4.24.20 - 2020 USDA RESP Deep Dive
Updated: Aug 31, 2020
Hi PAYS®Pals, here's your weekly newsletter!
Understanding the 2020 Rural Energy Savings Program (RESP) Loan Opportunity and Eligibility
RESP staff at RUS graciously spent two hours last week answering LibertyHomes’ many questions about the new RESP rule and Notice of Solicitations of Applications (NOSA). (The RESP Rule, NOSA, and list of eligible measures attached below). Here's what we learned:
How much is available for FY2020?
Approximately $100M of lending authority is currently available.
The reason this number is “approximate” is that the amount “currently available” will change as funds are committed since it’s first come first serve
When can eligible entities apply?
RUS is accepting letters of intent now!
Remember, RESP funds are first come first serve so send your interested partners to LibertyHomes and we will provide them with templates so they can move fast!
Who is eligible to be a borrower? [N.B. These eligibility criteria are the same year to year and for all RUS EE programs]
“Any public power district, public utility district, or similar entity, or any electric cooperative described in section 501(c)(12) or 1381(a)(2) of the Internal Revenue Code of 1986, that borrowed and repaid, prepaid, or is paying an electric loan made or guaranteed by the Rural Utilities Service (or any predecessor agency)”
“Any entity primarily owned or controlled by one (1) or more entities described in paragraph (a) of this section; or”
“...corporations, states, territories, and subdivisions and agencies thereof; municipalities; people’s utility districts; and cooperative, nonprofit, limited- dividend, or mutual associations that provide or propose to provide eligible purposes under the Rural Energy Savings Program, including energy efficiency, renewable energy, energy storage or energy conservation measures are considered eligible entities."
This means not only all-electric utilities (IOUs, Munis, and coops) and their subsidiaries are eligible, but also all other types of entities listed above that may provide EE, RE, ES, or EC even if they do not provide electricity services!
How will entities that have not borrowed from RUS in the past know if they are eligible?
New borrowers must meet the RESP rurality requirement of serving an area of 50,000 or less population. This test is not applied to the entire service area, but to all census-designated areas in their service territory. So, if ANY census-designated place of even the smallest granularity has a population of 50,000 or less inhabitants or any other area designated eligible by statute, then the new borrower is eligible.
To whom can the RESP RUS borrower offer or invest its RESP loan funds[N.B. This may change based on language of the congressional appropriation]
Qualified consumer is determined by the eligible borrower and be located within the area of 50,000 or less or anywhere else in the service territory when the RUS funding appropriation language allows.
The current appropriation says that as long as one part of your service territory is rural (defined below), you can disperse RUS funds to customers in ANY part of your territory. THIS IS ONLY FIXED FOR THE CURRENT APPROPRIATION. So whereas now the language says something to the effect of “Secretary will make funds available to any entity in any area of their service territory”, the next appropriation might say "only to rural customers" which would then limit which customers of an eligible entity could actually receive RESP funds for EE upgrades.
This definition of rural is different from that in the RE Programs Act which authorizes EECLP and defines rural as areas that have a population of 20,000 or fewer.
What else should an entity interested in RESP consider in addition to eligibility?
Consider the quality of collateral you can afford to offer to support your loan.
The loan security and collateral sections read as follows:
“Loan security. The RESP applicant’s assets pledged to secure the loan. Collateral will be assessed for each applicant taking into consideration asset value, lien position, credit risk and borrower’s profile. Collateral pledged should be adequate to protect the Government’s interest. RUS reserves the right to require an asset appraisal.”
“Collateral. RUS generally requires that borrowers provide it with a first priority lien on all of the borrower’s real and personal property, including intangible personal property and any property acquired after the date of the loan. Collateral that is used to secure a loan must ordinarily be free from liens or security interests other than those permitted by RUS or existing security documents. (1) For existing RUS borrowers, the Administrator may, in his or her sole discretion, rely on existing security arrangements with RUS. (2) When a RESP borrower is unable, by reason of preexisting encumbrances, or otherwise, to furnish a first priority lien on its entire system, the Administrator may accept other forms of security, including but not limited to a parent guarantee, state guarantee, an irrevocable letter of credit, surety bond, pledge of revenues, or other security if the Administrator determines such credit support is reasonably adequate to protect the government’s interests and otherwise acceptable in form and substance.”
What measures qualify?
See attached list
Recommendation: Always include the entire list in your application. That way you never have to go back if you decide to add something that is already approved.
Side note: The list includes "Energy efficient appliance upgrades if attached to real property as fixtures." We thought this meant physically attached, but apparently if a state requires refrigerators, clothes washers, dryers, be included in homes when sold or rented, those devices are considered "attached" and qualifying measures under RESP!
New and really valuable features!
No need to include a special waiver request for PAYS programs!
In the RESP rule RUS has defined a loan as follows: "Loan to a Qualified consumer means a transaction by which a RUS borrower makes RESP funds available to a Qualified consumer for the purpose of implementing energy efficiency measures at a property or for the property of a Qualified consumer to increase energy efficiency on the condition that the RUS borrower will be able to collect the funds made available to the Qualified consumer." ( § 1719.2 "Definitions" page 18419). So PAYS qualifies!
Why aren't RUS funds available on Oct. 1 of each year?
Funds are available after appropriations, apportionments, and allotments are completed.
In other words, determining the amount of funds available for lending from an appropriation and issuing a public notice of availability is a multistep process that takes time.
If you have any questions regarding RESP, reach out to LibertyHomes and if we can’t answer it, we will set up a conference call between you and the RESP folks ASAP! An again, if you know of an entity interested in applying, send them our way and we will help them fill out the letter of intent!