Farm Bill Advances Electric Co-op Interests in Rural Development, Broadband

Congress has passed a Farm Bill that will enable co-ops to invest in the grid, rural broadband deployment and their communities. (Photo By: John Lowrey)
Congress has passed a Farm Bill that will enable co-ops to invest in the grid, rural broadband deployment and their communities. (Photo By: John Lowrey)

From community development to broadband and renewable energy, electric cooperatives stand to benefit from the Farm Bill overwhelmingly passed by Congress this week and now headed to President Trump, who’s expected to sign it.

The House voted 369-47 in favor of the bill on Wednesday, a day after the Senate approved it, 87-13.

“The bill advances the interests of rural America,” said NRECA CEO Jim Matheson. “Its strong rural development provisions will enable co-ops to invest in modernizing the electric grid and continue key economic development activities in the communities they serve.”

Lawmakers agreed to keep or expand several programs important to electric co-ops.

The bill preserves the Rural Economic Development Loan and Grant Program beyond 2021, when funding was scheduled to expire. Electric co-ops use this program to finance economic development projects in their communities.

Funding also is maintained for the Rural Energy for America Program, which offers loans and grants for renewable energy initiatives.

The bill also extends the Rural Energy Savings Program to provide loans for home energy retrofits. Electric co-ops created the program as part of the 2014 Farm Bill. The new language increases the allowance for administrative expenses from 3 percent to 5 percent of the loan.

Big Win for Rural Broadband

Several provisions in the bill will help electric co-ops bridge the digital divide:

  • Authorization for $350 million a year in grants and loans for deploying rural broadband. (Funding for this new program is in addition to the Department of Agriculture’s $600 million broadband loan/grant pilot program included in the budget passed by Congress in March.)
  • Areas with low population density will be eligible for the highest proportion of federal grants. Broadband projects in areas with fewer than seven people per square mile may be eligible for grants covering up to 75 percent of the total project.
  • Grants will be available for areas where 90 percent of the homes lack internet service at the minimum level of 25 megabits per second to download data and 3 Mbps to upload. In areas where half the homes are without 25/3 Mbps service, applicants will be eligible for loans.
  • Loan or grant applicants must now commit to build broadband service at speeds that will meet the areas’ future needs.
  • The bill does not prevent the use of Rural Utilities Service funding for broadband projects in areas that have received Federal Communications Commission funding.

Mixed Results on ‘Cushion of Credit’ Program

The RUS cushion of credit program has provided escrow-like accounts for borrowers to deposit excess money and earn a steady return. The Farm Bill modifies the program to allow for withdrawals from the cushion of credit account for purposes of paying down RUS debt without penalty. The bill will eventually lower the interest rate paid on cushion of credit balances.

The bill includes these changes to the cushion of credit program:

  • No new cushion of credit deposits will be allowed after the bill is enacted.
  • Co-ops in the program may transfer their cushion of credit money to prepay RUS loans without penalty through Sept. 30, 2020.
  • Remaining cushion of credit funds after 30, 2020, may be applied only to regular RUS debt service payments.
  • Existing cushion of credit balances will earn 5 percent interest until Oct. 1, 2020, when that rate will drop to 4 percent. Beginning Oct. 1, 2021, interest on remaining balances will be paid at a floating 1-year Treasury rate.

Cathy Cash is a staff writer at NRECA.