US electric co-ops back new flexible finance bill as they recover from Covid-19

Sector body NRECA says it could save the sector £10bn as it adjusts to falling revenues as a result of the pandemic

A bipartisan bill was introduced to US Congress last week that could save electric co-ops more than $10bn.

The Flexible Financing for Rural America Act, sparked by the financial pressure brought on the sector by the Covid-19 crisis, would allow co-ops to reprice loans from the Rural Utilities Service at current low interest rates. If the bill passes, co-ops will have 180 days to ask the US Department of Agriculture for a rate adjustment on their loans. Any prepayment penalties normally associated with refinancing will be waived.

The umbrella body for US electric co-ops, NRECA, says the sector could enjoy net savings of $10.1bn from repricing $42bn of direct and guaranteed RUS loans held by about 500 co-ops. An average co-op with typical RUS debt could save $2m a year in interest payments, it says.

Small, rural broadband providers, which hold about $3bn in RUS Telecom Loans, also stand to benefit.

This will offer much needed relief as the US continues to weather the effects of the Covid-19 crisis. NRECA has warned that co-ops could lose up to $10 billion in revenue through 2022 as unemployed members fall behind behind with their bills and commercial customers buy less electricity as their own trade declines.

“Economic development has been part of electric co-ops’ DNA for decades,” said NRECA chief executive Jim Matheson. “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.”

He added: “America’s electric co-operatives face significant financial shortfalls due to the ongoing pandemic. Despite that, they are working to help their communities by working with co-op consumer-members on extended payment plans, accelerating cash back programmes, and expanding broadband access.”

The new bill was introduced by Sen John Hoeven (R-ND), who said: “Electric co-operatives and telecommunications providers are critical to the quality of life in rural areas. The restrictions on RUS loans hamper the ability of these organisations to cope with the challenges of Covid-19.

“The Fed reduced interest rates specifically to help businesses through this difficult time, and it makes sense to enable rural electric cooperatives and telecoms to benefit from this important tool, supporting a stronger recovery in our rural communities.”

The legislation is supported by the NRECA alongside the NTCA–The Rural Broadband Association, the North Dakota Association of Rural Electric Cooperatives, and the Broadband Association of North Dakota.

NRECA’s lobbying in support of the new measure follows its efforts to see the electric co-op sector included the federal Covid-19 relief packages put in place during the crisis. The $2tn CARES Act, passed in March, included $900m for the Low-Income Home Energy Assistance Program, which helps low- and moderate-income consumers pay their utility bills.