AN ACT AUTHORIZING THE FORMATION OF BUYING COOPERATIVES TO PURCHASE ELECTRICITY FOR RESIDENTIAL AND SMALL COMMERCIAL CUSTOMERS IN INVESTOR-OWNED DISTRIBUTION UTILITY SERVICE TERRITORIES IN WHICH THOSE CUSTOMERS CAN CHOOSE AN ELECTRICITY SUPPLIER; AUTHORIZING THE PUBLIC SERVICE COMMISSION TO DESIGNATE ONE OR MORE DEFAULT SUPPLIERS FOR ELECTRICITY WITHIN AN INVESTOR-OWNED DISTRIBUTION UTILITY'S SERVICE TERRITORY; AMENDING SECTIONS 69-8-103, 69-8-201, AND 69-8-403, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE.

WHEREAS, residential and small commercial customers of investor-owned distribution utilities in Montana need access to reliable electricity supply at equitable prices; and

WHEREAS, the aggregation of residential and small commercial customers that do not have access to competitive electricity suppliers at equitable prices provides them with market power to secure electricity at the least cost; and

WHEREAS, allowing one or more default suppliers to aggregate residential and small commercial customers to purchase electricity maximizes economies of scale, increases administrative efficiency, and provides maximum benefits to all small electricity customers; and

WHEREAS, wholesale competition in electricity markets may be facilitated by allowing entities to compete for the opportunity to provide electricity supply to those residential and small commercial customers on an aggregated basis; and

WHEREAS, the formation of nonprofit electricity buying cooperatives enhances the chances of securing for small customers the greatest amount of electricity at the least cost from the federal power system; and

WHEREAS, the state of Montana desires that its residents have access to the benefits of competitive retail electricity markets and federal Power Marketing Administration electricity; and

WHEREAS, federal Power Marketing Administration power or benefits should be distributed as widely and equitably as possible among small customers of open-access public utilities in the state of Montana in a manner that promotes efficient development and operation of the competitive retail electricity markets; and

WHEREAS, the state of Montana benefits by enacting legislation this session that maximizes the chances of an electricity buying cooperative being able to purchase power for small customers from the Bonneville Power Administration at preferential rates for the subscription period that begins in 2001.

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

Section 1. Short title. [Sections 1 through 28] may be cited as the "Electricity Buying Cooperative Act".

Section 2. Definitions. As used in [sections 1 through 28], unless the context requires otherwise, the following definitions apply:

(1) "Distribution utility" means the electricity distribution portion of a public utility as defined in 69-8-103.

(2) "Residential customer" means a residential customer of a distribution utility.

(3) "Small commercial customer" means, for a distribution utility, individual accounts of a commercial customer with an average monthly demand in the previous calendar year of less than 100 kilowatts or a new commercial customer with an estimated average monthly demand of less than 100 kilowatts.

(4) "Small customer" means a residential customer or small commercial customer of a distribution utility.

Section 3. Jurisdiction of public service commission. The public service commission has jurisdiction to choose and regulate a buying cooperative that obtains a default supplier license, as provided in 69-8-403. If a buying cooperative that has obtained a default supplier license has the opportunity to obtain federal power marketing administration power, the public service commission also has jurisdiction over the purchase and distribution of that power, as provided in 69-8-403.

Section 4. Permissible purpose of incorporation. A buying cooperative may be organized under this chapter only for the purpose of supplying electricity to small customers as a default supplier, pursuant to 69-8-403.

Section 5. Powers of buying cooperative. A buying cooperative may:

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

(2) have existence for as long as it serves its purpose;

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

(4) own, possess, and enjoy as much real and personal property as is necessary for the transaction of its business and sell and dispose of the property;

(5) borrow money, or otherwise contract indebtedness, and pledge its property, both real and personal, to secure the payment of the borrowed money or contract for debt;

(6) enter into contracts and other obligations for the purchase and sale of electricity to its members;

(7) sell or otherwise dispose of electricity on the wholesale market not consumed by its members;

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

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

(10) except as prohibited in [section 6], do and perform all other acts and things and have and exercise all other powers that may be necessary, convenient, or appropriate to accomplish the purpose for which the buying cooperative is organized.

Section 6. Restrictions on powers of buying cooperative. Notwithstanding any other provision of this chapter, a buying cooperative may not:

(1) construct, purchase, take, receive, or otherwise acquire or own, hold, equip, maintain, or operate electric generating plants or transmission or distribution lines or systems, except that a buying cooperative may enter into transmission or distribution agreements for the lease or use of capacity on transmission and distribution systems;

(2) purchase electricity for or sell electricity to commercial or industrial electric consumers having individual accounts with an average monthly demand in the previous calendar year of 100 kilowatts or more or a new commercial or industrial customer with an estimated average monthly demand of 100 kilowatts or more; or

(3) offer for sale any products other than electricity supply.

Section 7. Waiver of notice. (1) If [sections 1 through 28] or the buying 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.

Section 8. Name. (1) The name of each buying cooperative must include the phrase "electricity buying cooperative" and the abbreviation "inc."

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

(3) The phrase "electricity buying cooperative" may not be used in the name of any corporation organized under the laws of or authorized to transact business in this state, except a buying cooperative transacting business in this state pursuant to [sections 1 through 28].

Section 9. Incorporators. Five or more individuals may organize a buying cooperative, as provided in [sections 1 through 28].

Section 10. Articles of incorporation. (1) The articles of incorporation of a buying cooperative must state in the caption that the articles of incorporation are executed pursuant to [sections 1 through 28], 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 28] 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 28];

(b) provisions for classifications of members in a buying cooperative; and

(c) provisions for issuance of nonvoting stock.

(3) A buying cooperative's articles of incorporation must be submitted to the secretary of state for filing, as provided in [section 27].

(4) It is not necessary to include in the articles of incorporation of a buying cooperative the purpose for which it is organized or any of the corporate powers vested in a buying cooperative under [sections 1 through 28].

Section 11. 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 17].

(2) The notice of the meeting on the proposed amendment must be included in the proposed amendment. 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 28] 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 27].

Section 12. 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 buying 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 buying cooperative shall also file a certificate of change of principal office in each county office in which the buying cooperative's articles of incorporation or any prior certificate of change of principal office of the buying cooperative has been filed. The buying cooperative shall pay the change in location of principal office fee prescribed in [section 27]. The buying 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.

Section 13. Bylaws. The original bylaws of a buying 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 reassuring 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 28] or with the articles of incorporation.

Section 14. Membership. (1) Membership in a buying cooperative is restricted to small customers of a distribution utility.

(2) A member may join a buying cooperative by the methods prescribed in the buying cooperative's bylaws or may be assigned to a buying cooperative by the public service commission, as provided by commission rule.

Section 15. Nonliability of members, trustees, and officers. (1) The private property of the members of a buying cooperative is exempt from execution for the debts of the buying cooperative, and a member may not be liable or responsible for any debts of the buying cooperative.

(2) A trustee or officer of a buying cooperative or acting for a buying cooperative is not personally liable to the buying 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 18 and 19]; and

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

Section 16. Meetings of members. (1) An annual meeting of the members must be held at a time that must be 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 designated 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 20]. 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.

Section 17. Initiative by members -- approval of trustees not required. (1) Notwithstanding any other provision of [sections 1 through 28], there must be submitted to the members of a buying 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 28]. The affidavit or affidavits required to be filed with this proposition or document pursuant to applicable provisions of [sections 1 through 28] must be modified to be in compliance with the provisions of this section.

Section 18. Board of trustees -- number -- qualifications -- removal -- compensation -- joint memberships. (1) The business and affairs of a buying 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 buying cooperative. The bylaws must prescribe the number of trustees, their qualifications, other than those provided for in [sections 1 through 28], 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 buying cooperative employees; and

(b) except in emergencies, may not be employed by the buying 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 buying 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 buying cooperative, one person, but not more than one person, from a joint membership may be elected a trustee.

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

Section 19. Trustees -- term -- quorum -- powers. (1) The trustees of a buying cooperative named in articles of incorporation 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 buying cooperative, except those powers that are conferred upon the members by [sections 1 through 28] or by its articles of incorporation or bylaws.

Section 20. Voting districts. (1) Notwithstanding any other provisions of [sections 1 through 28], the bylaws may provide that the territory or geographic area in which a buying 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 buying cooperative from using a combination of voting districts based on members or classes of members with 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 buying 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, which may include the power to elect trustees and adopt, amend, or repeal the bylaws of a buying cooperative as provided in [sections 1 through 28].

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

Section 21. Officers. The officers of a buying 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 hold any of the above offices after that person has ceased to be 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 buying cooperative officers, agents, or employees that 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.

Section 22. 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 in favor of a buying cooperative or to which it is a party by reason of being an officer, trustee, director, or member of the buying cooperative.

Section 23. Refunds to members -- retention of unclaimed refunds. (1) Revenue of a buying cooperative for any fiscal year must, unless otherwise determined by a vote of the members, be distributed by the buying cooperative to its members as patronage refunds, prorated in accordance with the patronage of the buying cooperative by the respective members paid for during the fiscal year, whenever the revenue exceeds the amount necessary to:

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

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

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

(d) provide a reasonable reserve for working capital; and

(e) provide a reserve for the payment of indebtedness of the buying 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.

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

(3) A buying 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 buying cooperative must be used for educational purposes.

Section 24. 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 buying cooperative or in which the buying 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 buying 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 duly held meeting of members of the buying cooperative by an affirmative vote of not less than two-thirds of all the members of the buying cooperative and unless the notice of the proposed sale, mortgage, lease, or other disposition or encumbrance is contained in the notice of the meeting.

(2) The board of trustees of a buying cooperative, without authorization by the members of the buying 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 or all of the property, assets, rights, privileges, licenses, franchises, and permits of the buying 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 buying cooperative, all upon the terms and conditions that the board of trustees determines, to secure any indebtedness of the buying cooperative or any entity owned or controlled by the buying cooperative or in which the buying 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 buying 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 buying cooperative or a proposed buyer of buying cooperative property;

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

(c) at least 30 days before the meeting, mail to all members any alternative proposal made by buying 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.

Section 25. Dissolution of buying cooperative that has not commenced business. (1) A buying cooperative that has not commenced business may dissolve voluntarily by delivering to the secretary of state articles of dissolution, executed on behalf of the buying cooperative by a majority of the incorporators. The articles of dissolution must state:

(a) the name of the buying cooperative;

(b) the address of its principal office;

(c) the date of its incorporation;

(d) that the buying 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;

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

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

(2) The articles of dissolution must be submitted to the secretary of state for filing, as provided in [sections 1 through 28].

Section 26. Dissolution and winding up of buying cooperative that has commenced business. A buying 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 buying cooperative be dissolved voluntarily, and after that, the proposition that the buying cooperative be dissolved must be submitted to the members of the buying 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 buying cooperative.

(2) Upon approval of the voluntary dissolution, a certificate of election to dissolve is executed on behalf of the buying 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:

(a) name of the buying cooperative;

(b) address of its principal office;

(c) names and addresses of its trustees; and

(d) total number of members who voted for and against the voluntary dissolution of the buying cooperative. The president or vice president executing the certificate shall also make and annex to the certificate an affidavit stating that the provisions of this subsection were complied with. The certificate and affidavit must be submitted to the secretary of state for filing as provided in [sections 1 through 28].

(3) Upon the filing of the certificate provided for in subsection (2) and an affidavit with the secretary of state, the buying cooperative shall cease to carry on its business except to the extent necessary for winding up the business of the buying 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 buying cooperative is located.

(5) The board of trustees has the full power to wind up and settle the affairs of the buying cooperative and shall proceed to collect the debts owing to the buying 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 buying 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 buying cooperative dissolution for determination of members who are entitled to the patronage refunds for the capital redemption period; or

(b) if the buying 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 buying 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 buying 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 buying 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 28] and must state:

(a) the name of the buying cooperative;

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

(c) that the buying cooperative has up to this time filed with the secretary of state a certificate of election to dissolve and the date on which the certificate was filed;

(d) that all debts, obligations, and liabilities of the buying 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 buying 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 buying cooperative. The president or vice president executing the articles of dissolution shall also make and annex 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 [sections 1 through 28].

Section 27. Incorporation, amendment, and dissolution filings. (1) Articles of incorporation, amendment, or dissolution, when executed and accompanied by an affidavit that may be required by applicable provisions of [sections 1 through 28], must be presented to the secretary of state for filing. If the secretary of state finds that the articles presented conform to the requirements of [sections 1 through 28], the secretary of state shall upon the payment of the fees provided for in 35-18-502, file the articles, and upon the filing, the incorporation, amendment, or dissolution is legally effective.

(2) The secretary of state, immediately upon the filing of any articles pursuant to [sections 1 through 28], shall transmit a certified copy of the filing to the county clerk of the county in which the principal office of each buying cooperative or corporation affected by the incorporation, amendment, 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 26].

Section 28. Exemption from taxes. Buying cooperatives transacting business in this state pursuant to [sections 1 through 28] are exempt from all excise and income taxes, other than any applicable fees to fund the Montana consumer counsel and the public service commission as provided in Title 69, chapter 1, parts 2 and 4.

Section 29. 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 Title 35, chapter 18; 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) "Default supplier" means a distribution services provider or a person that has received a default supplier license from the commission.

(8) "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.

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

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

(11) "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.

(12) (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.

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

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

(15) "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.

(16) "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.

(17) "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.

(18) "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.

(19) "Small customer" means a residential customer or a small commercial customer who has an individual account with an average monthly demand in the previous calendar year of less than 100 kilowatts or a new commercial customer with an estimated average monthly demand of less than 100 kilowatts of a public utility distribution services provider that has opened access on its distribution system pursuant to [sections 1 through 28] or this chapter.

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

(21) "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.

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

(23) "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.

(24) "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.

(25) "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.

(26) "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.

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

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

(29) "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.

(30) "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.

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

Section 30. Section 69-8-201, MCA, is amended to read:

"69-8-201. Public utility -- transition to customer choice -- waiver. (1) A public utility shall, except as provided in this section, adhere to the following deadlines:

(a) On or before July 1, 1998, all customers with individual loads greater than 1,000 kilowatts and for loads of the same customer with individual loads at a meter greater than 300 kilowatts that aggregate to 1,000 kilowatts or greater must have the opportunity to choose an electricity supplier.

(b) Subject to subsection (2), and as soon as is administratively feasible but before July 1, 2002, all other public utility customers must have the opportunity to choose an electricity supplier.

(2) (a) Except as provided for in subsection (4), the commission may determine that additional time is necessary for customers identified in subsection (1)(b); however, the implementation of full customer choice may not be delayed beyond July 1, 2004.

(b) A determination by the commission that additional time is necessary for subsection (1)(b) customers must be made at least 60 days in advance of the scheduled date and must be based on one or more of the following considerations:

(i) implementation would not be administratively feasible;

(ii) implementation would materially affect the reliability of the electric system; or

(iii) Montana customers or electricity suppliers would be disadvantaged due to lack of a competitive electricity supply market.

(3) The commission shall designate the public utility or one or more default suppliers to provide regulated default service for those small customers of a public utility that are not being served by a competitive electricity supplier. The transition advisory committee shall review and address the need for continued default supply service and make recommendation to the 57th legislature.

(4) Except as provided in 69-5-101, 69-5-102, 69-5-104 through 69-5-112, and 69-8-402, a public utility currently doing business in Montana as part of a single integrated multistate operation, no portion of which lies within the basin of the Columbia River, may:

(a) defer compliance with this chapter until a time that the public utility can reasonably implement customer choice in the state of the public utility's primary service territory, except that the public utility shall file a transition plan pursuant to 69-8-202 to provide transition to customer choice on or before July 1, 2002, and must have completed the transition period to customer choice by July 1, 2006; and

(b) petition the commission to delay the public utility's transition plan filing until July 1, 2004.

(5) Upon a request from a public utility with fewer than 50 customers, the commission shall waive compliance with the requirements of 69-8-104, 69-8-202 through 69-8-204, 69-8-208 through 69-8-211, 69-8-402, and this section."

Section 31. Section 69-8-403, MCA, is amended to read:

"69-8-403. Commission authority -- rulemaking authority. (1) Beginning on the effective date of a commission order regarding a public utility's transition plan, the commission shall regulate the public utility's retail transmission and distribution services within the state of Montana, as provided in this chapter, and may not regulate the price of electricity supply except as electricity supply may be procured as provided in this section:

(a) by one or more default suppliers for those customers not being served by a competitive supplier; or

(b) by the distribution function of a public utility for those customers that are not being served by a competitive electricity supplier as provided by commission rules. During the transition period, those procurements may include a cost-based contract from a supply affiliate or an unregulated division.

(2) The commission shall decide if there is workable competition in the electricity supply market by determining whether competition is sufficient to inhibit monopoly pricing or anticompetitive price leadership. In reaching a decision, the commission may not rely solely on market share estimates.

(3) The commission shall license electricity suppliers and enforce licensing provisions pursuant to 69-8-404.

(4) The commission shall promulgate rules that identify the licensees and ensure that the offered electricity supply is provided as offered and is adequate in terms of quality, safety, and reliability.

(5) The commission shall establish just and reasonable rates through established ratemaking principles for public utility distribution and transmission services and shall regulate these services. The commission may approve rates and charges for electricity distribution and transmission services based on alternative forms of ratemaking such as performance-based ratemaking, on a demonstration by the public utility that the alternative method complies with this chapter, and on the public utility's transition plan.

(6) The commission shall certify that a cooperative utility has adopted a transition plan that complies with this chapter. A cooperative utility's transition plan is considered certified 60 days after the cooperative utility files for certification.

(7) The commission shall promulgate rules that protect consumers, distribution services providers, and electricity suppliers from anticompetitive and abusive practices.

(8) The commission shall license default suppliers and enforce default licensing provisions pursuant to [section 32].

(9) The commission shall promulgate rules for the licensing of default suppliers on or before December 1, 1999.

(10) Until the commission has determined that workable competition has developed for small customers, a default supplier's obligation to serve remains.

(11) In addition to promulgating rules expressly provided for in this chapter, the commission may promulgate any other rules necessary to carry out the provision of this chapter.

(12) This chapter does not give the commission the authority to:

(a) regulate cooperative utilities in any manner other than reviewing certification filings for compliance with this chapter; or

(b) compel any change to a cooperative utility's certification filing made pursuant to this chapter."

Section 32. Default supplier license. (1) In developing licensing rules for default suppliers, the commission shall promote and facilitate the development of a competitive market for electricity supply.

(2) Default supplier licensing rules must ensure that:

(a) a default supplier may not purchase electricity for or sell electricity to commercial or industrial electric consumers having individual accounts with an average monthly demand in the previous calendar year of 100 kilowatts or more or to new commercial or industrial electric consumers having individual accounts with an estimated monthly demand of 100 kilowatts or more;

(b) a default supplier may not discount its commission- approved rates to retain or gain customers;

(c) a default supplier may not obligate customers to a contractual term or service;

(d) federal power marketing administration power or benefits acquired by a default supplier are distributed as widely and equitably as possible among small customers and in a manner that encourages competition;

(e) a default supplier, except when the default supplier is the distribution services provider, may not construct, purchase, take, receive, or otherwise acquire or own, hold, equip, maintain, or operate electric generating plants or transmission or distribution lines or systems, except that a default supplier may enter into transmission or distribution agreements for the lease or use of capacity on transmission and distribution systems owned by others to supply electricity to its customers in the state;

(f) a default supplier may not offer for sale any products other than electricity supply or provide electricity supply to members or customers other than those residing in the state or

sell electricity or otherwise engage in the marketing of electricity on the wholesale market, but may dispose of excess electricity associated with temporary load-energy imbalances.

(3) Except as provided in subsection (2)(e), a default supplier may provide only a single electricity supply service to all of its small customers. A default supplier may also offer an additional electricity supply service that includes a component of renewable energy.

(4) A default supplier may not offer other supply services unless the default supplier forms a separate entity.

Section 33. Default supplier -- license revocation. The commission may revoke default supplier status for just cause on the commission's own investigation or upon complaint of an affected party, if it finds that the default supplier has violated the terms of default supplier status. Upon revocation, default supplier status reverts to the public utility, unless and until the commission grants new default supplier status to another person. The public utility must be given sufficient notice to acquire supply to serve this load and shall fully recover its costs of reentering the default supplier business.

Section 34. 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.

Section 35. 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].

Section 36. Codification instruction. (1) [Sections 1 through 28] are intended to be codified as an integral part of Title 35, and the provisions of Title 35 apply to [sections 1 through 28].

(2) [Sections 32 and 33] are intended to be codified as an integral part of Title 69, chapter 8, and the provisions of Title 69, chapter 8, apply to [sections 32 and 33].

Section 37. Effective date. [This act] is effective on passage and approval.

- END -

I hereby certify that the within bill,

SB 0406, originated in the Senate.

Secretary of the Senate

President of the Senate

Signed this	day

of	, .

Speaker of the House

Signed this	day

of	, .

SENATE BILL NO. 406

INTRODUCED BY S. DOHERTY, E. BERGSAGEL, A. BISHOP, J. BOHLINGER, J. ELLINGSON, D. EWER, L. GROSFIELD, H. HARPER, J. LYNCH, W. MCNUTT, J. QUILICI, F. THOMAS, B. WILSON

AN ACT AUTHORIZING THE FORMATION OF BUYING COOPERATIVES TO PURCHASE ELECTRICITY FOR RESIDENTIAL AND SMALL COMMERCIAL CUSTOMERS IN INVESTOR-OWNED DISTRIBUTION UTILITY SERVICE TERRITORIES IN WHICH THOSE CUSTOMERS CAN CHOOSE AN ELECTRICITY SUPPLIER; AUTHORIZING THE PUBLIC SERVICE COMMISSION TO DESIGNATE ONE OR MORE DEFAULT SUPPLIERS FOR ELECTRICITY WITHIN AN INVESTOR-OWNED DISTRIBUTION UTILITY'S SERVICE TERRITORY; AMENDING SECTIONS 69-8-103, 69-8-201, AND 69-8-403, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE.