This is our starting text

HB-5383, As Passed House, April 17, 2008

SUBSTITUTE FOR

HOUSE BILL NO. 5383

A bill to provide for the member-regulation of electric

cooperatives; to prescribe the powers and duties of certain state

agencies and officials; and to provide for certain penalties and

remedies.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1. This act shall be known and may be cited as the

"electric cooperative member-regulation act".

Sec. 2. As used in this act:

(a) "Board of directors" or "board" means the group of members

democratically elected by the members of a cooperative electric

utility to manage the business and affairs of the cooperative

electric utility.

(b) "Commission" means the Michigan public service commission.

electric utility organized as a cooperative corporation under

sections 98 to 109 of 1931 PA 327, MCL 450.98 to 450.109, serving

primarily members of the cooperative electric utility.

(d) "Electric utility" means a person, partnership,

corporation, association, or other legal entity whose transmission

or distribution of electricity the commission regulates under 1909

PA 106, MCL 460.551 to 460.559, or 1939 PA 3, MCL 460.1 to

460.10cc. Electric utility does not include a municipal utility,

affiliated transmission company, or independent transmission

company.

(e) "Member" means a person, partnership, corporation,

association, or other legal entity that purchases electricity from

a cooperative electric utility as a member of the cooperative.

(f) "Member-regulation" means the board of directors of the

cooperative is charged with establishing, maintaining, and applying

all rates, charges, accounting standards, billing practices, and

terms and conditions of service.

Sec. 3. Cooperative electric utilities, which are owned by the

members they serve, are regulated by their members acting through

democratically elected boards of directors. It is declared that

member-regulation by a cooperative in the areas of rates, charges,

accounting standards, billing practices, and terms and conditions

of service may be more efficient and cost-effective. The purpose of

this act is to allow the board of directors to elect member-

regulation for rates, charges, accounting standards, billing

practices, and terms and conditions of service.

Sec. 4. To become member-regulated under this act, the board

of directors shall comply with the following procedures:

(a) A director may propose to become member-regulated at any

properly convened meeting of the board of directors. The board may

not act on the proposal until 90 days has passed from the date the

proposal was made.

(b) The board may only act on the proposal to become member-

regulated at a meeting of the board for which written notice of the

time and place of the meeting has been provided to all members of

the cooperative. Notice to the members shall be written and

delivered not less than 21 or more than 60 days before the date of

the meeting and shall contain a copy of the proposal. Notice may be

sent by first-class mail or may be published in a periodical issued

by an association of cooperative electric utilities and mailed to

each member of record of the cooperative.

proposal is to be acted upon shall be open to all members of the

cooperative. The board shall allow members of the cooperative

reasonable time to address the board prior to its acting upon the

proposal.

(d) A roll call vote of the board of directors with 2/3 of the

members voting in support of the proposal to become member-

regulated is necessary for adoption of the proposal.

(e) The minutes of the meeting at which the proposal is acted

upon, including the roll call vote, shall be provided to the

members of the cooperative within 60 days from the date of the

meeting in the same manner as the notice of the meeting at which

the proposal was acted upon.

(f) The cooperative shall notify the commission in writing of

the action of the board of directors on the proposal to become

member-regulated within 10 days after the date of the action, and

the cooperative shall become member-regulated as provided for in

this act 90 days following the date of the notice to the

commission.

(g) The board of directors may vote to rescind the proposal

once adopted by following the same procedures that were followed in

the adoption of the proposal.

Sec. 5. The members of a cooperative that has elected to

become member-regulated may overturn the proposal adopted by the

board of directors by complying with the following:

(a) An election to overturn the vote by the board of directors

to be member-regulated shall be called not less than 120 days after

receipt of a valid petition signed by 5% or 750 members of the

cooperative, whichever is less.

(b) The proposition to overturn the vote by the board of

directors to be member-regulated shall be presented to a meeting of

the members of the cooperative, the notice of which shall set forth

the proposition for member-regulation and the time and place of the

meeting. The cooperative shall deliver written notice to members

not less than 21 days or more than 60 days before the date of the

meeting. Notice shall be sent in the same manner as the notice for

the meeting at which the proposal was acted upon. The cooperative

shall pay the costs to notify the members of an election under this

subdivision.

board of directors to be member-regulated shall be by mail ballot,

and internet, provided members attending the meeting provided for

in subdivision (b) may execute and deliver their ballot to the

cooperative during or at the conclusion of the meeting. Proxy

voting shall not be permitted.

(d) If the proposition to overturn the vote by the board of

directors to be member-regulated is approved by the affirmative

vote of not less than 2/3 of the members voting on the proposition,

and at least 10% of the total number of members cast a vote, the

cooperative shall notify the commission in writing of the results

within 10 days after the date of the election, and the cooperative

shall no longer be member-regulated as provided for in this act 90

days following the date of the notice to the commission.

(e) A cooperative's members may vote no more than once every

24 months to overturn the vote by the board of directors to be

member-regulated as provided in this act.

(f) If the proposition to overturn the vote by the board of

directors to be member-regulated is approved by the members in

accordance with this section, the board of directors may not act on

a proposal to member-regulate as provided for under section 4 until

36 months from the date notice of the election to overturn the vote

of the board of directors was provided to the commission under

subdivision (d).

Sec. 6. (1) A cooperative electing to be member-regulated

under this act shall, by board action, establish, maintain, and

apply all rates, charges, accounting standards, billing practices,

and terms and conditions of service in accordance with this act.

(2) Notwithstanding the provisions of this act, the commission

shall retain jurisdiction and control over all member-regulated

cooperatives for matters involving safety, interconnection, code of

conduct including, but not limited to, all relationships between a

member-regulated cooperative and an affiliated alternative electric

supplier, customer choice including, but not limited to, the

ability of customers to elect service from an alternative electric

supplier under 1939 PA 3, MCL 460.1 to 460.10cc, and the member-

regulated cooperative's rates, terms, and conditions of service for

customers electing service from an alternative electric supplier,

service area, distribution performance standards, and quality of

service, including interpretation of applicable commission rules

and resolution of complaints and disputes, except any penalties

pertaining to performance standards and quality of service shall be

established by the cooperative's members when voting on the

proposition for member-regulation or at an annual meeting of the

cooperative.

Sec. 7. (1) A cooperative electric utility that is member-

regulated under this act shall determine how rates and charges for

service provided are to be established, maintained, and applied.

The rates and charges shall reasonably reflect the costs of

providing service and shall be uniform within the classes of

service provided by the cooperative.

(2) The board of directors of a cooperative electric utility

that is member-regulated may adopt, amend, repeal, or add to the

cooperative's billing practices and service rules provided it has

given written notice to members at least 30 days prior to the

effective date of any action taken.

(3) Each cooperative which has elected to be member-regulated

shall maintain and make available to the public an electronic copy

of its rates, charges, accounting standards, billing practices and

service rules, and terms and conditions of service on a website and

shall maintain a paper copy at all offices of the cooperative for

review by the general public. In addition, the cooperative shall

provide a copy of the same to the commission as well as a copy of

the cooperative's most recent audited financial statement.

(4) If a cooperative is member-regulated under this act, the

board shall give at least 10 days' notice to all members of the

cooperative of the time and place of any meeting of the board at

which an increase in rates affecting at least 5% of the members or

substantive changes in billing practices and service rules or terms

and conditions of service are to be discussed and voted on. Any

such meeting shall be open to all members. Notice under this

subsection shall be sent by first-class mail to all members or may

be published in a periodical issued by an association of

cooperative electric utilities and mailed to each member of record

of the cooperative electric utility.

Sec. 8. (1) A cooperative electric utility that is member-

regulated shall publish notice of any rate change or any change in

billing practices and service rules or terms and conditions of

service at least 30 days prior to the effective date of the change.

(2) The notice under this section shall be sent by first-class

mail to all members or may be published in a periodical issued by

an association of cooperative electric utilities and mailed to each

member of record of the cooperative electric utility.

Sec. 9. (1) The commission shall retain jurisdiction over all

areas served and line extension disputes involving a cooperative

electric utility that is member-regulated under this act and a

regulated electric utility. This act does not limit the

commission's jurisdiction over areas served and line extension

disputes granted to the commission under any other law or statute.

A cooperative electric utility that is member-regulated under this

act shall operate in compliance with R 460.3411 of the Michigan

administrative code, regarding extension of electric service in

areas served by 2 or more utilities. The commission shall continue

to possess all jurisdiction and authority necessary to administer

and enforce the provisions of 1929 PA 69, MCL 460.501 to 460.506,

and R 460.3411 of the Michigan administrative code with respect to

member-regulated cooperative electric utilities.

(2) When a member-regulated cooperative is required to give

notice to the commission and any affected electric utility of its

intention to extend service to a prospective customer as required

under R 460.3411 of the Michigan administrative code, the notice

shall also include the charge to extend service, if any, and the

rate or rates for the service offered.

(3) If the electric utility, after being notified under R

460.3411 of the Michigan administrative code, believes that a

cooperative that is member-regulated under this act either proposes

to unlawfully extend service to a prospective customer or has

offered an unjustly preferential charge for extension of service or

unjust rate to a prospective customer and that prospective customer

could otherwise be served by the electric utility pursuant to the

commission's rules for extension of electric service, the affected

electric utility may file an objection with the commission. Any

objection allowed under this subsection shall be filed within 60

days from the date notice of the intent to extend service was

provided by the cooperative. If an objection is filed by the

utility notified under R 460.3411 of the Michigan administrative

code, the commission shall first determine whether the complaining

utility or the cooperative, or both, have the lawful right to

provide service to the prospective customer and then, if necessary,

determine whether the charges or rates offered by the cooperative

are just and reasonable based on the cooperative's cost of service.

That determination shall be made at a contested case proceeding

conducted pursuant to chapter 4 of the administrative procedures

act of 1969, 1969 PA 306, MCL 24.271 to 24.287. A cooperative's

charges or rates offered to a prospective customer shall be

considered just and reasonable upon a showing by the cooperative

that the charges to extend service to a prospective customer and

the rates offered are equivalent to the cooperative's charges to

extend service and rates charged to other similarly situated

customers served by the cooperative. If the cooperative does not

provide service to other similarly situated customers, the

cooperative shall demonstrate that its charges to extend service

and the rates offered to the prospective customer are just and

reasonable based on the cooperative's cost of providing service to

the prospective customer, consistent with industry practice. At the

choice of the customer, either the electric utility or the member-

regulated cooperative may provide service to the prospective

customer until the commission determines the appropriate service

House Bill No. 5383 (H-1) as amended April 17, 2008 (1 of 2)

provider.

[(4) A municipally owned utility that has entered into a service area agreement with a cooperative in accordance with section 10y(6) of 1939 PA 3, MCL 460.10y, may file an action in the circuit court in the district where the cooperative's main office is located alleging that a rate or charge offered by the cooperative is unjust and unreasonable. An action filed under this subsection shall be filed within 60 days after the municipally owned utility becomes aware of the rate or charge. In determining whether a rate or charge is just and reasonable, the circuit court shall use the standards set forth in subsection (3) for determinations made by the commission. If the circuit court determines that the rate or charge offered to the prospective customer is unjust or unreasonable, the court shall order the cooperative to assess the appropriate rate or charge to the prospective customer. Notwithstanding any law to the contrary, if the circuit court issues an order under this subsection, any prospective customer directly affected by the order shall be permitted by the cooperative to switch service to the objecting municipally owned utility, if the affected customer has given the cooperative written notice of the customer's intent to switch within 60 days from the date of the court's order and the objecting municipally owned utility agrees to pay the cooperative the reasonable value, as determined by the circuit court, of its facilities that will continue to be used to serve the customer by the objecting municipally owned utility.

(5)] If the commission finds that an electric utility or

cooperative providing temporary service to a customer under this

act is not a lawful service provider for that customer, the

commission shall order service to that customer transferred to the

lawful provider. That order shall require the provider acquiring

the customer to pay for the reasonable cost of the facilities, as

determined by the commission, constructed to serve the transferred

customer, which will be used by the acquiring provider to serve the

transferred customer.

[(6)] If the commission finds that the cooperative is a lawful

service provider but the cooperative's charges to extend service,

if any, or the rates offered to the prospective customer are unjust

or unreasonable, the commission shall order the cooperative to

assess the appropriate charges to extend service and assess the

appropriate rates to the prospective customer. Notwithstanding

rules to the contrary, if the commission issues an order under this

subsection, any prospective customer directly affected by the

commission's order shall be permitted by the cooperative to switch

service to the objecting electric utility, if the affected customer

has given the cooperative written notice of the customer's intent

to switch within 60 days from the date of the commission's order

and the objecting electric utility agrees to pay the cooperative

the reasonable value, as determined by the commission, of its

facilities that will continue to be used to serve the customer by

the objecting electric utility.