CHAPTER 27
SENATE BILL No. 480
An  Act concerning retail electric suppliers; amending K.S.A. 66-104d, 66-1,176
and 66-1,176b and repealing the existing sections.

Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 66-1,176 is hereby amended to read as follows: 66-
1,176. (a) Whenever a city proposes to annex land that is located within
the certified territory of a retail electric supplier, the city shall provide
notice to the retail electric supplier in the manner prescribed by K.S.A.
12-520a, and amendments thereto. All rights of a retail electric supplier
to provide electric service in an area annexed by a city shall terminate
180 days from the date of annexation, unless such electric supplier is then
holding a valid franchise for service in the area granted by the annexing
city. Such period of 180 days shall be extended to 210 days from the date
of annexation if a franchise is granted to the retail electric supplier pur-
suant to referendum conducted according to applicable franchise laws of
the state of Kansas within such period of 210 days. Whenever the city
annexes land that is located within the certified territory of a retail electric
supplier, the city shall negotiate for the issuance of a franchise agreement
pursuant to K.S.A. 12-2001, et seq., and amendments thereto, with a retail
electric supplier holding a certificate within the annexed area. Nothing
herein shall be construed to require a supplier holding both a certificate
of convenience and a franchise for the area annexed to obtain a new
franchise. The city shall have the final selection of which supplier receives
a franchise to operate within the annexed area. When making such selec-
tion, the city shall consider certain factors including, but not limited to:
(1) The public convenience and necessity; (2) rates of various suppliers;
(3) desires of the customer or customers to be served; (4) economic impact
on the suppliers; (5) economic impact on the customers of the suppliers;
(6) the utility's operational ability to serve the annexed area; (7) avoiding
the wasteful duplication of facilities; (8) avoiding unnecessary encum-
brance on the landscape; and (9) preventing the waste of materials and
natural resources. Within 30 days after the final decision of the city, any
supplier aggrieved thereby may file an appeal in the district court of the
county in which the annexed area is located to determine the reasonable-
ness of the final decision. In the event that an appeal of the decision is
filed in the district court, the retail electric supplier providing service at
the time of annexation shall continue to provide service until such time
as the appeal has been concluded. In the event service rights are termi-
nated pursuant to this section, the commission shall certify such annexed
area as a single certified territory to the supplier holding a franchise for
or then providing retail electric service in the city immediately prior to
the annexation.

      (b) In the event the supplier holding a franchise or then providing
retail electric service does not effect the assumption of electric service to
the annexed area at the termination of the applicable 180-day or 210-day
period as provided in subsection (a), then the originally certified supplier
shall have the right to continue service to the annexed area and charge
its ordinary rates therefor until such supplier does assume service to the
annexed area. Such service shall be free of any franchise fee or other
compensation to the city or the electric supplier holding the franchise. If
the supplier holding a franchise has not assumed service to the annexed
area within 180 days following the applicable 180-day or 210-day period
provided in subsection (a), the city may require the originally certified
supplier to obtain a franchise in order to continue service to the annexed
area. Unless otherwise mutually agreed upon by the affected suppliers,
no assumption of electric service shall occur within 15 days following
notice to the originally certified supplier of the intended changeover time.

      (c) Whenever the service rights of a retail electric supplier are ter-
minated pursuant to subsection (a), fair and reasonable compensation
shall be paid to such retail electric supplier by the supplier subsequently
authorized to provide electric service. Such compensation shall be an
amount mutually agreed upon by the affected suppliers or the sum of the
following:

      (1) The depreciated replacement cost for the electric utility facilities
in the territory in which the service rights have been terminated pursuant
to subsection (a). As used in this paragraph, ``depreciated replacement
cost'' shall mean the original installed cost of the facilities, adjusted to
present value by utilizing a nationally recognized index of utility construc-
tion costs, less accumulated depreciation based on the book depreciation
rates of the selling utility as filed with and approved by the state corpo-
ration commission, which are in effect at the time of acquisition;

      (2) all reasonable and prudent costs of detaching the electric system
facilities to be sold and all reasonable and prudent costs of reintegrating
the remaining electric system facilities of the retail electric supplier whose
service rights are terminated pursuant to subsection (a);

      (3) an amount equal to two times the gross revenues attributable to
the customers in the terminated territory during the 12 months next pre-
ceding the date of termination transfer of the service rights pursuant to
subsection (a); and

      (4) an amount equal to the state and federal tax liability created by
the taxable income pursuant to the provisions of this paragraph and par-
agraphs (1), (2) and (3) by the retail electric supplier whose service rights
are terminated pursuant to subsection (a), calculated without regard to
any tax deductions or benefits not related to the sale of assets covered
herein.

      (d) In the event that the parties are unable to agree upon an amount
of compensation to be paid pursuant to subsection (c), after 60 days fol-
lowing the date of termination of service rights either party may apply to
the district court having jurisdiction where any portion of the facilities
are located, for determination of compensation. Such determination shall
be made by the court sitting without a jury.

      Sec.  2. K.S.A. 66-1,176b is hereby amended to read as follows: 66-
1,176b. (a) When the service rights of a retail electric supplier are ter-
minated by a city during the period in which a valid franchise is in effect
and the service rights are assumed by the terminating city, the governing
body of the city shall acquire from the terminated supplier the parts of
the local electric distribution system necessary to serve all customers
within the previously franchised area and the terminated supplier shall
sell the system to the governing body of such city for which it shall be
fairly compensated. Such compensation shall be an amount mutually
agreed upon by the affected parties or an amount determined by the
following formula:

      (1) The depreciated replacement cost for the electric utility facilities
in the territory in which the service rights have been terminated. As used
in this paragraph, ``depreciated replacement cost'' means the original in-
stalled cost of the facilities, adjusted to present value by utilizing a na-
tionally recognized index of utility construction costs, less accumulated
depreciation based on the book depreciation rates of the selling utility,
as filed with and approved by the state corporation commission, which
are in effect at the time of acquisition;

      (2) the depreciated replacement costs of the remaining proportion of
any take or pay power contracts or participation power agreements;

      (3) the depreciated replacement cost for the electric utility facilities
outside the affected territory used in providing service to the formerly
franchised area. Such facilities shall include all generation facilities and
all transmission facilities throughout the terminated utility's integrated
system, the value of which shall be determined by the depreciated re-
placement cost formula in paragraph (1) multiplied by the percentage of
the terminated utility's total retail kilowatt-hour sales to customers in the
affected area during the 12 months next preceding the effective date of
the sale;

      (4) all reasonable and prudent costs of detaching the electric system
facilities to be sold, including the reasonable costs of studies and inven-
tories made to determine the facility's value and all reasonable and pru-
dent costs of reintegrating the remaining electric system facilities of the
retail electric supplier whose service rights are terminated;

      (5) an amount equal to two times the net revenues received during
the 12 months next preceding the date of termination of the service rights
from the customers within the affected area of the retail electric supplier
whose service rights are terminated. As used in this paragraph, ``net rev-
enues'' means the total revenues received by the terminated utility for
electric service within the affected area less franchise and sales taxes col-
lected; the cost of fuel or purchased power recovered in the revenues;
and labor, maintenance, administration and insurance. This number shall
be multiplied by the number of years remaining in any franchise contract;
and

      (6) an amount equal to the state and federal tax liability created by
the taxable income pursuant to the provisions of this paragraph and par-
agraphs (1), (2), (3), (4) and (5) by the retail electric supplier whose serv-
ice rights are terminated, calculated without regard to any tax deductions
or benefits not related to the sale of assets covered herein.

      (b) If the parties are unable to agree upon the amount of compen-
sation to be paid pursuant to this act after 60 days following the date of
termination of service rights, either party may apply to the district court
having jurisdiction where any portion of the facilities is located for de-
termination of compensation. Such determination shall be made by the
court sitting without a jury.

      Sec.  3. K.S.A. 66-104d is hereby amended to read as follows: 66-
104d. (a) As used in this section, ``cooperative'' means any cooperative,
as defined by K.S.A. 17-4603, and amendments thereto, which has fewer
than 15,000 customers and which provides power principally at retail.

      (b) Except as otherwise provided in subsection (f), a cooperative may
elect to be exempt from the jurisdiction, regulation, supervision and con-
trol of the state corporation commission by complying with the provisions
of subsection (c).

      (c) To be exempt under subsection (b), a cooperative shall poll its
members as follows:

      (1) An election under this subsection may be called by the board of
trustees or shall be called not less than 180 days after receipt of a valid
petition signed by not less than 10% of the members of the cooperative.

      (2) The proposition for deregulation shall be presented to a meeting
of the members, the notice of which shall set forth the proposition for
deregulation and the time and place of the meeting. Notice to the mem-
bers shall be written and delivered not less than 21 nor more than 45
days before the date of the meeting.

      (3) If the cooperative mails information to its members regarding the
proposition for deregulation other than notice of the election and the
ballot, the cooperative shall also include in such mailing any information
in opposition to the proposition that is submitted by petition signed by
not less than 1% of the cooperative's members. All expenses incidental
to mailing the additional information, including any additional postage
required to mail such additional information, must be paid by the sig-
natories to the petition.

      (4) If the proposition for deregulation is approved by the affirmative
vote of not less than a majority of the members voting on the proposition,
the cooperative shall notify the state corporation commission in writing
of the results within 10 days after the date of the election.

      (5) Voting on the proposition for deregulation shall be by mail ballot.

      (d) A cooperative exempt under this section may elect to terminate
its exemption in the same manner as prescribed in subsection (c).

      (e) An election under subsection (c) or (d) may be held not more
often than once every two years.

      (f) Nothing in this section shall be construed to affect the single cer-
tified service territory of a cooperative or the authority of the state cor-
poration commission, as otherwise provided by law, over a cooperative
with regard to service territory, charges for transmission services, sales of
power for resale, wire stringing and transmission line siting, pursuant to
K.S.A. 66-131, 66-183, 66-1,170 et seq. or 66-1,177 et seq., and amend-
ments thereto.

      (g)  (1) Notwithstanding a cooperative's election to be exempt under
this section, the commission shall investigate all rates, joint rates, tolls,
charges and exactions, classifications and schedules of rates of such co-
operative if there is filed with the commission, not more than one year
after a change in such cooperative's rates, joint rates, tolls, charges and
exactions, classifications or schedules of rates, a petition signed by not
less than 5% of all the cooperative's customers or 3% of the cooperative's
customers from any one rate class. If, after investigation, the commission
finds that such rates, joint rates, tolls, charges or exactions, classifications
or schedules of rates are unjust, unreasonable, unjustly discriminatory or
unduly preferential, the commission shall have the power to fix and order
substituted therefor such rates, joint rates, tolls, charges and exactions,
classifications or schedules of rates as are just and reasonable.

      (2) The cooperative's rates, joint rates, tolls, charges and exactions,
classifications or schedules of rates complained of shall remain in effect
subject to change or refund pending the state corporation commission's
investigation and final order.

      (3) Any customer of a cooperative wishing to petition the commission
pursuant to subsection (g)(1) may request from the cooperative the
names, addresses and rate classifications of all the cooperative's customers
or of the cooperative's customers from any one or more rate classes. The
cooperative, within 21 days after receipt of the request, shall furnish to
the customer the requested names, addresses and rate classifications and
may require the customer to pay the reasonable costs thereof.

      (h)  (1) If a cooperative is exempt under this section, not less than 10
days' notice of the time and place of any meeting of the board of trustees
at which rate changes are to be discussed and voted on shall be given to
all members of the cooperative and such meeting shall be open to all
members.

      (2) Violations of subsection (h)(1) shall be subject to civil penalties
and enforcement in the same manner as provided by K.S.A. 75-4320 and
75-4320a, and amendments thereto, for violations of K.S.A. 75-4317 et
seq. and amendments thereto.

      (i)  (1) Any cooperative exempt under this section shall maintain a
schedule of rates and charges at the cooperative headquarters and shall
make copies of such schedule of rates and charges available to the general
public during regular business hours.

      (2) Any cooperative which fails, neglects or refuses to maintain such
copies of schedule of rates and charges under this subsection shall be
subject to a civil penalty of not more than $500.

      Sec.  4. K.S.A. 66-104d, 66-1,176 and 66-1,176b are hereby repealed.

      Sec.  5. This act shall take effect and be in force from and after its
publication in the statute book.

Approved April 4, 2002.
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