SENATE BILL NO. 391

INTRODUCED BY F. THOMAS

A BILL FOR AN ACT ENTITLED: "AN ACT CREATING THE ELECTRIC COOPERATIVE NONPROFIT MEMBERSHIP CORPORATIONS ACT; AMENDING SECTIONS 35-18-101, 35-18-102, 35-18-105, 35-18-106, 35-18-201, 35-18-206, 35-18-301, 35-18-313, 35-18-316, 69-3-823, 69-5-102, AND 69-8-103, MCA; REPEALING SECTIONS 35-18-107 AND 35-18-318, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE."

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:

NEW SECTION. Section 1. Short title. [Sections 1 through 37] may be cited as the "Electric Cooperative Nonprofit Membership Corporations Act."

NEW SECTION. Section 2. Definitions. As used in [sections 1 through 37] the following definitions apply:

(1) "Broadband" means transmission facilities capable of handling frequencies greater than 4 kilohertz, the frequency level required for high grade voice communication.

(2) "Cable television system" means a system that receives and amplifies the signals broadcast by one or more television stations and redistributes the signals to subscribing members of the public for a fixed or periodic fee by wire, cable, microwave, or other means, whether owned or leased.

(3) "Conflict of interest transaction" means a transaction with the cooperative in which a trustee of the cooperative has a direct or indirect interest.

(4) "Cooperative" means a corporation organized under [sections 1 through 37] or a corporation that becomes and is subject to the provisions of [sections 1 through 37].

(5) "Member" means each incorporator of a cooperative and each person admitted to and retaining membership in a cooperative as provided by the articles of incorporation or bylaws of the cooperative, including a joint membership.

(6) "Person" includes a natural person, firm, association, corporation, business trust, partnership, federal or state agency or political subdivision or other organization or group of persons.

NEW SECTION. Section 3. Construction. [Sections 1 through 37] must be construed liberally. The enumeration of any object, purpose, power, manner, method, or thing does not exclude other objects, purposes, powers, manners, methods, or things.

NEW SECTION. Section 4. Exemption from public service commission jurisdiction. Cooperatives and foreign corporations transacting business in this state pursuant to [sections 1 through 37] are exempt in all respects from the jurisdiction and control of the public service commission of this state.

NEW SECTION. Section 5. Permissible purposes for incorporation. Electric cooperative nonprofit membership corporations may be organized under this chapter for any of the following purposes:

(1) supplying, transmitting, distributing, or generating electric energy and promoting and extending the use of electric energy;

(2) providing billing, metering, communications, and other services related or incidental to supplying, transmitting, distributing, or generating electric energy and promoting and extending the use of electric energy, whether or not a cooperative is supplying, transmitting, distributing, or generating electric energy;

(3) engaging in or promoting economic development activities, including those allowable under federal authorization; and

(4) for other purposes that may be lawfully carried out by a business, nonprofit, or other type of corporation, provided that the cooperative is organized and conducts its business primarily for the mutual benefit of its members as patrons of the cooperative. A cooperative has all of the powers of a natural person, including but not limited to the power to participate with others in a partnership, joint venture, or other association, transaction, or arrangement of any kind.

NEW SECTION. Section 6. Powers of cooperatives. A cooperative may:

(1) sue and be sued in its corporate name;

(2) have perpetual existence;

(3) adopt a corporate seal and alter the corporate seal;

(4) become a member in one or more other cooperatives or corporations or own stock in or otherwise financially participate and invest in one or more other cooperatives or corporations, regardless of whether the other cooperatives or corporations engage in business or activities beyond those related to supplying, transmitting, distributing, or generating electric energy;

(5) construct, purchase, take, receive, lease as lessee, or otherwise acquire and own, hold, use, equip, maintain, and operate and sell, assign, transfer, convey, exchange, lease as lessor, mortgage, pledge, or otherwise dispose of or encumber electric generating plants, lines, facilities, or systems for electric supply transmission, distribution, and generation, cable television, broadband, natural gas, propane, steam or any other energy delivery, lands, buildings, structures, dams, plants and equipment, and all kinds or classes of real or personal property that may be considered necessary to accomplish the purpose for which the cooperative is organized but may not own telegraph or radio broadcasting services or facilities;

(6) purchase or otherwise acquire and own, hold, use, and exercise and sell, assign, transfer, convey, mortgage, pledge, hypothecate, or otherwise dispose of or encumber franchises, rights, privileges, licenses, rights-of-way, and easements;

(7) borrow money and otherwise contract indebtedness and issue notes, bonds, and other evidence of indebtedness and secure the payment of indebtedness by mortgage, pledge, deed of trust, or any other encumbrance upon all of the cooperative's then owned or after-acquired real or personal property, assets, franchises, revenues, or income;

(8) construct, maintain, and operate lines, facilities, or systems for electric supply, transmission, distribution, and generation, cable television, broadband, natural gas, propane, steam, or for any other energy delivery, along, upon, under, and across all public thoroughfares, including without limitation all roads, highways, streets, alleys, bridges, and causeways and upon, under, and across all publicly owned lands, subject, however, to the same requirements in respect of the use of the thoroughfares and lands as are imposed by the respective authorities having jurisdiction of them upon corporations constructing or operating lines, facilities, or systems for electric supply, transmission, distribution, and generation, cable television, broadband, natural gas, propane, steam, or for any other energy delivery;

(9) exercise the power of eminent domain in the manner provided by the laws of this state for the exercise of that power by corporations constructing or operating lines, facilities, or systems for electric supply, transmission, distribution, and generation, cable television, broadband, natural gas, propane, steam, or for any other energy delivery;

(10) conduct its business and exercise all of the cooperative's powers within or outside of this state;

(11) adopt, amend, and repeal bylaws; and

(12) perform all other acts and exercise all other powers that may be necessary to accomplish the purposes for which the cooperative is organized or authorized.

NEW SECTION. Section 7. Foreign corporations. (1) A corporation organized under the laws of a state adjacent to this state on a nonprofit or a cooperative basis for the purpose of supplying electric energy and owning and operating electric transmission or distribution lines in that state is permitted to extend its lines into and transact business in this state without complying with any statute of this state pertaining to the qualification of a foreign corporation for the transaction of business in this state.

(2) Any foreign corporation meeting the provisions of subsection (1), as a prerequisite to the extension of its lines into and the transaction of business in this state, shall, by an instrument executed and acknowledged in its behalf by its president or vice president under its corporate seal attested by its secretary, designate the secretary of state its agent to accept service of process in its behalf. If process is served upon the secretary of state, the secretary of state shall immediately forward the process by registered or certified mail to the corporation at the address specified in the instrument.

(3) Any foreign corporation meeting the provisions of subsection (1) may sue and be sued in the state courts to the same extent that a cooperative may sue or be sued in the state courts.

(4) Any foreign corporation meeting the provisions of subsection (1) may secure its notes, bonds, or other debts by mortgage, pledge, deed of trust, or other encumbrance upon all of its then-owned or after-acquired real or personal property, assets, or franchises located or to be located in this state and also upon the revenue and income to be derived from that then-owned or after-acquired real or personal property and assets.

NEW SECTION. Section 8. Waiver of notice. (1) If [sections 1 through 37] or the cooperative's articles of incorporation or bylaws require that notice be given, a person may waive the notice if the waiver is in writing and signed by the person entitled to the notice whether before or after the time fixed for the giving of the notice.

(2) If a person entitled to notice of a meeting attends the meeting, the person's attendance constitutes a waiver of notice of the meeting, except in the case when the person attends the meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened.

NEW SECTION. Section 9. Name. (1) The name of each cooperative must include the words "electric" and "cooperative" and the abbreviation "Inc.". However, these limitations do not apply if, in an affidavit made by the president or vice president of a cooperative and filed with the secretary of state, it appears that the cooperative desires to transact business in another state and is precluded from transacting business by reason of its name.

(2) The name of a cooperative must distinguish it from the name of any other corporation organized under the laws of or authorized to transact business in this state.

(3) The words "electric" and "cooperative" may not both be used in the name of any corporation organized under the laws of or authorized to transact business in this state, except by a cooperative or a corporation transacting business in this state pursuant to the provisions of [sections 1 through 37].

NEW SECTION. Section 10. Incorporators. Five or more natural persons or two or more cooperatives may organize a cooperative, as provided by [sections 1 through 37].

NEW SECTION. Section 11. Articles of incorporation. (1) The articles of incorporation of a cooperative must state in the caption that the articles of incorporation are executed pursuant to [sections 1 through 37], must be signed by each of the incorporators, and must state:

(a) the name of the cooperative;

(b) the address of its principal office;

(c) the names and addresses of the incorporators;

(d) the names and addresses of the persons who constitute its first board of trustees; and

(e) any provisions not inconsistent with [sections 1 through 37] considered necessary or advisable for the conduct of its business and affairs.

(2) In addition to provisions required in subsection (1), the articles of incorporation may also contain:

(a) provisions not inconsistent with law eliminating or limiting liability as provided in [sections 1 through 37]; and

(b) provisions for classifications of members in a cooperative.

(3) A cooperative's articles of incorporation must be submitted to the secretary of state for filing as provided in [section 36].

(4) It is not necessary to include in the articles of incorporation of a cooperative the purpose for which it is organized or any of the corporate powers vested in a cooperative under [sections 1 through 37].

NEW SECTION. Section 12. Amendment of articles of incorporation. A buying cooperative may amend its articles of incorporation by complying with the following requirements:

(1) The proposed amendment must first be:

(a) approved by the board of trustees and then be submitted to a vote of the members at any annual or special meeting of the membership; or

(b) submitted by a petition bearing not less than 20% of the members' signatures, in accordance with the same procedures as those provided for member initiatives provided in [section 19].

(2) The notice of the meeting must state the proposed amendment approved or submitted in compliance with the requirements in subsection (1). The proposed amendment, with the changes that the members choose to make to the amendment, is considered to be approved on the affirmative vote of not less than two-thirds of those members voting on the amendment at the meeting.

(3) Upon an approval of the amendment by the members, the articles of amendment must be executed on behalf of the buying cooperative by its president or vice president and its corporate seal must be affixed to the articles of amendment and attested by its secretary. The articles of amendment must include in the caption that the articles of amendment are executed pursuant to [sections 1 through 37] and must state:

(a) the name of the buying cooperative;

(b) the address of its principal office;

(c) the date of the filing of its articles of incorporation in the office of the secretary of state; and

(d) the amendment to its articles of incorporation.

(4) The president or vice president executing the articles of amendment shall also make and attach to the articles of amendment an affidavit stating that the provisions of this section were met.

(5) The articles of amendment and the affidavit must be submitted to the secretary of state for filing as provided in [section 36].

NEW SECTION. Section 13. Change of principal office without amendment. A buying cooperative may, without amending its articles of incorporation, upon authorization of its board of trustees, change the location of its principal office. The cooperative shall file a certificate of change of principal office executed by its president or vice president, under its seal attested by its secretary, with the secretary of state's office. The cooperative shall also file a certificate of change of principal office in each county office in which the cooperative's articles of incorporation or any prior certificate of change of principal office of the cooperative has been filed. The cooperative shall pay the change in location of principal office fee prescribed in [sections 36]. The cooperative shall also, within 30 days after the filing of the certificate of change of principal office in any county office, file certified copies of its articles of incorporation and all article of incorporation amendments if not already on file in the county office.

NEW SECTION. Section 14. Existing corporations -- status of existing electric cooperatives -- reorganization under [sections 1 through 37] -- articles of conversion. Any electric cooperative previously created or reorganized pursuant to Title 35, chapter 18, and using a name in accordance with 35-18-201 and that was in existence as of [the effective date of this act], unless dissolved or reorganized under other state laws after [the effective date of this act], is subject to the provisions of [sections 1 through 37] with the same effect as if originally organized under [sections 1 through 37]. Any other corporation organized under the laws of this state for the purpose, among others, of supplying electric energy may become subject to [sections 1 through 37] with the same effect as if originally organized under [sections 1 through 37] by complying with the following requirements:

(1) The proposition for the conversion of a corporation into a cooperative under [sections 1 through 37] and proposed articles of conversion to give effect to that conversion must be first approved by the board of trustees or the board of directors of the corporation. The proposed articles of conversion must include in the caption that the articles of conversion are executed pursuant to [sections 1 through 37] and must state:

(a) the name of the corporation prior to its conversion into a cooperative under [sections 1 through 37];

(b) the address of the principal office of the corporation;

(c) the date of the filing of its articles of incorporation in the office of the secretary of state;

(d) the statute or statutes under which the corporation was organized;

(e) the name assumed by the corporation;

(f) a statement that the corporation elects to become a cooperative, nonprofit, membership corporation subject to [sections 1 through 37];

(g) the manner and basis of converting either memberships in or shares of stock of the corporation into memberships or stock of the cooperative after completion of the conversion; and

(h) any provisions not inconsistent with [sections 1 through 37] considered necessary or advisable for the conduct of its business and affairs.

(2) The proposition for the conversion of a corporation into a cooperative under [sections 1 through 37] and the proposed articles of conversion approved by the board of trustees or board of directors of the corporation are to be submitted to a vote of the members or stockholders of the corporation at any annual or special meeting of the members or stockholders. The notice of the meeting must include the specific details of the proposed conversion. The proposition for the conversion of a corporation into a cooperative under [sections 1 through 37] and the proposed articles of conversion, with those amendments to the proposed articles of conversion as the members or stockholders of the corporation may include in the proposed articles of conversion, are considered to be approved upon the affirmative vote of not less than two-thirds of those members of the corporation voting on the proposed articles of conversion at the annual or special meeting or, if the corporation is a stock corporation, upon the affirmative vote of the holders of not less than two-thirds of the capital stock of the corporation represented at the annual or special meeting.

(3) Upon an approval by the members or stockholders of the corporation, articles of conversion in the form approved by the members or stockholders of the corporation must be executed on behalf of the corporation by its president or vice president and its corporate seal must be affixed to the articles of conversion and attested by its secretary or assistant secretary. The president or vice president executing the articles of conversion on behalf of the corporation shall also make and attach to the articles of conversion an affidavit stating that the provisions of this section with respect to the approval of its trustees or directors and its members or stockholders of the proposition for the conversion of the corporation into a cooperative under [sections 1 through 37] and that the articles of conversion were met.

(4) The articles of conversion and affidavit must be submitted to the secretary of state for filing as provided in [sections 1 through 37].

(5) The term "articles of incorporation" as used in [sections 1 through 37] is considered to include the articles of conversion of a converted corporation.

NEW SECTION. Section 15. Bylaws. The original bylaws of a cooperative must be adopted by its board of trustees. After adoption by the board of trustees, the bylaws may be adopted, amended, or repealed by its members or, except as authorized in a bylaw, by its board of trustees. A bylaw may not prevent the members from reassuming sole power to amend bylaws or prevent members from otherwise adopting, amending, or repealing bylaws. The bylaws must include the rights and duties of members and trustees and may contain other provisions for the regulation and management of the affairs of the cooperative not inconsistent with [sections 1 through 37] or with the articles of incorporation.

NEW SECTION. Section 16. Members -- shares of stock. (1) A person who is not an incorporator may not become a member of a cooperative unless that person agrees to use electric energy or other goods or services furnished by the cooperative as provided by the bylaws of the cooperative. The bylaws may prescribe additional membership qualifications and limitations, provided that ownership of shares of stock, if any are authorized, is not a condition of membership in the cooperative.

(2) Membership in the cooperative is not transferable except as provided in the bylaws. The articles of incorporation or the bylaws may allow joint membership and may prescribe additional qualifications, limitations, rights, and obligations in respect to any membership and membership class, including but not limited to the number of trustees each class or membership or a class or classes of membership within a voting district under [section 25] is entitled to elect.

(3) The articles of incorporation or the bylaws of a cooperative may provide for classifications of members in a cooperative.

(4) Members or a class or classes of members may designate voting delegates as provided by [section 25] and the bylaws of the cooperative and may vote through their designated voting delegates. The bylaws may provide that each classification of members may designate a different number and method for selecting and governing of voting delegates.

NEW SECTION. Section 17. Nonliability of members, trustees, and officers. (1) The private property of the members of a cooperative is exempt from execution for the debts of the cooperative, and a member may not be liable or responsible for any debts of the cooperative.

(2) A trustee or officer of a cooperative or acting for a cooperative is not personally liable to the cooperative or its members for any actions taken or any failure to take any action as a trustee or officer unless:

(a) the trustee or officer fails to perform the trustee's or officer's responsibilities or duties, including those in compliance with [sections 20 and 21]; and

(b) the failure to perform constitutes willful misconduct or recklessness.

NEW SECTION. Section 18. Meetings of members. (1) An annual meeting of the members must be held at a time provided in the bylaws.

(2) Special meetings of the members may be called by the board of trustees, by any three trustees, by not less than 20% of the members, or by the president.

(3) Meetings of members must be held at a place allowed in the bylaws. In the absence of a provision in the bylaws that designates a meeting place, all meetings must be held at a place determined by the board of trustees.

(4) Except as otherwise provided, written or printed notice stating the time and place of each meeting of members and, in the case of a special meeting, the purpose or purposes for which the meeting is called must be given to each member, either personally or by mail, not less than 10 or more than 25 days before the date of the meeting.

(5) Five percent of all members present in person or 50 members present in person, whichever is fewer, constitute a quorum for the transaction of business at all meetings of the members, but the bylaws may prescribe the presence of a greater percentage or number of the members for a quorum. If less than a quorum is present at a meeting, a majority of those present in person may adjourn the meeting from time to time without further notice.

(6) Each member is entitled to one vote on each matter submitted to a vote at a meeting. Voting must be in person but, if the bylaws allow, voting may also be by proxy or by mail, or both or if the bylaws allow, by the method provided in [section 25]. If the bylaws provide for voting by proxy or by mail, the bylaws must also prescribe the conditions under which proxy or mail voting or both are to be exercised. In any event, a person may not vote as a proxy for more than three members at a meeting of the members.

NEW SECTION. Section 19. Initiative by members -- approval of trustees not required. (1) Notwithstanding any other provision of [sections 1 through 37], there must be submitted to the members of a cooperative any proposition embodied in a petition signed by not less than 20% of its members, together with any document submitted with the petition to give the effect to the proposition, either at a special meeting of the members held within 45 days after the presentation of the petition or, if the date of the next annual meeting of members falls within 90 days after the presentation or if the petition specifically requests, at the annual meeting.

(2) The approval of the board of trustees is not required for any proposition or document submitted to the members pursuant to this section and approved by them, but any proposition or document is subject to all other applicable provisions of [sections 1 through 37]. The affidavit or affidavits required to be filed with this proposition or document pursuant to applicable provisions of [sections 1 through 37] must be modified to be in compliance with the provisions of this section.

NEW SECTION. Section 20. Duties of trustees and officers. (1) A trustee or officer shall discharge the duties of the office, including the trustee's or officer's duties as a member of any committee:

(a) in good faith;

(b) with the care an ordinarily prudent person in a similar position would exercise under similar circumstances; and

(c) in a manner the trustee or officer reasonably believes to be in the best interests of the cooperative.

(2) In discharging duties, a trustee or officer is entitled to rely on factual information, opinions, reports, or statements, including financial statements and other financial data if prepared and presented by:

(a) one or more officers or employees of the cooperative whom the trustee or officer reasonably believes to be reliable and competent in the matters presented;

(b) attorneys, public accountants, engineers, or other persons with regard to matters that the trustee or officer reasonably believes are within the person's professional or expert competence; or

(c) a committee of the board of trustees or officers of which the trustee or officer is not a member if the trustee or officer reasonably believes that the committee merits confidence.

(3) A trustee or officer is not acting in good faith if the trustee or officer has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (2) unwarranted.

(4) A trustee or officer is not liable for any action taken as a trustee or officer or for any failure to take any action if the trustee or officer performs the duties of the office in compliance with this section.

NEW SECTION. Section 21. Trustee conflict of interest. (1) A conflict of interest transaction is not voidable, and it may not be the basis of imposing liability on a director if the transaction was fair at the time it was entered into.

(2) If a trustee has a conflict of interest relating to a transaction, a trustee:

(a) shall disclose to the trustees or members voting on the transaction the existence and nature of the conflict of interest and all facts known to the trustee respecting the subject matter of the transaction that an ordinary prudent person would reasonably believe to be material to a judgment about whether or not to proceed with the transaction; and

(b) may not participate, directly or indirectly in the vote on the transaction.

(3) For purposes of this section, a trustee of a corporation has an indirect interest in a transaction if:

(a) another entity in which the trustee has a material interest or in which the trustee is a general partner is a party to the transaction; or

(b) another entity other than a cooperative or corporation of which the cooperative is a member or shareholder, of which the trustee is a director, officer, or trustee, is a party to the transaction.

(4) (a) Except as provided in subsection (4)(b) for purposes of this section, a conflict of interest transaction is authorized, approved, or ratified if it receives the affirmative vote of a majority of the trustees on the board or on the committee who do not have a direct or indirect interest in the transaction.

(b) A transaction may not be authorized, approved, or ratified under this section by a single trustee.

(c) If a majority of the trustees on the board who do not have a direct or indirect interest in the transaction vote to authorize, approve, or ratify the transaction, then a quorum is present for the purpose of taking action under this section.

(d) The presence of or a vote cast by a trustee with a direct or indirect interest in the transaction does not affect the validity of an action taken under this section if the transaction is otherwise approved as provided in this section.

(5) The articles or bylaws of the cooperative may impose additional requirements on conflict of interest transactions.

NEW SECTION. Section 22. Indemnification of trustees and officers. To the extent not inconsistent with [sections 1 through 37], indemnification of trustees and officers of a corporation or acting for a corporation must be provided as specified in Title 35, chapter 1, except that all references to directors in Title 35, chapter 1, extend to cooperative corporate trustees and officers.

NEW SECTION. Section 23. Board of trustees -- number -- qualifications -- removal -- compensation -- joint memberships. (1) The business and affairs of a cooperative must be managed by or under the direction of a board of not less than five trustees, each of whom must be a member of the cooperative or of another cooperative that is a member of the cooperative. The bylaws must prescribe the number of trustees, their qualifications, other than those provided for in [sections 1 through 37], the manner of holding meetings of the board of trustees and of the election of successors to trustees who resign, die, or are otherwise incapable of acting. The bylaws may also provide for the removal of trustees from office and for the election of their successors.

(2) Without approval of the membership, trustees:

(a) may not receive any salaries for their services as trustees, except trustees may receive the same insurance coverage provided to cooperative employees; and

(b) except in emergencies, may not be employed by the cooperative in a capacity involving compensation.

(3) The bylaws may provide that the board of trustees may establish a fixed sum, including expenses of attendance, if any, to be allowed for:

(a) attendance at each meeting of the board of trustees or any committee of the board of trustees; or

(b) representing the cooperative at a meeting or on business whenever representation has been approved by the board.

(4) If two or more persons hold a joint membership in a cooperative, one person but not more than one person from a joint membership may be elected a trustee.

(5) The policies of the cooperative may provide that benefits provided to employees may be extended to trustees.

NEW SECTION. Section 24. Trustees -- term -- quorum -- powers. (1) The trustees of a cooperative named in articles of incorporation, consolidation, merger, or conversion, shall hold office until the next following annual meeting of the members or until their successors have been elected and qualified. At each annual meeting or, in case of failure to hold the annual meeting as specified in the bylaws, at a special meeting called for that purpose, the members shall elect trustees who may serve for 1, 2, or 3-year terms. Each trustee shall hold office for the term for which that trustee is elected or until the trustee's successor has been elected and qualified.

(2) A majority of the board of trustees constitutes a quorum.

(3) The board of trustees may exercise all of the powers of a cooperative, except those powers that are conferred upon the members by [sections 1 through 37] or its articles of incorporation or bylaws.

NEW SECTION. Section 25. Voting districts. (1) Notwithstanding any other provisions of [sections 1 through 37], the bylaws may provide that the territory or geographic area in which a cooperative operates to serve its members, or a class or classes of members, must be divided into two or more voting districts and that in respect to each voting district:

(a) the members or the members of a membership class or classes residing in the voting district shall elect a designated number of trustees;

(b) the members or the members of a membership class or classes residing in the voting district shall elect a designated number of delegates; or

(c) the members or the members of a membership class or classes shall elect both trustees and delegates.

(2) This section does not restrict or prohibit a cooperative from using a combination of voting districts based on members or classes of members within a territory or geographical area or voting districts at large based on members or classes of members using one or more kinds of services or products provided by the cooperative.

(3) The bylaws must prescribe the manner in which the voting districts and the members or membership classes of those voting districts and the delegates and trustees, if any, elected from those voting districts shall function and the powers of the delegates, that may include the power to elect trustees and adopt, amend, or repeal the bylaws of a cooperative as provided in [sections 1 through 37].

(4) A member at a voting district meeting and a delegate at a meeting may not vote by proxy or by mail.

NEW SECTION. Section 26. Officers. The officers of a cooperative consist of a president, vice president, secretary, and treasurer who are elected annually by and from the board of trustees. A person may not continue to be an officer if that person is not a trustee. The offices of secretary and of treasurer may be held by the same person. The board of trustees may also elect or appoint other cooperative officers, agents, or employees as it considers necessary or advisable and shall prescribe the powers and duties of those other officers, agents, or employees. An officer may be removed from office and a successor elected in the manner prescribed in the bylaws.

NEW SECTION. Section 27. Authority to take acknowledgments. A person who is authorized to take acknowledgments under the laws of this state may not be disqualified from taking acknowledgments of instruments executed to which the cooperative is a party or because the person is an officer, trustee, director, or member of the cooperative.

NEW SECTION. Section 28. Refunds to members -- retention of unclaimed refunds. (1) Revenue of a cooperative for any fiscal year must, unless otherwise determined by a vote of the members, be distributed by the cooperative to its members as patronage refunds, prorated in accordance with the patronage of the cooperative by the respective members paid for during the fiscal year, whenever the revenue exceeds the amount necessary to:

(a) defray expenses of the cooperative and of the operation and maintenance of its facilities during the fiscal year;

(b) pay interest and principal obligations of the cooperative coming due in the fiscal year;

(c) finance or provide a reserve for the financing of the construction or acquisition by the cooperative of additional facilities to the extent determined by the board of trustees;

(d) provide a reasonable reserve for working capital;

(e) provide a reserve for the payment of indebtedness of the cooperative maturing more than 1 year after the date of the incurrence of the indebtedness in an amount not less than the total of the interest and principal payments required to be made during the next fiscal year; and

(f) provide a fund that may be not less than 2% or more than 5% of the balance remaining, for education in cooperation and for the dissemination of information concerning the effective use of electric energy and other services made available by the cooperative.

(2) This section may not be construed to prohibit the payment by a cooperative of all or any part of its indebtedness prior to the date when the payment becomes due.

(3) A cooperative shall, upon the action of the board of trustees, retain redeemed patronage refunds that are allocated to its members and that remain unclaimed for a period of 5 years after the end of the year in which the refunds are given. Unclaimed redeemed patronage refunds retained by the cooperative must be used for educational purposes.

NEW SECTION. Section 29. Disposition or encumbrance of property. (1) Except as provided in subsection (2), or other than as arises relating to the issuance of stock or for any sale, mortgage, lease, transfer, or other disposition or encumbrance of property to any entity owned or controlled by the cooperative or in which the cooperative holds a majority interest, or for any disposition or encumbrance arising from or in connection with the issuance of shares of stock, if any is authorized, a cooperative may not sell, mortgage, lease, or otherwise dispose of or encumber all or any substantial portion of its property unless the sale, mortgage, lease, or other disposition or encumbrance is authorized at a meeting of members of the cooperative by the affirmative vote of not less than two-thirds of all the members of the cooperative. In order for the vote to be valid, a notice of the proposed sale, mortgage, lease, or other disposition or encumbrance must have been included in the notice of the meeting.

(2) The board of trustees of a cooperative, without authorization by the members of the cooperative, has the full power and authority to authorize the execution and delivery of a mortgage or mortgages or a deed or deeds of trust upon or the pledging or encumbrancing of any of the property, assets, rights, privileges, licenses, franchises, and permits of the cooperative, whether acquired or to be acquired and wherever situated, as well as the revenue and income from the property, assets, rights, privileges, licenses, franchises, and permits of the cooperative, all upon the terms and conditions that the board of trustees determines, to secure any indebtedness of the cooperative, or any entity owned or controlled by the cooperative or in which the cooperative owns a majority interest, to the United States or any instrumentality or agency of the United States or to any other financing sources within the United States.

(3) Before a meeting is held to vote on authorization of disposition of cooperative property as provided in subsection (1), the board of trustees shall:

(a) have the property appraised by three appraisers chosen by the board and not associated with the cooperative or a proposed buyer of cooperative property;

(b) notify all cooperative members, at least 90 days in advance, of a meeting to vote on disposition of cooperative property. Detailed proposals for disposition of the property must accompany the notice.

(c) at least 30 days before the meeting, notify all other cooperatives situated and operating in the state that the property is available for disposition and include with the notice one copy of each appraisal on the cooperative property; and

(d) at least 30 days before the meeting, mail to all members any alternative proposal made by cooperative members if it has been submitted to the board and signed by 50 or more members.

(4) The vote on property disposition may take place at an annual meeting if the board notifies the members as provided in this section.

(5) This section does not apply to the transfer of cooperative property in a merger or consolidation of cooperatives.

NEW SECTION. Section 30. Long-term indebtedness -- membership approval. Before a cooperative may create or enter into an agreement that results in any direct or indirect obligation for the repayment of long-term bonded indebtedness for financing directly or indirectly the construction, maintenance, or operation of nuclear power generating facilities that may result in a rate increase to the cooperative's members for repayment of the obligation, the cooperative must receive approval from a majority of those members present and voting at the meeting. The approval must be obtained at a special meeting held for that purpose.

NEW SECTION. Section 31. Procedure for merger. One or more cooperatives, each designated a "merging cooperative", may merge into another surviving cooperative complying with the following requirements:

(1) In order for a merger and the proposed articles of merger to be valid, the board of trustees of each merging cooperative and the board of trustees of the surviving cooperative shall first approve the merger. The proposed articles of merger must state in the caption that they are executed pursuant to [sections 1 through 37] and must state:

(a) the name of each merging cooperative, the address of its principal office, and the date of the filing of its articles of incorporation in the office of the secretary of state;

(b) the name of the surviving cooperative and the address of its principal office;

(c) a statement that the merging cooperatives elect to be merged into the surviving cooperative;

(d) the terms and conditions of the merger and the means of making the merger effective, including the manner and basis of converting the memberships in the merging cooperative or cooperatives into memberships in the surviving cooperative and the issuance of certificates of membership in respect of the converted memberships; and

(e) any provisions not inconsistent with [sections 1 through 37] considered necessary or advisable for the conduct of the business and affairs of the surviving cooperative.

(2) The proposition for the merger of the merging cooperatives into the surviving cooperative and the proposed articles of merger approved by the board of trustees of the respective cooperatives that are parties to the proposed merger must be submitted to a vote of the members of each cooperative at any annual or special meeting of the cooperative. The meeting notice must include the specific details of the proposed merger. The proposed merger and the proposed articles of merger are considered to be approved upon the affirmative vote of not less than two-thirds of those members of each cooperative voting on the merger at the meeting.

(3) Upon approval of the merger by the members of the respective cooperative parties to the proposed merger, articles of merger in the form approved must be executed on behalf of each cooperative by its president or vice president and the cooperative's seal must be affixed to the articles of merger and attested by the cooperative's secretary. The president or vice president of each cooperative executing the articles of merger shall also make and attach to the articles of merger, an affidavit stating that the cooperative complied with the provisions of this section.

(4) The articles of merger and affidavits must be submitted to the secretary of state for filing as provided in [section 36].

NEW SECTION. Section 32. Procedure for consolidation. Two or more cooperatives designated a "consolidating cooperative", may consolidate into a new cooperative by complying with the following requirements:

(1) In order for a consolidation and the proposed articles of consolidation to be valid, the board of trustees of each consolidating cooperative and the board of trustees of the new cooperative shall first approve the merger. The proposed articles of consolidation must state in the caption that they are executed pursuant to [sections 1 through 37] and must state:

(a) the name of each consolidating cooperative, the address of its principal office, and the date of the filing of its articles of incorporation in the office of the secretary of state;

(b) the name of the new cooperative and the address of its principal office;

(c) the names and addresses of the persons who will constitute the first board of trustees of the new cooperative;

(d) the terms and conditions of the consolidation and the mode of carrying the consolidation into effect, including the manner and basis of converting memberships in each consolidating cooperative into memberships in the new cooperative and the issuance of certificates of memberships in respect of those converted memberships; and

(e) any provisions not inconsistent with [sections 1 through 37] considered necessary or advisable for the conduct of the business and affairs of the new cooperative.

(2) The proposition for the consolidation of the consolidating cooperatives into the new cooperative and the proposed articles of consolidation approved by the board of trustees of each consolidating cooperative must be submitted to a vote of the members of each cooperative at any annual or special meeting of the cooperative. The meeting notice must include the specific details of the proposed consolidation. The proposed consolidation and the proposed articles of consolidation are considered to be approved upon the affirmative vote of not less than two-thirds of those members of each consolidating cooperative voting on the proposed consolidation at the meeting.

(3) Upon approval of the consolidation by the members of the respective consolidating cooperatives, articles of consolidation in the form approved must be executed on behalf of each consolidating cooperative by its president or vice president and the cooperative's seal must be affixed to the articles of consolidation and attested by the cooperative's secretary. The president or vice president of each consolidating cooperative executing the articles of consolidation shall also make and attach to the articles of consolidation an affidavit stating that the cooperative complied with the provisions of this section.

(4) The articles of consolidation and affidavits must be submitted to the secretary of state for filing as provided in [section 36].

NEW SECTION. Section 33. Effect of merger or consolidation. The effect of consolidation or merger is as follows:

(1) The several cooperatives that are party to the consolidation or merger must be considered a single cooperative that, in the case of a consolidation, is the new cooperative provided for in the articles of consolidation and, in the case of a merger, is that cooperative designated in the articles of merger as the surviving cooperative. The separate existence of all cooperatives that are party to the consolidation or merger, except the new or surviving cooperative ceases.

(2) The new or surviving cooperative has all the rights, privileges, immunities, and powers and is subject to all the duties and liabilities of a cooperative organized under the provisions of [sections 1 through 37] and possesses the rights; privileges; immunities; franchises, of a public as well as of a private nature; property, real and personal; applications for membership; debts due on whatever account; and all other choses in action of each of the consolidating or merging cooperatives. Furthermore, each interest of or belonging or due to each of the cooperatives that are consolidated or merged must be taken and considered to be transferred to and vested in the new or surviving cooperative without further act or deed, and the title to any real estate or any interest in the real estate under the laws of this state vested in a cooperative may not revert or be in any way impaired by reason of the consolidation or merger.

(3) The new or surviving cooperative is responsible and liable for all of the liabilities and obligations of each of the cooperatives consolidated or merged. Any claim existing or action or proceeding pending by or against any of the cooperatives may be prosecuted as if the consolidation or merger had not taken place, but the new or surviving cooperative may be substituted in its place.

(4) The rights of creditors or any liens upon the property of consolidated or merged cooperatives may not be impaired by a consolidation or merger.

(5) In the case of a consolidation, the articles of consolidation are considered to be the articles of incorporation of the new cooperative. In the case of a merger, the articles of incorporation of the surviving cooperative are considered to be amended to the extent, if any, that changes in the articles of incorporation of the surviving cooperative are provided for in the articles of merger.

NEW SECTION. Section 34. Dissolution of cooperative that has not commenced business. (1) A cooperative that has not commenced business may dissolve voluntarily by delivering to the secretary of state articles of dissolution, executed on behalf of the cooperative by a majority of the incorporators. The articles of dissolution must state:

(a) the name of the cooperative;

(b) the address of its principal office;

(c) the date of its incorporation;

(d) that the cooperative has not commenced business;

(e) that the amount, if any, actually paid in on account of membership fees, less any part of the amount disbursed for necessary expenses has been returned to those entitled to money and that all easements have been released to the grantors;

(f) that there are not any unpaid cooperative debts; and

(g) that a majority of the incorporators elect that the cooperative be dissolved.

(2) The articles of dissolution must be submitted to the secretary of state for filing as provided in [sections 1 through 37].

NEW SECTION. Section 35. Dissolution and winding up of cooperative that has commenced business. A cooperative that has commenced business may dissolve voluntarily and wind up its affairs in the following manner:

(1) The board of trustees shall first recommend that the cooperative be dissolved voluntarily, and after that, the proposition that the cooperative be dissolved must be submitted to the members of the cooperative at any annual or special meeting. The notice of the annual or special meeting must include the proposition. The proposed voluntary dissolution is considered approved upon the affirmative vote of not less than two-thirds of all of the members of the cooperative.

(2) Upon approval of the voluntary dissolution, a certificate of election to dissolve, referred to as "certificate" in this section, is executed on behalf of the cooperative by its president or vice president and its corporate seal must be affixed to the certificate and attested by its secretary or assistant secretary. The certificate must state the name of the cooperative, the address of its principal office, the names and addresses of its trustees, and the total number of members who voted for and against the voluntary dissolution of the cooperative. The president or vice president executing the certificate shall also make and attach to the certificate an affidavit stating that the provisions of this subsection were met. The certificate and affidavit must be submitted to the secretary of state for filing as provided in [sections 1 through 37].

(3) Upon the filing of the certificate and affidavit by the secretary of state, the cooperative stops conducting business except when necessary for winding up the business of the cooperative, but its corporate existence must continue until articles of dissolution have been filed by the secretary of state.

(4) After the filing of the certificate and affidavit with the secretary of state, the board of trustees shall immediately mail a notice of the winding up proceedings to each known creditor and claimant and publish the notice once a week for 2 successive weeks in a newspaper of general circulation in the county in which the principal office of the cooperative is located.

(5) The board of trustees has the full power to wind up and settle the affairs of the cooperative and shall proceed to collect the debts owing to the cooperative, convey and dispose of its property and assets, pay, satisfy, and discharge its debts, obligations, and liabilities, and do all other things required to liquidate its business and affairs, and after paying or adequately providing for the payment of all its debts, obligations, and liabilities, the board of trustees shall distribute the remainder of its property and assets among its members in proportion to the aggregate patronage of each cooperative member:

(a) during the period preceding the date of the filing of the certificate that encompasses the longest period of time in effect prior to the cooperative dissolution for determination of members who are entitled to the patronage refunds, also known as the capital redemption period; or

(b) if the cooperative was not in existence for the period provided for in subsection (5)(a), then during the period of its existence.

(6) When all debts, liabilities, and obligations of the cooperative have been paid and discharged or adequate provision has been made in return for all debts, liabilities, and obligations and all of the remaining property and assets of the cooperative are distributed to the members pursuant to the provisions of this section, the board of trustees shall authorize the execution of articles of dissolution that must be executed on behalf of the cooperative by its president or vice president and its corporate seal must be affixed to the articles of dissolution and attested by its secretary. The articles of dissolution must include in the caption that the articles of dissolution are executed pursuant to [sections 1 through 37] and must state:

(a) the name of the cooperative;

(b) the address of the principal office of the cooperative;

(c) that the cooperative has up to this time delivered to the secretary of state a certificate of election to dissolve and the date on which the certificate was filed by the secretary of state in the records of the secretary of state's office;

(d) that all debts, obligations, and liabilities of the cooperative have been paid and discharged or that adequate provision has been made in return for all debts, obligations, and liabilities;

(e) that all the remaining property and assets of the cooperative have been distributed among the members in accordance with the provisions of this section; and

(f) that there are not any actions or suits pending against the cooperative. The president or vice president executing the articles of dissolution shall also make and attach to the articles of dissolution an affidavit stating that the provisions of this subsection(6) were met. The articles of dissolution and affidavit, accompanied by proof of the publication required in this subsection, must be submitted to the secretary of state for filing as provided in [section 36].

NEW SECTION. Section 36. Filings of incorporation, amendment, consolidation, merger, conversion, and dissolution. (1) Articles of incorporation, amendment, consolidation, merger, conversion, or dissolution, when executed and accompanied by affidavits that may be required by applicable provisions of [sections 1 through 37], must be filed with the secretary of state's office. If the secretary of state finds that the articles presented conform to the requirements of [sections 1 through 37], the secretary of state shall, upon the payment of the fees provided for in 35-18-502, file the articles presented, and upon the filing, the incorporation, amendment, consolidation, merger, conversion, or dissolution is legally effective.

(2) The secretary of state, immediately upon the filing of any articles pursuant to [sections 1 through 37], shall transmit a certified copy of the filing to the county clerk of the county in which the principal office of each cooperative or corporation affected by the incorporation, amendment, consolidation, merger, conversion, or dissolution is located. The clerk of any county, upon receipt of the certified copy, shall file and index the certified copy in the records of the clerk's office. Failure of the secretary of state or of a clerk of a county to comply with the provisions of this section does not invalidate the articles.

(3) The provisions of this section also apply to certificates of election to dissolve and affidavits of compliance executed pursuant to [section 35].

NEW SECTION. Section 37. Exemption from taxes. Cooperatives and foreign corporations transacting business in this state pursuant to [sections 1 through 37], except as provided in 10-4-201, are exempt from all excise and income taxes.

Section 38. Section 35-18-101, MCA, is amended to read:

"35-18-101. Short title. This chapter may be cited as the "Telephone Cooperative Act"."

Section 39. Section 35-18-102, MCA, is amended to read:

"35-18-102. Definitions.

In this chapter, unless the context otherwise requires, the following definitions apply:

(1) "Broadband" means transmission facilities capable of handling frequencies greater than 4 kilohertz, the frequency level required for high grade voice communication.

(2) "Cable television system" means a system that receives and amplifies the signals broadcast by one or more television stations and redistributes the signals to subscribing members of the public for a fixed or periodic fee by wire, cable, microwave, or other means, whether the means are owned or leased.

(3) "Cooperative" means a corporation organized under this chapter or a corporation that becomes subject to the provisions of this chapter.

(4) "Member" means each incorporator of a cooperative and each person admitted to and retaining membership in a cooperative including a husband and wife admitted to joint membership.

(5) "Person" includes any natural person, firm, association, corporation, business trust, partnership, federal agency, state or political subdivision or an agency of a state or political subdivision, or other organization or group of persons.

"

Section 40. Section 35-18-105, MCA, is amended to read:

"35-18-105. Permissible purposes for incorporation. Cooperative nonprofit membership corporations may be organized under this chapter:

(1) for the purposes of making generally available adequate telephone service, cable television service, or broadband facilities through the improvement and expansion of existing telephone, cable television, or broadband facilities and the construction and operation of additional facilities that are required to assure the availability of service to the widest practicable number of users of telephone service, cable television service, or broadband facilities; and

(2) for purposes allowable under federal authorization, including rural economic development activities."

Section 41. Section 35-18-106, MCA, is amended to read:

"35-18-106. Powers of cooperatives. A cooperative may:

(1) sue and be sued in its corporate name;

(2) have perpetual existence;

(3) adopt a corporate seal and alter the corporate seal;

(4) become a member in one or more other cooperatives or corporations or to own stock in other cooperatives or corporations;

(5) construct, purchase, take, receive, lease as lessee, or otherwise acquire and to own, hold, use, equip, maintain, and operate and sell, assign, transfer, convey, exchange, lease as lessor, mortgage, pledge, or otherwise dispose of or encumber telephone lines, facilities or systems, but not telegraph or radio broadcasting services or facilities, as defined by law, lands, buildings, structures, dams, plants and equipment, and all kinds or classes of real or personal property, that may be considered necessary, convenient, or appropriate to accomplish the purpose for which the cooperative is organized;

(6) purchase or otherwise acquire and own, hold, use, and exercise and sell, assign, transfer, convey, mortgage, pledge, hypothecate, or otherwise dispose of or encumber franchises, rights, privileges, licenses, rights-of-way, and easements;

(7) borrow money and otherwise contract indebtedness and issue notes, bonds, and other evidences of indebtedness and secure the payment of indebtedness by mortgage, pledge, deed of trust, or any other encumbrance upon all of its then owned or after-acquired real or personal property, assets, franchises, revenues, or income;

(8) construct, maintain, and operate telephone, cable television, or broadband lines, facilities, or systems along, upon, under, and across all public thoroughfares, including without limitation all roads, highways, streets, alleys, bridges, and causeways and upon, under, and across all publicly owned lands, subject, however, to the same requirements in respect of the use of the thoroughfares and lands that are imposed by the respective authorities having jurisdiction of them upon corporations constructing or operating telephone lines, facilities, or systems;

(9) exercise the power of eminent domain in the manner provided by the laws of this state for the exercise of that power by corporations constructing or operating telephone lines, facilities, or systems;

(10) conduct its business and exercise all of its powers within or outside of this state;

(11) adopt, amend, and repeal bylaws;

(12) in the case of corporations organized under the provisions of 35-18-105(1):

(a) improve and expand existing telephone lines, facilities, and systems and construct, acquire, operate, and furnish additional telephone lines, facilities, and systems that are required to ensure the availability of adequate telephone service to the widest practicable number of users of telephone service; and

(b) make loans to persons to whom telephone service is or will be supplied by the cooperative for the purpose of and otherwise to assist those persons in wiring their premises for telephone service and installing in their premises telephone fixtures, appliances, apparatus, and equipment of all kinds and character and, in connection with telephone fixtures, purchase, acquire, lease, sell, distribute, install, and repair the telephone fixtures, appliances, apparatus, and equipment and accept or otherwise acquire and sell, assign, transfer, endorse, pledge, hypothecate, and otherwise dispose of notes, bonds, and other debt and all types of security for telephone fixtures; and

(13) perform all other acts and exercise all other powers that may be necessary to accomplish the purpose for which the cooperative is organized or authorized under federal law."

Section 42. Section 35-18-201, MCA, is amended to read:

"35-18-201. Name. (1) The name of each cooperative must include the words "telephone" and "cooperative" and the abbreviation "Inc.". However, these limitations may not apply if, in an affidavit made by the president or vice president of a cooperative and filed with the secretary of state, it appears that the cooperative desires to transact business in another state and is precluded from transacting business by reason of its name.

(2) The name of a cooperative must distinguish it from the name of any other corporation organized under the laws of or authorized to transact business in this state.

(3) The words "telephone" and "cooperative" may not be used in the name of a corporation organized under the laws of or authorized to transact business in this state, except a cooperative or a corporation transacting business in this state pursuant to the provisions of this chapter."

Section 43. Section 35-18-206, MCA, is amended to read:

"35-18-206. Existing corporations -- reorganization under this chapter -- articles of conversion. Any corporation organized under the laws of this state for the purpose, among others, of supplying telephone service may become subject to this chapter with the same effect as if originally organized under this chapter by complying with the following requirements:

(1) The proposition for the conversion of a corporation into a cooperative under this chapter and proposed articles of conversion to give effect to that conversion must first be approved by the board of trustees or the board of directors of the corporation. The proposed articles of conversion must include in the caption that the articles of conversion are executed pursuant to this chapter and must state:

(a) the name of the corporation prior to its conversion into a cooperative under this chapter;

(b) the address of the principal office of the corporation;

(c) the date of the filing of its articles of incorporation in the office of the secretary of state;

(d) the statute or statutes under which the corporation was organized;

(e) the name assumed by the corporation;

(f) a statement that the corporation elects to become a cooperative, nonprofit, membership corporation subject to this chapter;

(g) the manner and basis of converting either memberships in or shares of stock of the corporation into memberships in the corporation after completion of the conversion; and

(h) any provisions not inconsistent with this chapter considered necessary or advisable for the conduct of its business and affairs.

(2) The proposition for the conversion of a corporation into a cooperative under this chapter and the proposed articles of conversion approved by the board of trustees or board of directors of the corporation are to be submitted to a vote of the members or stockholders of the corporation at any annual or special meeting of the members or stockholders, and the notice of the meeting must include the specific details of the proposed conversion. The proposition for the conversion of a corporation into a cooperative under this chapter and the proposed articles of conversion, with those amendments to the proposed articles of conversion that the members or stockholders of the corporation may include in the proposed articles of conversion, are considered to be approved upon the affirmative vote of not less than two-thirds of those members of the corporation voting on the proposed articles of conversion at the annual or special meeting or if the corporation is a stock corporation, upon the affirmative vote of the holders of not less than two-thirds of the capital stock of the corporation represented at the annual or special meeting.

(3) Upon the approval by the members or stockholders of the corporation, articles of conversion in the form approved by the members or stockholders of the corporation must be executed on behalf of the corporation by its president or vice president and its corporate seal must be affixed to the articles of conversion and attested by its secretary or assistant secretary. The president or vice president executing the articles of conversion on behalf of the corporation shall also make and attach to the articles of conversion an affidavit stating that the provisions of this section with respect to the approval of its trustees or directors and its members or stockholders of the proposition for the conversion of the corporation into a cooperative under this chapter and that the articles of conversion were met.

(4) The articles of conversion and affidavit must be submitted to the secretary of state for filing as provided in this chapter.

(5) The term "articles of incorporation" as used in this chapter is considered to include the articles of conversion of a converted corporation."

Section 44. Section 35-18-301, MCA, is amended to read:

"35-18-301. Members. (1) A person who is not an incorporator may not become a member of a cooperative unless that person agrees to use telephone service furnished by the cooperative when the telephone service is available through its facilities. The bylaws may provide that a person, including an incorporator, shall cease to be a member of a cooperative if that person fails or refuses to use telephone service made available by the cooperative or if telephone service is not made available to the person by the cooperative within a specified time after the person becomes a member of the cooperative.

(2) Membership in the cooperative is not transferable, except as provided in the bylaws. The bylaws may prescribe additional qualifications and limitations in respect to membership."

Section 45. Section 35-18-313, MCA, is amended to read:

"35-18-313. Voting districts. (1) Notwithstanding any other provisions of this chapter, the bylaws may provide that the territory in which a cooperative supplies telephone service to its members must be divided into two or more voting districts and that in respect to each voting district:

(a) the members residing in the voting district shall elect a designated number of trustees;

(b) the members residing in the voting district shall elect a designated number of delegates; or

(c) the members shall elect both trustees and delegates.

(2) The bylaws must prescribe the manner in which the voting districts and the members of those voting districts and the delegates and trustees, if any, elected from those voting districts shall function and the powers of the delegates, that may include the power to elect trustees.

(3) A member at any voting district meeting and a delegate at any meeting may not vote by proxy or by mail."

Section 46. Section 35-18-316, MCA, is amended to read:

"35-18-316. Refunds to members -- retention of unclaimed refunds. (1) Revenue of a cooperative for any fiscal year must, unless otherwise determined by a vote of the members, be distributed by the cooperative to its members as patronage refunds prorated in accordance with the patronage of the cooperative by the respective members paid for during the fiscal year, whenever the revenue exceeds the amount necessary to:

(a) defray expenses of the cooperative and of the operation and maintenance of its facilities during the fiscal year;

(b) pay interest and principal obligations of the cooperative coming due in the fiscal year;

(c) finance or provide a reserve for the financing of the construction or acquisition by the cooperative of additional facilities to the extent determined by the board of trustees;

(d) provide a reasonable reserve for working capital;

(e) provide a reserve for the payment of indebtedness of the cooperative maturing more than 1 year after the date of the incurrence of the indebtedness in an amount not less than the total of the interest and principal payments required to be made during the next fiscal year; and

(f) provide a fund, which may be not less than 2% or more than 5% of the balance remaining, for education in cooperation and for the dissemination of information concerning the effective use of other services made available by the cooperative.

(2) This section may not be construed to prohibit the payment by a cooperative of all or any part of its indebtedness prior to the date when the payment becomes due.

(3) A cooperative shall, upon the action of the board of trustees, retain patronage refunds allocated to its members that remain unclaimed for a period of 5 years after the end of the year in which the refunds are given. Refunds retained by the cooperative must be used for educational purposes."

Section 47. Section 69-3-823, MCA, is amended to read:

"69-3-823. Exception. This part does not affect the exemption from regulation provided by 35-18-104 and [section 4]."

Section 48. Section 69-5-102, MCA, is amended to read:

"69-5-102. Definitions. When used in this part, the following definitions apply:

(1) "Agreement" means a written agreement between two or more electric facilities providers that identifies the geographical area to be served exclusively by each electric facilities provider that is a party to the agreement and any terms and conditions pertinent to the agreement.

(2) "Electric cooperative" means a rural electric cooperative organized under Title 35, chapter 18 or [sections 1 through 37], or a foreign corporation admitted thereunder to do business in Montana.

(3) "Electric facilities provider" means any utility that provides electric service facilities to the public.

(4) "Electric service facilities" means any distribution or transmission system or related facility necessary to provide electricity to the premises, including lines.

(5) "Electric utility" means a person, firm, or corporation other than an electric cooperative that provides electric service facilities to the public.

(6) "Line" means any electric supply conductor.

(7) "Premises" means a building, residence, structure, or facility to which electric service facilities are provided or are to be installed; however, two or more buildings, structures, or facilities that are located on one tract or contiguous tracts of land and that are used by one electric consumer for farming, business, commercial, industrial, institutional, governmental, or trailer court purposes must together constitute one premises, except that any building, structure, or facility, other than a trailer court, may not, together with any other building, structure, or facility, constitute one premises if the electric service to it is separately metered and the charges for that service are calculated independently of charges for service to any other building, structure, or facility.

(8) "Utility" means a public utility regulated by the commission pursuant to Title 69, chapter 3, or a utility qualifying as an electric cooperative pursuant to Title 35, chapter 18 or [sections 1 through 37]."

Section 49. Section 69-8-103, MCA, is amended to read:

"69-8-103. Definitions. As used in this chapter, unless the context requires otherwise, the following definitions apply:

(1) "Aggregator" or "market aggregator" means an entity, licensed by the commission, that aggregates retail customers and purchases electric energy and takes title to electric energy as an intermediary for sale to retail customers.

(2) "Assignee" means any entity, including a corporation, partnership, board, trust, or financing vehicle, to which a utility assigns, sells, or transfers, other than as security, all or a portion of the utility's interest in or right to transition property. The term also includes an entity, corporation, public authority, partnership, trust, or financing vehicle to which an assignee assigns, sells, or transfers, other than as security, the assignee's interest in or right to transition property.

(3) "Board" means the board of investments created by 2-15-1808.

(4) "Broker" or "marketer" means an entity, licensed by the commission, that acts as an agent or intermediary in the sale and purchase of electric energy but that does not take title to electric energy.

(5) "Cooperative utility" means:

(a) a utility qualifying as an electric cooperative pursuant to [sections 1 through 37]; or

(b) an existing municipal electric utility as of May 2, 1997.

(6) "Customer" or "consumer" means a retail electric customer or consumer. The university of Montana, pursuant to 20-25-201(1), and Montana state university, pursuant to 20-25-201(2), are each considered a single retail electric customer or consumer with a single individual load.

(7) "Distribution facilities" means those facilities by and through which electricity is received from a transmission services provider and distributed to the customer and that are controlled or operated by a distribution services provider.

(8) "Distribution services provider" means a person controlling or operating distribution facilities for distribution of electricity to the public.

(9) "Electricity supplier" means any person, including aggregators, market aggregators, brokers, and marketers, offering to sell electricity to retail customers in the state of Montana.

(10) "Financing order" means an order of the commission adopted in accordance with 69-8-503 that authorizes the imposition and collection of fixed transition amounts and the issuance of transition bonds.

(11) (a) "Fixed transition amounts" means those nonbypassable rates or charges, including but not limited to:

(i) distribution;

(ii) connection;

(iii) disconnection; and

(iv) termination rates and charges that are authorized by the commission in a financing order to permit recovery of transition costs and the costs of recovering, reimbursing, financing, or refinancing the transition costs and acquiring transition property through a plan approved by the commission in the financing order, including the costs of issuing, servicing, and retiring transition bonds.

(b) If requested by the utility in the utility's application for a financing order, fixed transition amounts must include nonbypassable rates or charges to recover federal and state taxes in which the transition cost recovery period is modified by the transactions approved in the financing order.

(12) "Functionally separate" means a utility's separation of the utility's electricity supply, transmission, distribution, and unregulated retail energy services assets and operations.

(13) "Local governing body" means a local board of trustees of a rural electric cooperative.

(14) "Low-income customer" means those energy consumer households and families with incomes at or below industry-recognized levels that qualify those consumers for low-income energy-related assistance.

(15) "Nonbypassable rates or charges" means rates or charges approved by the commission imposed on a customer to pay the customer's share of transition costs or universal system benefits program costs even if the customer has physically bypassed either the utility's transmission or distribution facilities.

(16) "Pilot program" means a program using a representative sample of residential and small commercial customers to assist in developing and offering customer choice of electric supply for all residential and commercial customers.

(17) "Public utility" means any electric utility regulated by the commission pursuant to Title 69, chapter 3, on May 2, 1997, including the public utility's successors or assignees.

(18) "Transition bondholder" means a holder of transition bonds including trustees, collateral agents, and other entities acting for the benefit of that holder.

(19) "Transition bonds" means any bond, debenture, note, interim certificate, collateral, trust certificate, or other evidence of indebtedness or ownership issued by the board or other transition bonds issuer that is secured by or payable from fixed transition amounts or transition property. Proceeds from transition bonds must be used to recover, reimburse, finance, or refinance transition costs and to acquire transition property.

(20) "Transition charge" means a nonbypassable rate or charge to be imposed on a customer to pay the customer's share of transition costs.

(21) "Transition cost recovery period" means the period beginning on July 1, 1998, and ending when a utility customer does not have any liability for payment of transition costs.

(22) "Transition costs" means:

(a) a public utility's net verifiable generation-related and electricity supply costs, including costs of capital, that become unrecoverable as a result of the implementation of this chapter or of federal law requiring retail open access or customer choice;

(b) those costs that include but are not limited to:

(i) regulatory assets and deferred charges that exist because of current regulatory practices and can be accounted for up to the effective date of the commission's final order regarding a public utility's transition plan and conservation investments made prior to universal system benefits charge implementation;

(ii) nonutility and utility power purchase contracts, including qualifying facility contracts;

(iii) existing generation investments and supply commitments or other obligations incurred before May 2, 1997, and costs arising from these investments and commitments;

(iv) the costs associated with renegotiation or buyout of the existing nonutility and utility power purchase contracts, including qualifying facilities and all costs, expenses, and reasonable fees related to issuing transition bonds; and

(v) the costs of refinancing and retiring of debt or equity capital of the public utility and associated federal and state tax liabilities or other utility costs for which the use of transition bonds would benefit customers.

(23) "Transition period" means the period beginning on July 1, 1998, and ending on July 1, 2002, unless otherwise extended pursuant to this chapter, during which utilities may phase in customer choice of electricity supplier.

(24) "Transition property" means the property right created by a financing order including without limitation the right, title, and interest of a utility, assignee, or other issuer of transition bonds to all revenue, collections, claims, payments, money, or proceeds of or arising from or constituting fixed transition amounts that are the subject of a financing order including those nonbypassable rates and other charges and fixed transition amounts that are authorized by the commission in the financing order to recover transition costs and the costs of recovering, reimbursing, financing, or refinancing the transition costs and acquiring transition property including the costs of issuing, servicing, and retiring transition bonds. Any right that a utility has in the transition property before the utility's sale or transfer or any other right created under this section or created in the financing order and assignable under this chapter or assignable pursuant to a financing order is only a contract right.

(25) "Transmission facilities" means those facilities that are used to provide transmission services as determined by the federal energy regulatory commission and the commission.

(26) "Transmission services provider" means a person controlling or operating transmission facilities.

(27) "Universal system benefits charge" means a nonbypassable rate or charge to be imposed on a customer to pay the customer's share of universal system benefits program costs.

(28) "Universal system benefits programs" means public purpose programs for:

(a) cost-effective local energy conservation;

(b) low-income customer weatherization;

(c) renewable resource projects and applications, including those that capture unique social and energy system benefits or provide transmission and distribution system benefits;

(d) research and development programs related to energy conservation and renewables;

(e) market transformation designed to encourage competitive markets for public purpose programs; and

(f) low-income energy assistance.

(29) "Utility" means any public utility or cooperative utility."

NEW SECTION. Section 50. Repealer. Sections 35-18-107 and 35-18-318, MCA, are repealed.

NEW SECTION. Section 51. Codification instruction. [Sections 1 through 37] are intended to be codified as an integral part of Title 35, and the provisions of Title 35 apply to [sections 1 through 37].

NEW SECTION. Section 52. Saving clause. [This act] does not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before [the effective date of this act].

NEW SECTION. Section 53. Severability. If a part of [this act] is invalid, all valid parts that are severable from the invalid part remain in effect. If a part of [this act] is invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications.

NEW SECTION. Section 54. Effective date. [This act] is effective on passage and approval.

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