Legislative Update - End of Session Wrap-up

 

On Wednesday, the General Assembly wrapped up its session for the year after a long day of House and Senate floor sessions. There were tense moments with legislators working on yet another legislative fix to the TNReady testing fiasco, and the House and Senate tussling over a few remaining bills. TMEPA reminded engaged on a bill from the beginning of the day at 9am until the very end around 11pm. The bill, regarding municipal natural gas utilities and economic development, was the last bill the House and Senate voted on for the day and the year, and it’s detailed below. It was the end of an eventful day and eventful year for TMEPA.

The last day of session was a hectic one for TMEPA as we worked to help clarify a bill that allows municipal natural gas utilities to devote revenues from the natural gas system to fund chambers of commerce and economic and community organizations The bill, HB1914 by Sen. Dolores Gresham and Rep. Ron Gant, was filed at the request of a handful of small municipal natural gas companies in West Tennessee. As amended in committee, the bill said a "municipality" may devote revenues from the natural gas utility to chambers of commerce and economic and community organizations. Since the amendment simply said a "municipality" may devote the funds, we were concerned when there is a utility board separate from the city council that a city council could spend municipal natural gas utility funds on behalf of the utility without the utility board’s taking any action on it. Needless to say, this could have significant consequences in the future for a municipal natural gas utility. TMEPA worked with the bill sponsors, TML, and staff from the Comptroller’s office to clarify the bill language, as they all understood our concerns and were willing to clarify the language to keep the status quo of the utility board being the entity that approves spending gas utility funds when there is a separate utility board from the city council. An amendment was filed to clarify the bill. When the bill was passed by the full Senate on Monday, another amendment was added to the bill with the support of the bill sponsor that said "shall not raise rates on customers to cover contributions targeted for economic development efforts." On Wednesday morning, the bill was the first bill on the calendar for the House that day when it went into session at 9:00 am. The bill was in a posture where the House had to take the bill up, conform to the Senate version which had the clarifying amendment, and pass the bill. During floor debate on the bill, some legislators raised concerns and opposition to the legislation. After a long period of discussion, the bill was rolled further down the agenda for Rep. Mike Carter to exempt his county out of the bill, even though Hamilton County does not have a municipal natural gas utility. Before the bill came back up for consideration, ten amendments total had been filed. Included in those amendments were two regarding smart meters, but fortunately they were both kill using procedural motions. Before the bill was passed by the House, seven counties were exempted from the bill, with only one of them (Knox County) having a municipal natural gas utility. The bill went back to the Senate, where the bill sponsor Sen. Gresham eventually non-concurred in the House amendments after initially attempting to concur and go along with them. This set the stage for a conference committee to be appointed by the House and Senate to work out the differences between the two versions. The conference committee agreed to amending just the big four counties out of the bill (Davidson, Shelby, Knox and Hamilton), which meant applying the bill to all of municipal natural gas utilities except KUB and MLGW. The conference committee report also included language that stated the authority in the bill for municipal natural gas utilities to devote funds to chambers of commerce and economic and community organizations is "in addition to such authorization as may be provided to municipal utility systems under otherwise applicable law." This was grandfathering language TMEPA sought that clarifies the authority municipal utilities currently have under state law to use utility funds for general utility purposes, including for economic development, is not impacted or reduced by the bill. The conference committee report passed the Senate first unanimously, but failed in the House by five votes. The House bill sponsor and House leadership attempted to pass it again, with a second conference committee, with the exact same language as the first one. The bill passed the Senate again unanimously, and needing 50 votes to pass it passed the House 52-26 around 11:00 pm on Wednesday. The bill was the last one to pass the House and Senate this year, after starting the day as the first one on the calendar in the House. It was a long and hectic day as we worked to protect municipal natural gas utility board independence, and we protected the ability for all municipal utilities to use utility funds for general utility purposes, including for economic development.

All of the state’s utility associations (TMEPA, TECA, TML, Tennessee Association of Utility Districts, Tennessee Gas Association, and even TML) filed the legislation this year to prevent a tax increase from going into effect as the Department of Revenue believed that state law could allow the department to require utilities to collect sales tax on connection and reconnection fees. Now that won’t happen. SB2121 by Sen. Ken Yager and Rep. Steve McDaniel passed with popular support in both houses of the legislature. The bill was signed by the governor last week.

The wireless industry’s legislation to put in place statewide guidelines for how local governments approve and site small cell wireless antennas passed the legislature earlier this month. The bill, SB2504, has two main amendments, the main amendment and a second amendment that makes some tweaks. A third amendment fixed a typographical error. The bill contains a broad exemption for any poles owned by a distributor of electric service and any "government-owned electric, gas, water or wastewater utility." The final bill language can be found here.

This year’s session saw four bills filed by Rep. Harry Brooks of Knox County in response to issues he saw with Lenoir City Utility Board, and all four bills would have negatively affected other municipal electric utilities across the state. Rep. Brooks stated his displeasure with the board makeup of Lenoir City Utility Board (LCUB) and its payment in lieu of taxes (PILOT) it pays to Lenoir City. LCUB has most of its customers in Knox County, and its PILOT goes to Lenoir City. Knox County already has two seats on LCUB’s board, and its PILOT goes to Lenoir City because it was used to pay back bonds that helped finance building out its system into Knox County. While Rep. Brooks wants to change this, he has filed four bills that would apply statewide and impact many municipal electric utilities:

• HB1898 prohibited a member of any utility board from being an employee of the utility, an elected official, or having an immediate family member who is an employee of the utility. This bill applies to all utilities (electric, water, wastewater, telephone, municipal, cooperative, utility district), and it would certainly impact municipal utilities that have city council members or mayors as members of their board. It is unclear how the bill would impact utilities whose city council or county commission serve as the utility board.
• HB1897 required any municipal electric utility to have proportional board representation if more than 50% of its customer base is outside its home county. To our knowledge, these circumstances only apply to LCUB. The bill would also require LCUB to proportionally distribute its PILOT to the cities and counties it serves. However, in doing so, the bill removes language in state statute that allows private acts and city charters to determine distribution of a PILOT. Under the bill, a municipal electric system could only distribute its PILOT according to the formula in state statute or according to an agreement between the local governments the utility serves.
• HB2066 removes language in state statute that allows private acts and city charters to determine distribution of a PILOT. Under the bill, a municipal electric system could only distribute its PILOT according to the formula in state statute or according to an agreement between the local governments the utility serves. This is also included in HB1897.
• HB2067 attempts to allow a county to take over a municipal electric system that serves in the county. As drafted the bill refers to a utility district that provides electric service, but we believe this is a drafting error and is meant to be municipally owned electric providers.

Early in the session, Rep. Brooks said he would not be moving three of his bills: HB1897, HB2066, and HB2067. That left his fourth, HB1898, which he attempted to move forward. After meeting with several utility associations, Rep. Brooks drafted an amendment that was somewhat of an improvement over the original bill, but it still infringed on local authority of appointing utility board members. Under the amendment, elected officials could be on utility boards or city councils that serve as utility boards would be permissible if the state or local law that allows it was in place by January 1, 2018. The amendment would also prevented an employee of the utility or someone with a felony from being on a utility board, a utility board member from hiring or promoting a family members, violating Title 12, Chapter 4 of state law, or have an immediate family member from getting a direct benefit from a utility contract. Even though the amendment was better than the original bill, TMEPA remained opposed to the bill. Due to TMEPA’s opposition and opposition by the Tennessee Gas Association, Rep. Brooks took his bill off notice and didn’t pursuing it any more this session. We greatly appreciate everyone’s help in defeating these bills.

 

Two smart meter bills were filed this year, and neither bill advanced out of committee. HB2490 by Rep. Andy Holt and Sen. Mark Green would have prohibited an electric or gas utility from 1) installing a smart meter without the customer's written and signed consent; 2) discontinuing service to a customer if the customer declines to install or use a smart meter; 3) charging a customer any fee for not installing or using a smart meter; or 4) charging a customer any fee to remove a smart meter. It was referred to summer study in the Senate State and Local Government Committee and the House Business and Utilities Subcommittee. Sometimes a bill is referred to "summer study" as a way to politely kill a bill, and with this bill we’ll see if a summer study committee meeting is actually held on the legislation. If it is, the meeting will be a good opportunity to educate legislators about utilities using advancing meter infrastructure to benefit the utility and ratepayers. Another smart meter bill was brought to a vote and defeated. HB1910 by Rep. Antonio Parkinson would prohibit a utility from charging its customers who have a smart meter a fee to reconnect service if the service was disconnected due to nonpayment. The House Business and Utilities Subcommittee defeated it by a vote of 2-7. We appreciate everyone’s help in defeating these bad pieces of legislation.

As originally drafted, Rep. Joe Towns’ SB2114 would prohibit any person, governmental entity, or other legal entity, including a utility district, from rounding up the consumer's bill without obtaining the consumer's express, written permission to opt-in to such a billing procedure. Rep. Towns had drafted an amendment that would continue to allow opt-out round-up programs, but it would put in place more local and state reporting on the funds raised. TMEPA testified to the subcommittee about municipal electric utilities’ round-up statute, how the round-up programs operate, and what the funds from the programs generally are used for. The subcommittee appeared generally comfortable with municipal electric round-up programs, but the bill sponsor and a subcommittee member pledged to work on the issue over the summer as the bill was made mute for the year when it was taken off notice.

Under a bill (SB1793) passed by the legislature this year, wind energy facilities will be required to jump significant state and local regulatory hoops to be allowed in Tennessee. The legislation has allows local governments to set up regulations for the facilities as well. The final bill language can be found here.

Last week the Senate passed legislation that requires beginning in March 2019 the comptroller to offer free online training starting for water utility board members to comply with their training requirements. Last year the legislature passed legislation that requires municipal utility boards that oversee water and wastewater services to receive training, with 12 hours required within one year of appointment to the board and 12 hours over the next three years. SB2292 by Sen. Mike Bell and Rep. Bill Sanderson as amended also allows statewide associations to offer online training as well. The House version reduced from 12 to 7 the total number of training and continuing education hours a municipal utility board commissioner must attend annually, but the Senate restored the full 12 hour requirement. The House concurred in the Senate version, and the bill goes to the governor for his signature.

The legislature passed HB1727, which changes state law regarding the rights of a former owner to property acquired through eminent domain for an amount not less than the fair market value, together with costs. Under current law passed in 2014, a local government that acquires property through eminent domain must attempt to sell the property back to the former owner if the property is being sold within ten years of being acquired. As amended, this year’s bill changes the amount the former owner has to pay as the lesser of 1) price paid to the former property owner, plus interest and the appraised fair market value of any improvements made to the property, or 2) amount representing not less than the fair market value of the property. Also, every two years the former owner could request from the local government entity a statement of intent for the use of the property.

Legislation to expand the ability for communities to deannex from municipalities did not advance this year. As passed by the Senate last 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 in 2016, and a bill even based both the House and Senate in different forms. While the full Senate approved the bill last year, Rep. Carter, the House sponsor, said he didn’t have the votes to move the bill forward this year.

 

Last year the legislature passed the governor’s Tennessee Broadband Accessibility Act, which allows electric cooperatives to offer internet service and provides for grants and tax breaks to expand broadband service. This was a significant piece of legislation after years of municipal electric broadband providers seeking passage of bills that would allow them to serve broadband outside of their electric service area. With the legislature passing broadband legislation last year, there was little appetite to pass any bills on the topic this year. That didn’t stop the legislature’s biggest backer of municipal broadband expansion, who nearly won committee approval of a municipal broadband expansion bill earlier this year. Sen. Bowling is unrelenting in her push to remove barriers to access, and she was still pushing for municipal and cooperative broadband providers to offer broadband outside of their territories. Her SB1045 was heard in the Senate Commerce Committee, and with two committee members absent, the bill failed by one vote in a 3-4 vote. This is the closest vote a bill that includes municipal broadband expansion has gotten in a Senate committee in years. Sen. Bowling attempted to move two other bills: HB969 (allows anyone that serves at least 1,000 with fiber to the premise to receive a statewide internet franchise), HB970 (TMEPA’s bill that allows municipal broadband to expand beyond its electric service area), and HB1410 (the companion to SB1045 that is on calendar for Senate Commerce). Both bills died in House and Senate committees. With significant broadband legislation passing the General Assembly last year, any broadband legislation was a long shot this year. TMEPA didn’t request the sponsors to put the bills on notice, but we supported their efforts where we could.

When the FCC revoked its net neutrality rules in 2017, some states have taken steps to implement similar rules on the state and local levels. Three bills were filed this year on the topic, although none of them got out of a House or Senate committee:

• HB2253 prohibits an internet provider engaging in certain activities when providing internet service to the state, including but not limited to unreasonably interfering or disadvantaging either the state or a state employee’s ability to select, access, and use broadband internet access service or lawful internet content or services of the state or employee’s choice. This bill is also scheduled for the Senate Commerce Committee.
• HB1755 prohibits an internet service provider from engaging in certain activities that would impede a customer’s access to lawful content or services. It also prohibits an internet service provider from engaging in deceptive or misleading practices that misrepresent the treatment of internet traffic or content to a customer. The bill also bans any state governmental entity or local government from contracting with an internet service unless the provider is compliant with this act. TMEPA is opposed to this legislation due to the restriction placed on local government entities. This bill is also scheduled for the Senate Commerce Committee.
• HB2405 creates a task force of eight members of the general assembly to study issues relating to the FCC’s withdrawal of the Open Internet Order. It requires the task force to timely report its findings and recommendations, including any proposed legislation, to the general assembly no later than January 2019.

Earlier this year the legislature considered SB1752, which classified a physical injury to a utility employee while the employee is performing work duties as aggravated assault and a Class A misdemeanor with a fine of up to $15,000. Other professions already have this increased penalty: police officers, firefighters, medical fire responders, paramedics, emergency medical technicians, health care providers, and any other first responders. The bill passed the House Criminal Justice Subcommittee without much discussion. When it came up in the Senate Judiciary Committee, there was extensive debate about the need to treat utility workers differently. At the end of the discussion, the bill failed by a 3-5 vote, with one of the no votes coming from a bill cosponsor.

A Missouri electric cooperative has been in a years-long legal battle over the use of fiber optic cable. With a $130 million class-action judgment, a court found Sho-Me Electric Cooperative went beyond the legal use of their electric easements when it ran fiber optic cables on its system and used the fiber for telecommunications. To prevent such a lawsuit in Tennessee, TECA passed legislation this year to make clear an electric cooperative’s easement can also be used for broadband service. A municipal utility’s easements could not face such a lawsuit, so legislation for municipal electric utilities is not needed.

A bill that would have made daylight savings time permanent all year was sent to a summer study in the Senate State and Local Government Committee this year. In the House it had been resurrected after it was killed earlier this session in a House subcommittee. HB1881 was taken off notice in the full House State Government Committee. Recently, Florida moved to permanent daylight savings time.