U.S. Representative Abigail Spanberger cosponsored a bipartisan bill that would reduce the barriers that prevent many Rural Utilities Service (RUS) borrowers from refinancing their debt to take advantage of lower market rates.
All three electric cooperatives operating in Virginia’s Seventh District – Rappahannock Electric Cooperative, Southside Electric Cooperative, and Central Virginia Electric Cooperative – are RUS borrowers and would be able to refinance more efficiently under this bipartisan reform.
“While pundits constantly pivot to follow the fluctuations of the stock market, Central Virginians are still facing the hard facts of economic uncertainty due to the COVID-19 pandemic. Some of the local companies that have been hit hardest by the worsening economic crisis are rural utility service providers. Many Seventh District residents depend on businesses like electric co-ops and small telecom providers for reliable power and affordable internet access – tools that are more essential than ever,” said Spanberger. “The Flexible Financing for Rural America Act would give these local service providers the flexibility they need to take advantage of low interest rates and refinance their debt, without facing expensive, burdensome penalties from the USDA. During this challenging period, we should be reducing the number of hoops people have to jump through to keep their businesses running and maintain service for their customers. I’m proud to support bipartisan legislation to enable more of Central Virginia’s rural utility providers to stay open during this crisis, and play a meaningful role in our long-term economic recovery.”
“America’s electric cooperatives face significant financial shortfalls due to the ongoing pandemic,” said Jim Matheson, CEO, National Rural Electric Cooperative Association. “Despite that, electric cooperatives are working to help their communities by working with co-op consumer-members on extended payment plans, accelerating cash back programs, and expanding broadband access. Economic development has been part of electric co-ops’ DNA for decades and that element of community leadership will be critical as communities rebound from the public health emergency. This essential legislation will give co-ops the flexibility to manage financial shortfalls and focus on the long-term stability of the communities they serve. We thank Representative Spanberger for her support of a vital piece of bipartisan legislation that will have a tangible impact on co-ops throughout Central Virginia.”
“Central Virginia Electric Cooperative (CVEC) fully supports the Flexible Financing for Rural America Act, and thanks Representative Spanberger for her support of this important legislation. The ability to take advantage of the low interest rates in today’s markets and the flexibility to adjust loan terms to address the impacts of COVID-19 will both benefit CVEC members, as well as other electric cooperative members across the United States,” said Gary Wood, President and CEO, Central Virginia Electric Cooperative. “The bill will allow us to reduce interest expense, with the savings passed along to our members. It also provides financial stability, assuring that COVID-19 related challenges do not impact our commitment to affordable electric service and broadband internet access for all members.”
The Flexible Financing for Rural America Act is led by U.S. Representatives Vicky Hartzler (R-MO-04) and Tom O’Halleran (D-AZ-01). This bipartisan legislation would enable more RUS borrowers to avoid burdensome, costly penalties, and give them the financial flexibility they need to continue providing essential services like electricity and telecommunications during this challenging time.
Unlike most private lenders, RUS does not permit borrowers to refinance their debt for the purpose of taking advantage of lower interest rates. There are few circumstances in which refinancing is allowed, and even then, the penalties imposed on borrowers are costly and significant.
The Flexible Financing for Rural America Act would allow RUS borrowers like electric cooperatives and small telecom providers to refinance their RUS debt at current market rates, giving them more flexibility when it comes to cash flow. This flexibility can make all the difference, as small rural service providers are struggling to continue providing essential utilities to rural Americans in worsening economic conditions.
Over the past decade, electric cooperatives in Virginia’s Seventh District have received over $240 million in RUS loans. Participation in the program is also quite high among rural utility services statewide. If the Spanberger-supported legislation became law and RUS debt was refinanced, the Commonwealth could see an annual savings of more than $14 million per year.
In addition to expanding the opportunities that rural utility services have to refinance their debt, this bipartisan legislation would also prohibit RUS, which is a division of the U.S. Department of Agriculture, from imposing any penalties or fees on borrowers. By removing this barrier, the bill ensures that small borrowers are not punished for making the financial decisions that are best for their business and their rural customers.