Water and electric agreements

SECOND REGULAR SESSION

SENATE COMMITTEE SUBSTITUTE FOR

HOUSE BILL NO. 1493

92ND GENERAL ASSEMBLY

Reported from the Committee on Commerce and the Environment, April 23, 2004, with recommendation that the Senate Committee Substitute do pass.

TERRY L. SPIELER, Secretary.

4021S.05C

AN ACT

To repeal sections 247.085, 247.172, 386.390, and 394.312, RSMo, and to enact in lieu thereof five new sections relating to water and electric utilities.

Be it enacted by the General Assembly of the State of Missouri, as follows:

Section A. Sections 247.085, 247.172, 386.390, and 394.312, RSMo, are repealed and five new sections enacted in lieu thereof, to be known as sections 247.085, 247.172, 386.390, 393.156, and 394.312, to read as follows:

247.085. 1. The board of directors of any public water supply district [which is dependent upon purchases of water to supply its needs] shall have power to sell and convey part or all of the property of the district to any city, owning and operating a waterworks system, in consideration whereof the city shall obligate itself to pay or assume the payment of all outstanding bond obligations of the district, and to provide reasonable and adequate water service and furnish water ample in quantity for all needful purposes, and pure and wholesome in quality, to the inhabitants of the territory lying within the district, during such period of time and under such terms and conditions as may be agreed upon by the city and the board of directors of the district; provided, however, that no action shall be taken as provided herein until said city and public water supply district shall cause a printed notice of their intention to act under this section to be published in a manner prescribed for by law in a newspaper having a general circulation in said city and public water supply district, and a statement of the time and manner of said publication shall be recited in any agreement or contract executed hereunder.

2. Thereafter the board of directors may sell and convey any remaining property of the district and after payment of the debts of the district, other than bond obligations, the board of directors may use the funds of the district for the purpose of providing fire protection or for any other public purpose which in the opinion of the board will be beneficial to the inhabitants of the district.

3. The powers granted by this section are in addition to the powers granted by other sections and are not subject to the terms and conditions set forth in those sections.

247.172. 1. Competition to sell and distribute water, as between and among public water supply districts, water corporations subject to public service commission jurisdiction, and municipally owned utilities may be displaced by written territorial agreements, but only to the extent hereinafter provided for in this section.

2. Such territorial agreements shall specifically designate the boundaries of the water service area of each water supplier subject to the agreement, any and all powers granted to a public water supply district by a municipality, pursuant to the agreement, to operate within the corporate boundaries of that municipality, notwithstanding the provisions of sections 247.010 to 247.670 to the contrary, and any and all powers granted to a municipally owned utility, pursuant to the agreement, to operate in areas beyond the corporate municipal boundaries of its municipality.

3. Where the parties cannot agree upon the boundaries of the water service areas that are to be set forth in the agreement, they may, by mutual consent of all parties involved, petition the public service commission to designate the boundaries of the water service areas to be served by each party and such designations by the commission shall be binding on all such parties. Petitions shall be made pursuant to the rules and regulations of the commission governing applications for certificates of public convenience and necessity and the commission shall [be required to] hold evidentiary hearings on all petitions so received, except that in those instances where the matter is resolved by a stipulation and agreement submitted to the commission by all the parties, such hearings may be waived by agreement of the parties. The commission shall base its final determination regarding such petitions upon a finding that the commission's designation of water service areas is in the public interest.

[3.] 4. Before becoming effective, all territorial agreements entered into under the provisions of this section, including any subsequent amendments to such agreements, or the transfer or assignment of the agreement or any rights or obligations of any party to an agreement, shall receive the approval of the public service commission by report and order. Applications for commission approval shall be made and notice of such filing shall be given to other water suppliers pursuant to the rules and regulations of the commission governing applications for certificates of public convenience and necessity. Unless otherwise ordered by the commission for good cause shown, the commission shall rule on such applications not later than one hundred twenty days after the application is properly filed with the secretary of the commission.

[4.] 5. The commission shall hold evidentiary hearings to determine whether such territorial agreements should be approved or disapproved, except that in those instances where the matter is resolved by a stipulation and agreement submitted to the commission by all the parties, such hearings may be waived by agreement of the parties. The commission may approve the application if it [shall after hearing determine] determines that approval of the territorial agreement in total is not detrimental to the public interest. Review of commission decisions under this section shall be governed by the provisions of sections 386.500 to 386.550, RSMo.

[5.] 6. Commission approval of any territorial agreement entered into under the provisions of this section shall in no way affect or diminish the rights and duties of any water supplier not a party to the agreement to provide service within the boundaries designated in such territorial agreement. In the event any water corporation which is not a party to the territorial agreement and which is subject to the jurisdiction, control and regulation of the commission under chapters 386, RSMo, and 393, RSMo, has sought or hereafter seeks authorization from the commission to sell and distribute water or construct, operate and maintain water supply facilities within the boundaries designated in any such territorial agreement, the commission, in making its determination regarding such requested authority, shall give no consideration or weight to the existence of any such territorial agreement, and any actual rendition of retail water supply services by any of the parties to such territorial agreement will not preclude the commission from granting the requested authority.

[6.] 7. The commission shall have jurisdiction to entertain and hear complaints involving any commission-approved territorial agreement. Such complaints shall be brought and prosecuted in the same manner as other complaints before the commission. [After hearing,] The commission shall hold an evidentiary hearing regarding such complaints except that in those instances where the matter is resolved by a stipulation and agreement submitted to the commission by all the parties, such hearings may be waived by agreement of the parties. If the commission determines that [the] a territorial agreement [is not] that is the subject of a complaint is no longer in the public interest, it shall have the authority to suspend or revoke the territorial agreement. If the commission determines that the territorial agreement is still in the public interest, such territorial agreement shall remain in full force and effect. [Except as provided in this section, nothing in this section shall be construed as otherwise conferring upon the commission jurisdiction over the service, rates, financing, accounting, or management of any public water supply district or municipally owned utility, or to amend, modify, or otherwise limit the rights of public water supply districts to provide service as otherwise provided by law.

7.] 8. Notwithstanding the provisions of section 386.410, RSMo, the commission shall by rule set a schedule of fees based upon its costs in reviewing proposed territorial agreements for approval or disapproval. Responsibility for payment of the fees shall be that of the parties to the proceeding as ordered by the commission in each case. The fees shall be paid to the director of revenue who shall remit such payments to the state treasurer. The state treasurer shall credit such payments to the public service commission fund, or its successor fund, as established in section 33.571, RSMo. [Nothing in this section shall be construed as otherwise conferring upon the commission jurisdiction over the service, rates, financing, accounting or management of any public water supply district or municipally owned utility and except as provided in this section, nothing shall affect the rights, privileges or duties of public water supply districts, water corporations subject to public service commission jurisdiction or municipally owned utilities.]

9. Nothing in this section shall be construed as otherwise conferring upon the commission jurisdiction over the service, rates, financing, accounting, or management of any public water supply district or municipality-owned utility, or to amend, modify, or otherwise limit the rights of public water supply districts to provide service as otherwise provided by law. Except as provided in this section, nothing shall affect the rights, privileges, or duties of public water supply districts, municipally owned utilities, or water corporations subject to public service commission jurisdiction.

10. Notwithstanding any other provision of this section, the commission may hold a hearing regarding any application, complaint, or petition filed under this section upon its own motion.

386.390. 1. Complaint may be made by the commission of its own motion, or by the public counsel or any corporation or person, chamber of commerce, board of trade, or any civic, commercial, mercantile, traffic, agricultural or manufacturing association or organization, or any body politic or municipal corporation, by petition or complaint in writing, setting forth any act or thing done or omitted to be done by any corporation, person or public utility, including any rule, regulation or charge heretofore established or fixed by or for any corporation, person or public utility, in violation, or claimed to be in violation, of any provision of law, or of any rule or order or decision of the commission; provided, that no complaint shall be entertained by the commission, except upon its own motion, as to the reasonableness of any rates or charges of any gas, electrical, water, sewer, or telephone corporation, unless the same be signed by the public counsel or the mayor or the president or chairman of the board of aldermen or a majority of the council, commission or other legislative body of any city, town, village or county, within which the alleged violation occurred, or not less than twenty-five residential consumers or purchasers[, or prospective consumers or purchasers,] or five large industrial customers of such gas, electricity, water, sewer, or telephone service. For the purposes of this section, the term "large industrial customer" means any customer using more than ten million kilowatt hours of electricity per year.

2. All matters upon which complaint may be founded may be joined in one hearing, and no motion shall be entertained against a complaint for misjoinder of causes of action or grievances or misjoinder or nonjoinder of parties; and in any review by the courts of orders or decisions of the commission the same rule shall apply with regard to the joinder of causes and parties as herein provided.

3. The commission shall not be required to dismiss any complaint because of the absence of direct damage to the complainant. Upon the filing of a complaint, the commission shall cause a copy thereof to be served upon the public utility, corporation or person complained of.

4. Service in all hearings, investigations and proceedings pending before the commission may be made upon any person upon whom summons may be served in accordance with the provisions of the code of civil procedure of this state, and may be made personally or by mailing in a sealed envelope with postage prepaid.

5. The commission shall fix the time when and the place where a hearing will be had upon the complaint and shall serve notice thereof, not less than ten days before the time set for such hearing, unless the commission shall find that the public necessity requires that such hearing be held at an earlier date.

6. Any overearnings complaints heard by the commission shall be decided within eleven months.

393.156. 1. As part of a pilot program to be conducted by the commission, any electrical corporation proposing to construct, lease, or invest more than ten percent of its net electric utility plant in Missouri as stated in the utility's annual report to the Missouri public service commission in any new generation plant or to contract for the purchase of power and energy associated with a new generation plant located in the state of Missouri and owned or leased by an entity with a physical presence in the state of Missouri as of April 1, 2004, or a subsidiary thereof, may file with the commission an application requesting a determination of prudence of the decision to construct, lease, or invest in such infrastructure or contract for power and energy based upon the circumstances prevailing and information and alternatives presented at the time of the determination. The commission may in its discretion consider an application proposing to enter into a contract for the purchase of power and energy not associated with such a new generation plant. As part of its application, the corporation may also request that the commission determine certain ratemaking principles that will be applied to the investment or contract in future proceedings before the commission. The application may include, at the option of the corporation, a request for a certificate of convenience and necessity under section 393.170, if necessary. At the time the application is filed, the corporation shall file all evidence supporting its proposed course of action, including testimony, exhibits, work papers, and studies, including electronic versions of all models used. The corporation shall also file proposed confidentiality agreements, including any required by third-party vendors, and identify all material for which a need for confidentiality is asserted. If any proposed generation facility is not to be located within the state of Missouri, in addition to evidence that the project itself is reasonable and prudent, the corporation shall submit evidence that the location of the facility is in the best interest of Missouri ratepayers of the corporation.

2. The commission shall establish guidelines for the submission of the application by the corporation. The commission shall conduct a hearing and issue an order within one hundred and eighty days after the filing of the application in accordance with any guidelines established by the commission. The commission may approve the application as proposed by the corporation, approve the application on the basis of conditions required to be accepted by the corporation, or may reject the application. If, after hearing, the commission determines that the decision to construct, lease, or invest in such infrastructure or enter into such contract is reasonable and prudent, the commission shall issue an order and certificate so stating and addressing, whether by approving, modifying, or rejecting, each ratemaking principle raised in the hearing. The commission may impose conditions on the certificate requiring the corporation to monitor, and to report to the commission on a specified schedule, any significant changes in specified costs, load, regulatory, economic, or other assumptions upon which the decision was based. Costs will be included in rates of the corporation only in accordance with the existing law, except as otherwise provided in subsection 6 of this section. Nothing in this section alters the authority or procedures of the commission in setting the rates of the corporation, or to review the prudence of construction management.

3. The order by the commission approving, modifying, or rejecting the determination of prudence and addressing ratemaking principles will be applied in any future rate case to the investment and costs of the facility or the treatment of the cost of the contract and shall be binding for ratemaking purposes in all future proceedings. Ratemaking principles may include, but are not limited to, authorized return on equity, capital structure to finance the facility, estimated service life, depreciation rate for cost of service purposes, jurisdictional allocation method to be applied to the cost, and in-service criteria used to determine when a facility is fully operational and used for service consistent with section 393.135.

4. If the commission fails to issue an order determining the prudence of the proposal within one hundred eighty days after the application is filed in accordance with the guidelines established by the commission, the project or contract is deemed to be prudent as proposed, any certificate for convenience and necessity requested by the corporation in the application shall be deemed approved by the commission.

5. The corporation shall have two hundred seventy days after the effective date of an order determining a project to be prudent to notify the commission whether it will construct the facility. If the corporation notifies the commission it will not proceed with construction of the facility, any ratemaking principles included in the order will be of no further force and effect and there shall be no adverse presumption applied to the corporation in any future proceeding before the commission based on the decision by the commission or the decision of the corporation not to proceed under the order.

6. The corporation shall report to the commission at the times specified in the order of the commission, or upon the occurrence of any significant unusual event such as an act of God, a significant change in federal or state environmental or utility law or regulation, or other significant events which may individually or collectively, materially, and adversely affect the project for which a certificate has been issued. At the time of any such report, the corporation may request the commission to consider a modification or termination of the project, or, upon the occurrence of any such significant event, the commission on its own motion may require the corporation to present evidence supporting a decision to continue a project for which a certificate has been issued. In the event the commission, after hearing, determines that continuation of a project is no longer prudent, or should be modified, the commission in its discretion may allow the corporation to recover in rates, in a timely manner, consistent with financial obligations of the corporation, the amounts already expensed, incurred, or obligated on such project including, if applicable, capitalized, net of income taxes, interest expense, and a capitalized return on equity invested in the project up to the time the order is entered even though the project may never be fully operational or used for service. The approved costs will be amortized to expenses and recovered in rates, over a period of years and in a manner to be determined by the commission at the time the application is initially approved or when the order to modify or terminate the project is issued.

7. No corporation shall file more than one application covering more then one project to meet a specific need under this section in any twelve-month period; provided however, if an application is dismissed or denied or the corporation notifies the commission it will not proceed under an approved application, the corporation may file a new application for the same or an alternate facility at any time. The commission may waive this limitation when it deems a waiver to be in the public interest. Nothing in this section shall impair or alter whatever existing authority the commission has to approve tariffs, applications, programs, or other filings relating to the terms and conditions under which an electric, gas, or water corporation may acquire, lease, invest in, expend monies on, or recover the costs of, an infrastructure project or a contract for the purchase or use of power and energy, natural gas supplies, financial hedging instruments, natural gas transportation, or storage services, electric transmission services, or other transactions undertaken to provide utility services.

8. Nothing in this section shall excuse a corporation from complying with its public service obligation to provide safe and adequate service at just and reasonable rates.

9. No application shall be filed under this section after June 15, 2006. No application may be filed under this section by a utility subject to a rate moratorium.

394.312. 1. Competition to provide retail electric service, as between rural electric cooperatives, electrical corporations and municipally owned utilities may be displaced by written territorial agreements, but only to the extent hereinafter provided for in this section.

2. Such territorial agreements shall specifically designate the boundaries of the electric service area of each electric service supplier subject to the agreement, any and all powers granted to a rural electric cooperative by a municipality, pursuant to the agreement, to operate within the corporate boundaries of that municipality, notwithstanding the provisions of section 394.020 and of section 394.080 to the contrary, and any and all powers granted to a municipally owned utility, pursuant to the agreement, to operate in areas beyond the corporate municipal boundaries of its municipality.

3. Where the parties cannot agree upon the boundaries of the electric service areas that are to be set forth in the agreement, they may, by mutual consent of all parties involved, petition the public service commission to designate the boundaries of the electric service areas to be served by each party and such designations by the commission shall be binding on all such parties. Petitions shall be made pursuant to the rules and regulations of the commission governing applications for certificates of public convenience and necessity [and the commission shall be required to]. The commission shall hold evidentiary hearings on all petitions so received, except that in those instances where the matter is resolved by a stipulation and agreement submitted to the commission by all the parties, such hearings may be waived by agreement of the parties. The commission shall base its final determination regarding such petitions upon a finding that the commission's designation of electric service areas is in the public interest.

[3.] 4. The provisions of sections 386.310, RSMo, and 393.106, RSMo, and sections 394.160 and 394.315 to the contrary notwithstanding, before becoming effective, all territorial agreements entered into under the provisions of this section, including any subsequent amendments to such agreements, or the transfer or assignment of the agreement or any rights or obligations of any party to an agreement, shall receive the approval of the public service commission by report and order. Applications for commission approval shall be made and notice of such filing shall be given to other electrical suppliers pursuant to the rules and regulations of the commission governing applications for certificates of public convenience and necessity. Unless otherwise ordered by the commission for good cause shown, the commission shall rule on such applications not later than one hundred twenty days after the application is properly filed with the secretary of the commission.

[5.] 6. Commission approval of any territorial agreement entered into under the provisions of this section shall in no way affect or diminish the rights and duties of any supplier not a party to the agreement or of any electrical corporation authorized by law to provide service within the boundaries designated in such territorial agreement. In the event any electrical corporation which is not a party to the territorial agreement and which is subject to the jurisdiction, control and regulation of the commission under chapters 386, RSMo, and 393, RSMo, has heretofore sought or hereafter seeks authorization from the commission to render electric service or construct, operate and maintain electric facilities within the boundaries designated in any such territorial agreement, the commission, in making its determination regarding such requested authority, shall give no consideration or weight to the existence of any such territorial agreement and any actual rendition of retail electric service by any of the parties to such territorial agreement will not preclude the commission from granting the requested authority.

[6.] 7. The commission shall have jurisdiction to entertain and hear complaints involving any commission-approved territorial agreement. Such complaints shall be brought and prosecuted in the same manner as other complaints before the commission. [After hearing,] The commission shall hold an evidentiary hearing regarding such complaints, except that in those instances where the matter is resolved by a stipulation and agreement submitted to the commission by all the parties, such hearings may be waived by agreement of the parties. If the commission determines that [the] a territorial agreement [is not] that is the subject of a complaint is no longer in the public interest, it shall have the authority to suspend or revoke the territorial agreement. If the commission determines that the territorial agreement is still in the public interest, such territorial agreement shall remain in full force and effect. Except as provided in this section, nothing in this section shall be construed as otherwise conferring upon the commission jurisdiction over the service, rates, financing, accounting, or management of any rural electric cooperative or municipally owned utility, or to amend, modify, or otherwise limit the rights of electrical suppliers to provide service as otherwise provided by law.

[7.] 8. Notwithstanding the provisions of section 386.410, RSMo, the commission shall by rule set a schedule of fees based upon its costs in reviewing proposed territorial agreements for approval or disapproval. Responsibility for payment of the fees shall be that of the parties to the proceeding as ordered by the commission in each case. The fees shall be paid to the director of revenue who shall remit such payments to the state treasurer. The state treasurer shall credit such payments to the public service commission fund, or its successor fund, as established in section 33.571, RSMo. Nothing in this section shall be construed as otherwise conferring upon the commission jurisdiction over the service, rates, financing, accounting or management of any rural electric cooperative or municipally owned utility and except as provided in this section nothing shall affect the rights, privileges or duties of rural electric cooperatives, electrical corporations or municipally owned utilities.

9. Notwithstanding any other provision of this section, the commission may hold a hearing regarding any application, complaint, or petition filed pursuant to this section upon its own motion.

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