2017 Legislative Wrap-up

 

This year’s legislative session adjourned for the year on Wednesday, May 10, which was the end of a short but productive work week for the legislature. Last Friday, May 5, the House passed the budget after tensions eased among different groups of legislators over different funding priorities, and the Senate approved it on Monday night. With the budget out of the way, both chambers went to work on bills "behind the budget," which are bills that languish in the Finance Committees waiting to get funding in the budget because their fiscal notes say they cause state or local governments to spend or lose money. With the budget passing the legislature, the bills funded in the budget can begin moving, and the bills that weren’t funded meet a quick death. After passing the budget, the House and Senate grinded through these bills along with a handful of others that waited until the very end to get passed. The legislature is set to return January 9, 2018, at 12:00 pm sharp. Below is a wrap-up of the bills most important to municipal electric utilities, both the ones that passed and the ones that didn’t.  

The governor’s broadband bill (SB1215, Public Chapter 228) was approved by the legislature last month and seeks to increase access to broadband across the state. The highest profile part of the bill allows electric cooperatives to offer broadband and video services. Also included in the bill are grants ($35 million over three years) to expand 10/1 internet service to unserved areas and a tax incentive ($10 million over three years) for private companies that purchase broadband equipment. The bill doesn’t include any authorization for municipal broadband expansion, but municipal providers will be able to sell broadband wholesale to electric cooperatives now that cooperatives can offer broadband service. There were several other bills, including one from TMEPA (HB970), that would have allowed municipal broadband service to be offered outside of their electric footprint, but none of them advanced. 

At the urging of TMEPA, this year the General Assembly approved legislation to allow most municipal electric systems to convert to municipal energy authorities. The bill amends current law which allows only home rule cities to convert their electric utilities to municipal energy authorities. Johnson City is the sole system to take advantage of this statute, and it follows four other utilities that became energy authorities through private acts which passed the legislature (Jackson, Bolivar, Brownsville, Tullahoma). The bill (HB1290) expands current law so that every municipal electric system (except the big four systems) would only have to have their city council approve it by a two-thirds majority without having to then also get state legislative approval. Because some municipal electric systems offer other utility services, the bill includes language regarding water and wastewater service. Gas provisions in the original bill were removed due to the opposition from private gas companies and gas utility districts. With the gas provisions removed, a municipal electric system that offers gas service could not become an energy authority under this bill, but it would still be able to become one through a private act. The bill officially passed the legislature on the last day of session when the Senate concurred in a House amendment that clarifies a municipal energy authority that offers water and wastewater service would still be subject to the regular oversight and regulations of municipal water and wastewater systems. The bill is expected to be signed by governor in the next week or two.

This year saw two bills that would have required municipal utility boards to add members outside their municipality. HB269 was targeted at utilities serving Knox County, but it was pulled early in the legislative session with the bill sponsor saying he will ask the Comptroller and utility associations to study the issue of board representation.  SB1247 as filed applied statewide, but it eventually was amended to target Shelby County and MLGW. It was finally pulled after the House sponsor from Shelby County received written assurances from Memphis city leadership regarding input into the MLGW board from outside Memphis city limits. Even though both bills didn’t pass this year, previous legislative sessions have seen similar bills, so this issue is likely to return in the future.

This year the legislation approved legislation to require water and wastewater boards to undergo training and continuing education. SB138 (Public Chapter 118) requires board members of any utility that offers water or wastewater service to undergo 12 hours of training on subjects like board governance, financial oversight, policy-making responsibilities, and other topics related to duties of the board. An amendment was added on the bill to clarify the training requirements also apply to city councils that serve as a utility’s board. The bill was filed at the request of the Comptroller’s Office, and it was recommended by the Utility Management Review Board and the Water and Wastewater Financing Board. This legislation does not apply to boards that oversee only an electric utility, but some of TMEPA’s board training could apply to the bill’s requirements. As the Comptroller puts out guidance, we’ll put more information out as we get it. 

A bill pushed by Piedmont Gas against Nashville Electric Service was pushed hard this year, but eventually it was pulled after the utilities worked out an agreement. The bill (HB983 as amended) would have forced NES to change their connection fees, specifically regarding whether the property has just electric service or both electric and gas service. NES’s connection charge fees recover their costs, but Piedmont Gas testified they believe the fees are unfair. The bill had advanced out of a House subcommittee and out of the Senate State and Local Government Committee. The utilities were in discussions for a week or two, and they came to a final agreement just before the House committee meeting when the bill was pulled. 

One of the first bills to pass the legislature this year was SB128, which updates state law so that the electrical safety code adheres to the August 2016 edition of the American National Standard Electrical Safety Code, which is the most recent version. The bill removed the August 2011 edition as the state’s electrical safety code. The bill became Public Chapter 3.

A bill (SB464, Public Chapter 233) passed the legislature that makes some tweaks to Tennessee’s open records law:

• The bill clarifies that requests to simply view records do not have to be in writing and cannot be assessed a fee. 
• To request copies of public records, a government entity may require it be in writing, and if it is required to be in writing the written request shall be accepted if delivered in person, by mail, by email, or by an electronic form. Allowing request for copies by email is perhaps the biggest change. A government entity may still require the requestor to present a photo ID. 
• If a person makes two or more requests to view a public record within a six-month period and, for each request, the person fails to view the public record within fifteen business days of receiving notification the record is available to view, the local government is not required to comply with any public records request from the person for a period of six months from the date of the second request unless the records custodian determines failure to view the public record was for good cause. 
• If a person makes a request for copies of a public record and, after copies have been produced, the person fails to pay to the records custodian the cost for producing such copies, the records custodian is not required to comply with any public records request from the person until the person pays the local government for such copies if the records custodian provided the person with an estimated cost for producing the copies in prior to producing the copies and the person agreed to pay the estimated cost for such copies. 

Many private telephone and broadband providers would see their tax bill decreased under legislation passed on the last day of session. SB1363 as amended changes the classification of property of ILECs, telephone cooperatives and nongovernmental entities that provide telephone or VoIP services so their property is assessed lower at a rate similar to cable companies. The state constitution provides for categories of real property, with public utility property assessed at 55 percent of its value and industrial and commercial property assessed at 40 percent of its value. Currently, the legacy telephone companies like AT&T and telephone cooperatives are classified as a public utility and are assessed at 55 percent of its value, while cable companies like Comcast and Charter are classified as industrial and commercial property and are assessed at 40 percent of its value. All of these companies now provide internet service but are taxed at different rates, and this bill taxes them at a similarly assessed value. This tax cut will be phased in over a five-year period through a temporary privilege tax that will ease the reduced revenue to state and local governments. For municipal providers, starting January 1, 2023, their PILOT payments can take into consideration the reclassification of these services at the lower 40 rate when their in lieu of tax payments are calculated. 

The legislature approved a statewide year-long moratorium until July 2018 on wind farms (SB1336). The House and Senate sponsors represent Cumberland County, which is the location of a proposed wind farm to be built. The moratorium would not apply to counties or cities that have already established local zoning for wind farms. During the moratorium, a task force established in the legislation will come up with recommendations for state legislation next year. The task force’s recommendations are due in January 2018 for the legislature to take up at the beginning of next year’s legislative session. 

Local governments will be able to keep some records that deal economic development confidential. SB1179, as amended, allows contracts or agreements of counties and municipalities that obligate public funds as part of the local government's economic and community development program to be kept confidential until the contract or agreement is presented to or considered by the governing body. The local governing body must publicly disclose the proposal prior to a vote regarding the proposal.

A bill to protect vendor information related to cybersecurity passed the legislature this year. SB1201 authorizes local governments to make the identity of a vendor that provides goods or services used to protect electronic information process systems, telecommunication and other communication system and data storage confidential by affirmative vote of its governing body. The bill also requires the identity of a state vendor that provides goods or services used to protect electronic information process systems, telecommunication and other communication system and data storage for the state to be confidential. The bill goes to the governor for his signature. The governor has signed the bill and is Public Chapter 114. 

A bill to establish a state Energy Policy Council passed the legislature the last week of session. HB438 creates the Tennessee Energy Policy Council to make recommendations to the governor and general assembly on how to manage energy resources in the state. The bill was amended to tweak some of the language, including moving the council from TDEC to the Comptroller’s Office. Included on the thirteen-member proposed council is TVA and a representative of a "local distribution utility." With the amendments on the bill, the fiscal note was reduced and the bill’s costs were funded in the governor’s supplemental amendment to the budget. As the energy policy council comes together, it will be interesting the role it makes for itself. TMEPA will add this new state entity as something else to keep our eye on and advocate to on behalf of municipal power.

Legislation to expand the ability for communities to deannex from municipalities passed the Senate this year. SB641 would allow residents in an area to hold a referendum to vote on whether to leave the city. The bill would also prohibit the discontinuation of utility services outside municipal boundaries for reasons related to deannexation. Also included in the legislation is language that clarifies any deannexation would not affect current utility services, meaning utility service would not have to be pulled out of deannexed areas. This issue saw heavy debate last year, and a bill even based both the House and Senate in different forms. While the full Senate approved the bill, it was never scheduled for a hearing in a House committee. 

The legislature approved legislation (SB445) that changes where handgun carry permit holders can carry handguns onto the property of local governments. SB445 removes a local government’s ability to prohibit or restrict the possession of a handgun by a handgun carry permit holder on local government property unless the following are provided t at each public entrance to the property:

1. Metal detection devices;
2. At least one law enforcement or private security officer who has been adequately trained to conduct inspections of persons entering the property by use of metal detection devices; and
3. That each person who enters the building through the public entrance when the building is open to the public and any bag, package, and other container carried by the person is inspected by a law enforcement, private security officer, or authorized representative with the authority to deny entry to the property.

The bill exempts some local government buildings like schools or courthouses, but none of the exemptions apply to municipal utilities. The bill also allows lawsuits against local governments for ordinances and policies that adversely affect a lawful gun owner. 

Legislation recommended by the Comptroller regarding taking corrective actions from audit findings passed this year after seeing significant changes from its original form. As amended, SB315 requires local governments and utilities with one or more audit findings to submit a corrective action plan to the Comptroller addressing each finding. The corrective action plan must provide contact names for who is responsible for the corrective action, the corrective action taken or planned, and the anticipated completion date. If the local government or utility does not agree with an audit finding, or believes corrective action is not required, the corrective action plan must state the reasons and justifications for that disagreement or belief. The amendment language which rewrites the bill can be found here. The bill originally allowed the state to withhold tax revenue in reserve until the noncompliant local government becomes compliant with the bill, but that was taken out of the bill. 

• SB1158 would have established an Emergency Relief Program, to be administered by TEMA under which a city or county may request a grant to help offset the costs incurred by the county in responding to an emergency. Money would still need to be appropriated to the program in the budget. The bill didn’t make it out of the House Finance Subcommittee and the Senate Finance Committee, but it could find new life next year.
• SB794 was deferred to a summer study in the House and removed from consideration for the year in the Senate. The bill would allow communities in start a Property Assessed Clean Energy (PACE) program. Under the program, cities would allow property owners to borrow money from the city to install solar or other "clean energy" devices on their homes, and the property owners would pay back the costs of the devices through a special assessment on their property taxes.