CHAPTER 157

FORMERLY

SENATE BILL NO. 189

AS AMENDED BY HOUSE AMENDMENT NOS. 2 AND 4 AND

SENATE AMENDMENT NO. 1

AN ACT TO AMEND TITLE 26 OF THE DELAWARE CODE RELATING TO THE PUBLIC SERVICE COMMISSION AND COOPERATIVES.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE :

WHEREAS, rural electric cooperatives are owned by, and operated for the benefit of, their ratepayer members; and

WHEREAS, the business and affairs of rural electric cooperatives are managed by boards of directors chosen by and from the membership through annual elections in which each member is entitled to one vote; and

WHEREAS, the primary task of the public service commission in its ratemaking function is to balance the competing interests of ratepayers and investor owners; and

WHEREAS, the ratepayers of rural electric cooperatives are also the owners of those organizations; and

WHEREAS, ratemaking regulation by the public service commission imposes upon rural electric cooperatives certain transactional expenses, delays and operational restrictions which are inherent in any regulatory process; and

WHEREAS the General Assembly has determined that the informed membership of an electric cooperative is fully capable, through its member-elected directors, of governing the conduct of its own business and affairs, and judging the reliability and cost effectiveness of its services; and

WHEREAS, the General Assembly finds that the members of rural electric cooperatives should be empowered to elect, through a majority vote of the membership, to deregulate the organization which they own and from which they purchase electricity and to re-regulate the organization which they own and from which they purchase electricity.

NOW THEREFFORE:

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend §202, Chapter 1, Title 26, Delaware Code by adding a new subsection to read as follows:

“(g) Except as provided in Section 224 of this title, the Commission shall have no supervision or regulation over any electric cooperative, the membership of which has voted to be exempt from regulation by the Commission in accordance with §223 of this Title.”

Section 2. Amend Chapter 1, Title 26, Delaware Code by adding two new sections to read as follows:

"§223. Electric Cooperative’s Election To Be Exempt From Regulation.

(a) To be exempt under §202(g) of this Title, an electric cooperative shall conduct an election of all its members as follows:

(1) An election under this section may be called by the cooperative’s Board of Directors or shall be called not less than one hundred (100) days after receipt by the Board of a valid petition signed by not less than one thousand members of the cooperative.

(2) The proposition to exempt the cooperative from regulation by the Commission shall be voted upon by the cooperative’s members and presented to a meeting of the members. The Board of Directors of the cooperative shall provide notice of the election and such meeting to the members of the cooperative. Such notice shall set forth the proposition to exempt the cooperative from regulation by the Commission and the time, date, and place of the meeting. Notice shall be given in writing to the members and to the Commission by mail or by hand delivery not less than forty (40) days nor more than ninety (90) days before the date of the meeting. Such notice shall also include directions for voting on the proposal, a form of written ballot, and the time, date, and place of the forums required by paragraph (3).

(3) With the call for an election under paragraph (1), the Board of Directors of the cooperative shall schedule, and shall thereafter convene, at least two open forum sessions to allow members of the cooperative to discuss, or make inquiries concerning, the proposal and the election. Such forums shall be held on separate dates at differing locations within the cooperative’s service territory at times convenient for members to attend. Such forums shall be held no sooner than ten (10) days after delivery of the notice described in paragraph (2) and no later than twenty days (20) days prior to the date of the meeting for presenting the proposition. The time, date, and location of each such forum shall be included in the notice required by paragraph (2). At such forum, a member of the cooperative shall have the opportunity to make inquiries about the proposition and shall have a reasonable, equal opportunity to present the member’s views concerning the proposition, including a view in opposition to the proposition.

(4) If the cooperative mails information to its members regarding the proposition to exempt the cooperative from regulation by the Commission, other than the information required by paragraph (2), the cooperative shall also include in the same mailing any materials provided in opposition to the proposition which are submitted by a petition signed by not less than one hundred (100) members of the cooperative. The cooperative shall pay the incremental cost of mailing such materials up to an amount equal to the cost of mailing the cooperative’s information regarding the proposition. Any cost in excess of that amount shall be paid, pro rata, by the petitioners submitting materials in opposition, which payment shall be secured by an advance deposit reasonably estimated to cover such excess costs.

(5) An independent auditor selected by the Board of Directors voting shall control and supervise the procedures for voting on the proposition. Each member of the cooperative shall be entitled to one vote on the proposition, regardless of the manner utilized to cast such vote. A member may vote by use of a written ballot prescribed for the election. Such form of written ballot shall be included with the notice required under paragraph (2) of this subsection. Such written ballot shall be cast if received by the time of the close of the voting at the meeting described in paragraph (2). In addition, a member may vote at the meeting required by paragraph (2) by means of such written ballot or by use of a voting machine. After the close of the voting, the independent auditor shall tally the votes validly cast both by written ballot and by use of a voting machine. The cooperative, by its charter or bylaws, may also authorize members to cast ballots by means of an electronic format and electronic transmission. The procedures adopted for the use and transmittal of such electronic ballots shall ensure that each electronic ballot was sent by a member entitled to vote. An electronic ballot shall be cast if received by the close of voting at the meeting described in paragraph (2).

(6) An election under this section shall require the affirmative vote of a majority of those members voting, in an election at which at least fifteen per cent (15%) of the cooperative's members cast votes, to carry the proposition.

(7) The independent auditor shall certify to the Commission, in writing, the results of any such election within five (5) business days after the date of such election. Subject to §224, the action voted by the members shall become effective at the expiration of fifteen (15) days from the date the election certificate is filed with the Commission.

(b) In the event the members of the cooperative have voted, pursuant to subsection (a) of this section, to exempt the cooperative from regulation by the Commission, any such cooperative may vote no more than once every twelve (12) months to return said cooperative under the regulation of the Commission. Such proposition may be submitted to the members of the cooperative by the cooperative’s Board of Directors, or shall be submitted to the members of the cooperative if at least one thousand of the members of the cooperative sign a petition requesting such an election. Such proposition shall be submitted to the members of the cooperative and voted upon in the same manner as provided for in subsection (a) of this section.

§224. Regulations Governing Exempt Electric Cooperatives.

Notwithstanding any electric cooperative’s election to exempt itself from the regulatory authority of the Commission under Section 223, during any such period of exemption:

(a) Such cooperative shall remain subject to the Restructuring Plan approved by the Commission pursuant to section 1005(b) until April 1st, 2005, except as provided in subsection (i)(5) hereof, and subject to modification by the Commission upon application by the cooperative. Effective April 1st, 2005, the governing body of the cooperative shall have full power and authority to revise such Restructuring Plan, subject only to the provisions of subsections (b) through (j) of this section.

(b) Such cooperative shall remain subject to the Commission’s jurisdiction and regulatory authority as necessary to implement sections 203A, 203B, and 204 of this Title.

(c) Whenever such cooperative is a subject of, or participant in, any investigation or proceeding which the Commission is authorized to conduct under this section 224, the cooperative shall be charged with and pay such portion of the expenses of the Commission as is reasonably attributable to such investigation or proceeding in accordance with section 114 of this Title.

(d) Such cooperative shall make available to its members the following reports:

(1) rate schedules, tariffs, and Terms & Conditions of Service, and all amendments thereto

(2) financial and statistical information regarding gross intrastate operating revenues, revenues per rate class, number of members and number of meters per rate class

(3) data and information concerning load management, energy conservation, and similar programs

(4) information concerning ongoing consumer education programs

(5) information concerning the cooperative’s performance (income statements, balance sheets, reliability data, etc.

(e) Such cooperative shall remain subject to section 117 of this Title and shall continue to abide by section 303(a) of this title.

(f) No such cooperative shall increase or decrease any of its rates or charges for Electric Distribution Service or Electric Supply Service for “default” customers under subsection (i)(6) of this section unless:

(1) it provides notice of such proposed action to the members as provided in subsection (g) hereof;

(2) it allows the members to attend those portions of the meeting of the governing body during which such proposed action is to be publicly voted upon, provided, however, that nothing herein shall be deemed to limit the governing body’s right to go into executive session, closed to members, to discuss pending or potential litigation, confidential proprietary information the disclosure of which could be detrimental to the cooperative’s financial interests or which could negatively impact on its ability to conduct business in a competitive environment, or to consult with legal counsel;

(3) it allows the members a reasonable opportunity to address the governing body at such meeting prior to a final decision being made on such proposed action.

(4) the applicable rates and charges for Electric Distribution Service are, within each service classification, the same without regard to the customer’s Electric Supply Service provider.

(g) Such cooperative shall provide notice of all regular meetings of its governing body in its newsletters or as part of the monthly billing statement, and by posting on its website, if any. Notice of special meetings shall be posted on the cooperative’s website, if any, or published (double-column, bordered in black) in two newspapers of general circulation in the cooperative’s service territory at least 24 hours in advance of such meeting. Such notice shall include a statement that copies of the updated agenda for such meetings will be posted on the cooperative’s website, if any, and available at the offices of the cooperative during normal business hours until the time of the meeting; provided however, anything herein to the contrary notwithstanding, failure to provide notice or an updated agenda as required herein due to impossibility, impracticality, or inadvertence, shall not invalidate the meeting or any action taken thereat.

(h) Unless such cooperative has implemented a restructuring plan that provides for retail competition in its Delaware service territory, such electric cooperative may not use the transmission or distribution facilities of a non-affiliated electric utility to make sales to customers in such non-affiliated electrical utility’s Delaware service territory; nor shall such electric cooperative own or receive, directly or indirectly, any economic interest in any entity which uses the transmission or distribution facilities of a non-affiliated electric utility to make sales to customers in such non-affiliated electrical utility’s Delaware service territory.

(i) in the event such cooperative has implemented a restructuring plan that provides for retail competition in its Delaware service territory, such electric cooperative:

(1) shall remain subject to the Commission’s jurisdiction and regulatory authority as necessary to implement the following sections of this Title:

a. Section 1014 (d) (“net energy metering”)

b. Section 1012 (certification of “Electric Suppliers”)

(2) shall implement procedures to require all Electric Suppliers to deliver energy to the cooperative at locations and in amounts which are adequate to meet each Electric Supplier’s obligations to its customers.

(3) shall be governed by section 1011(b) of this title with regard to metering and billing for customers in the cooperative’s service territory.

(4) shall implement and maintain such procedures, processes, and protocols (including all personnel, facilities, and equipment) as reasonable and necessary to provide Direct Access (as defined in section 1001 of this title) to Electric Suppliers and their customers.

(5) shall, until March 31st, 2005, maintain rates and charges that do not exceed those rates and charges previously established by the Commission pursuant to section 1006 (b)(1) of this title, subject to the cooperative’s right to petition the Commission for authority to change those rates in order to recover extraordinary costs pursuant to section 1006 (b)(1) & (b)(2); and subject also to the right of such cooperative, without Commission approval: (1) to revise any individual rate(s) or charge(s) at any time provided that such rate(s) or charge(s) does/do not exceed those established by the Commission pursuant to section 1006(b)(1); and/or (2) to increase rates and charges above those previously established by the Commission, if (and only if) necessary, because of increases in the cooperative’s wholesale power cost, for the cooperative to maintain the minimum 1.5 TIER (“Times Interest Earned Ratio”) and Debt Service Coverage lending requirements established by the Rural Utility Service of the United States Department of Agriculture.

(6) shall have the obligation to provide Electric Supply Service, in accordance with the cooperative’s published rate schedules, terms and conditions of service to all customers within its Commission-designated territory who:

a. Have no choice regarding electric suppliers

b. Do not choose another electric supplier, or

c. Have contracted for electric supply service that is not delivered

(j) Such cooperative may adopt procedures to hear, decide, and address, in a prompt and fair manner, complaints from its members, Electric Suppliers, or suppliers of other competitive services. For purposes of this subsection, ‘other competitive services’ shall mean any service or product provided for a fee by the cooperative to members or customers, other than Electric Supply Service, Electric Distribution Service, metering and billing, or ‘ancillary services’, as defined in Section 1001 of this Title. Such procedures may provide for both informal and formal complaint proceedings. A formal complaint proceeding shall include, at a minimum, the right to present a complaint in writing, the right to have such complaint heard by the Chief Executive Officer of the cooperative (or his/her designee), the right to a written response setting forth the reasons for any decision, and the right to have the complaint and response reviewed by the Board of Directors of the cooperative. A member, Electric Supplier, other supplier of competitive services may, but is not required to, utilize such informal or formal complaint procedures adopted by the cooperative and may, at any time, pursue any other remedy available under law. A determination made in the informal or formal complaint process shall be binding on the cooperative. A member, Electric Supplier, or supplier of other competitive services may agree to accept a determination made in the informal or formal complaint process but may reject such determination and pursue any other remedy available under law.”

Section 3. Amend Chapter 10, Title 26, Delaware Code by adding a new Section 1018 to read as follows:

"§1018. Electric Cooperatives Exempt From Commission Supervision and Jurisdiction

Notwithstanding any other provision of this chapter, any electric cooperative while exempt from the supervision and jurisdiction of the Commission pursuant to Sections 202(g) and 223 of this Title shall be exempt from all provisions of this Chapter except as specified in Section 224 of this Title."

Section 4. Amend Section 1001, Chapter 10, Title 26, Delaware Code by deleting subsection (10) in its entirety and substituting in lieu thereof the following new subsection (10) to read as follows:

"(10) 'Electric Supplier' means a person or entity certified by the Commission that sells electricity to retail electric customers, utilizing the transmission and/or distribution facilities of a non-affiliated electric utility, including: (a) municipal corporations which choose to provide electricity outside their municipal limits (except to the extent provided prior to February 1, 1999), (b) electric cooperatives which, having exempted themselves from the Commission’s jurisdiction pursuant to sections 202 (g) and 223 of this title, choose to provide electricity outside their assigned service territories, and (c) any broker, marketer, or other entity (including public utilities and their affiliates)."

Section 4. Amend §102, Title 26 of the Delaware Code by inserting after the phrase "for public use" the following:

"however, electric cooperatives shall not be permitted directly or through an affiliate to engage in the production, sale or distribution of propane gas or heating oil."

Approved July 10, 2001