TERM OF LOANS.

2 Section 305(c) of the Act (7 U.S.C. 935(c)) is amend3 ed by adding at the end thereof a new paragraph (4) as

4 follows:

5 ‘‘(4) LIMITATION ON TERMS OF LOANS.—The

6 term of any loan made under this subsection may

7 not exceed the expected useful life of the assets

8 being financed or 35 years, whichever is less.’’.

9 SEC. 121. ACCOMMODATION AND SUBORDINATION OF

10 LIENS TO ASSIST CERTAIN BORROWERS IN

11 ACQUIRING CREDIT AFTER OCTOBER 1, 1996.

12 Effective October 1, 1995, section 306 of the Act (7

13 U.S.C. 936) is amended by—

14 (a) Adding ‘‘(a)’’ before the first sentence; and

15 (b) Adding at the end thereof a new subsection

16 (b) as follows:

17 ‘‘(b) In order to assist borrowers with outstanding

18 electric loans made under this Act prior to October 1,

19 1995, who are not eligible for loans under section 102 to

20 meet their further credit needs from commercial, coopera21 tive, or other legally organized lending institutions, the

22 Secretary is authorized to share the Government’s lien on

23 the borrower’s assets or to subordinate the Government’s

24 lien on the property to be financed by the lender to the

25 extent that the Secretary determines that the security for
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1 all loans of the borrower made or guaranteed under this

2 Act will remain reasonably adequate.’’.

3 SEC. 122. REPEAL OF AUTHORIZATION TO REFINANCE FED4 ERAL FINANCING BANK LOANS.

5 Section 306C of the Act (7 U.S.C. 936c) is repealed.

6 SEC. 123. REPEAL OF REQUIREMENT FOR SPECIAL TREAT7 MENT OF CERTAIN ELECTRIC BORROWERS

8 Section 306E of the Act (7 U.S.C. 936e) is repealed.

9 SEC. 124. REPEAL OF 30 PERCENT LIMITATION ON RE10 QUIRED FINANCING FROM OTHER SOURCES.

11 Section 307 of the Act (7 U.S.C. 937) is amended

12 by striking out the last sentence thereof.

13 SEC. 125. REPEAL OF AUTHORIZATION TO REFINANCE CER14 TAIN RURAL DEVELOPMENT LOANS.

15 Section 310 of the Act (7 U.S.C. 940) is repealed.

16 SEC. 126. USE OF FUNDS.

17 Section 312 of the Act (7 U.S.C. 940b) is repealed.

18 SEC. 127. REPEAL OF CUSHION OF CREDIT PAYMENTS PRO19 GRAM.

20 Section 313 of the Act (7 U.S.C. 940c) is repealed.

21 SEC. 128. REPEAL OF CERTAIN AUTHORIZATIONS FOR AP22 PROPRIATIONS.

23 Section 314 of the Act (7 U.S.C. 940d) is amended

24 in subsection (b) by—

25 (a) striking out paragraphs (1) and (2); and
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1 (b) renumbering paragraphs (3) and (4) as

2 paragraphs (1) and (2), respectively.

3 TITLE II—PRESERVATION OF EXCLUSIVE

4 STATE JURISDICTION OVER RETAIL

5 ELECTRIC SERVICE TERRITORIES.

6 SEC. 201. AMENDMENT TO THE FEDERAL POWER ACT OF

7 1935.

8 Section 201 of the Federal Power Act of 1935 (16

9 U.S.C. 824) is amended by adding at the end thereof the

10 following new subsection:

11 ‘‘(h) EXCLUSIVE STATE JURISDICTION OVER ALLO12 CATION OF RETAIL ELECTRIC SERVICE TERRITORIES.—

13 Notwithstanding any other provision of law, the regulation

14 and allocation of service territories or service areas to pro15 viders of electric service shall be subject only to State law

16 and shall not be subject to the requirements of this Act,

17 or any other provision of Federal law. No Executive agen18 cy (as defined in section 105 of title 5, United States

19 Code) shall have authority to preempt or interfere with

20 the operation of any law of a State or a political subdivi21 sion of a State relating to a service territory or service

22 area allocation to providers of electric service.’’.
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1 TITLE III—IMPROVEMENTS TO THE DE2 LIVERY OF RURAL DEVELOPMENT

3 PROGRAMS

4 SEC. 301. ELIGIBILITY FOR WATER AND WASTE LOAN AND

5 GRANT PROGRAMS.

6 The Consolidated Farm and Rural Development Act

7 (7 U.S.C. 1921 et seq.) is amended by—

8 (1) in subsection (a) of section 306 (7 U.S.C.

9 1926(a)), striking out the second sentence; and

10 (2) in section 365 (7 U.S.C. 2008), striking out

11 subsection (h).

12 SEC. 302. REGULATIONS UNDER SECTION 370 OF THE CON13 SOLIDATED FARM AND RURAL DEVELOP14 MENT ACT.

15 If the Secretary of Agriculture has not issued final

16 or interim final regulations to ensure compliance with the

17 provisions of section 370(a) of the Consolidated Farm and

18 Rural Development Act (7 U.S.C. 2008e) on or before

19 September 30, 1995, the Secretary shall not make any

20 loan, loan advance, or grant for rural development pur21 poses under any provision of such Act or any loan, loan

22 advance, or grant under any provision of the Rural Elec23 trification Act of 1936 until such regulations are issued.
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1 SEC. 303. ADMINISTRATION OF RURAL DEVELOPMENT PRO2 GRAMS.

3 The Consolidated Farm and Rural Development Act

4 of 1972 (7 U.S.C. 1921 et seq.) is amended by adding

5 at the end therefore the following new section:

6 ‘‘SEC. 372. ADMINISTRATION OF RURAL DEVELOP7 MENT PROGRAMS.—Notwithstanding any other provision

8 of law, in administering all rural development programs

9 and activities, other than rural development programs re10 lating to rural businesses and industry development, the

11 Secretary shall give priority, in the awarding of all loans

12 and grants (including, but not limited to, grants and loans

13 provided under title V of the Rural Electrification Act of

14 1936), to rural development projects that are included in

15 a local, regional, or Statewide development plan and the

16 Secretary shall give the highest priority to public bodies

17 and nonprofit entities that operate on a nonprofit basis.’’.

18 SEC. 304. EQUAL ACCESS TO FEDERAL RURAL DEVELOP19 MENT FUNDS.

20 Section 502 of the Rural Electrification Act of 1936

21 (7 U.S.C. 950aa–1) is amended—

22 (a) in paragraph (1) of subsection (b)—

23 (1) in the first sentence, by striking out

24 ‘‘Borrowers under this Act’’ and inserting in

25 lieu thereof ‘‘Borrowers under this Act and all

26 nonprofit entities’’; and
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1 (2) by striking out the second sentence.

2 (b) in section (b), by adding at the end thereof

3 the following new paragraph:

4 ‘‘(4) PREFERENCE FOR NONPROFIT ENTI5 TIES.—In reviewing applications for assistance, the

6 Secretary shall give the highest priority to those ap7 plications and preapplications submitted by non8 profit entities that operate on a nonprofit basis.’’;

9 and

10 (c) in subsection (e), by striking out the second

11 sentence.

12 SEC. 305. ELIMINATION OF DUPLICATIVE PROGRAMS.

13 Section 2322 of the Food, Agriculture, Conservation,

14 and Trade Act of 1990 (7 U.S.C. 1926–1) is repealed.

Æ

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