October 30, 2007, Introduced by Reps. Brown, Accavitti, Clemente, Angerer, Mayes, Farrah, Palsrok, Nofs, Shaffer, Opsommer, Nitz, Walker, Emmons, Booher, Moolenaar, Huizenga, Meekhof, Hopgood, Melton, Hammon, Lahti and Lemmons and referred to the Committee on Energy and Technology.
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.
(c) "Cooperative" or "cooperative electric utility" means an
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.
(c) The meeting of the board of directors at which the
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.
(c) Voting on the proposition to overturn the vote by the
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,
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 rules involving safety, interconnection, code of
conduct, customer choice, service area, distribution performance
standards, and quality of service, 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. 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.
(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 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 determine if the charges or rates
offered 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. The
member-regulated cooperative may provide service to the prospective
customer until the commission determines the appropriate service
provider.
(4) If the commission finds that the cooperative's charges to
extend service, if any, and the rates offered to the prospective
customer are unjust and 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 of its facilities that will
continue to be used to serve the customer by the objecting electric
utility.