This bill terminates the water and wastewater financing board and the utility management review board and creates a new Tennessee board of utility regulation in the office of the comptroller of the treasury. The ongoing business of the utility management review board and the water and wastewater financing board, and the supervision of all entities under the utility management review board and the water and wastewater financing board will be transferred to the Tennessee board of utility regulation.
Presently, the water and wastewater financing board is composed of the following nine members:
(1) The comptroller of the treasury, or the comptroller's designee, who serves as chair;
(2) The commissioner of environment and conservation, or the commissioner's designee;
(3) One gubernatorial appointee who represents municipalities;
(4) One gubernatorial appointee who represents utility districts;
(5) One gubernatorial appointee who represents environmental interests;
(6) One gubernatorial appointee who represents manufacturing interests;
(7) One gubernatorial appointee who represents minority citizens;
(8) One gubernatorial appointee who is an active employee of a municipal water utility; and
(9) One gubernatorial appointee who is an active employee of a water utility district.
Presently, the utility management review board is composed of the following nine members:
(1) The commissioner of environment and conservation or the commissioner's designee;
(2) The comptroller of the treasury or the comptroller's designee, who serves as chair; and
(3) Seven members appointed by the governor, three of whom are experienced utility district managers, three of whom are experienced utility district commissioners, and one of whom is a consumer residing in the state who may have experience in residential development but is not engaged in utility district management or operation.
TENNESSEE BOARD OF UTILITY REGULATION
The new Tennessee board of utility regulation will be composed of 11 members as follows:
(1) The comptroller of the treasury, or the comptroller's designee, who serves as chair;
(2) The commissioner of environment and conservation, or the commissioner's designee, who serves as vice chair;
(3) One gubernatorial appointee who represents the interests of utilities under the jurisdiction of the board;
(4) One gubernatorial appointee who is an active municipal employee or elected official in a county that owns or operates a utility system, who represents the municipalities of this state;
(5) One gubernatorial appointee who represents the interests of minority citizens of this state;
(6) One gubernatorial appointee who is an active employee or sits on the governing board of a municipal water utility under the jurisdiction of the board;
(7) Two gubernatorial appointees who are active employees or commissioners of a utility district under the jurisdiction of the board;
(8) One member, appointed by the comptroller of the treasury;
(9) One member, appointed by the speaker of the senate, who sits on the governing body, or is an active employee, of a utility system; and
(10) One member, appointed by the speaker of the house, who sits on the governing body, or is an active employee, of a utility system.
The initial appointees to the board will serve staggered terms and subsequent appointees will serve four-year terms. The full text of this bill specifies various procedural requirements that will apply to the board.
This bill requires the comptroller to designate a staff person to serve as manager to the board.
Generally, this bill combines the functions and responsibilities of the utility management review board and the water and wastewater financing board into the Tennessee board of utility regulation. The full text of this bill specifies various powers that the board will be authorized to exercise, many of which may presently be exercised by the utility management review board and the water and wastewater financing board.
MUNICIPAL ENERGY AUTHORITIES
Present law authorizes a municipal energy authority to issue bonds for various purposes and to issue notes in anticipation of the collection of revenues from the system for whose benefit the financing is undertaken for the purpose of financing electrical power purchases, including transmission costs, storage costs, and pipeline capacity costs; provided, that no such notes may be issued without first being approved by the comptroller.
This bill adds a review process for bonds and notes, other than a note issued in anticipation of the collection of revenues, proposed to be issued by a municipal energy authority. Generally, a resolution authorizing a bond or note, together with certain information must be submitted to the comptroller. The comptroller will have 15 days to conduct a review and issue a report concerning the bond or note. The report must be published in a local newspaper and on the authority's website. The review process is substantially similar to the review process presently required for bonds and notes issued by water and wastewater treatment authorities under the Water and Wastewater Treatment Authority Act.
Prior to the beginning of the fiscal year, this bill requires an authority to adopt a balanced annual operating budget that identifies the authority's anticipated revenues by source and anticipated expenses by type of expense. The full text of this bill specifies requirements for the budget. A budget as adopted must be submitted to the comptroller for approval. This bill requires the comptroller to provide guidance to the form of a budget. If a proper budget is not approved by or submitted to the comptroller within two months of the beginning of the fiscal year, then the authority is prohibited from issuing a debt or financing obligation until the comptroller of the treasury approves the budget or as otherwise provided for in a manner approved by the comptroller. The comptroller is authorized to waive the requirement of budget approval in order to allow the authority to enter into emergency financial transactions. Under present law, these budgeting requirements apply generally to all utility districts except that this bill adds a requirement that budgets be created in conformity with generally accepted accounting principles and prepared in a form consistent with accepted governmental standards and as approved by the comptroller.
If an authority proposes to sell bonds in excess of $50,000,000 at a negotiated sale, this bill requires that a written request for proposal must be sent to a minimum of five qualified firms no later than 30 days prior to the first meeting of the board of commissioners to discuss the specific bond transaction. A minimum of three proposals must be received no later than 14 days prior to the first meeting. This requirement applies to both financial advisory and underwriting services.
UTILITY DISTRICT LAW OF 1937
This bill makes various changes to reporting requirements under the Utility District Law of 1937.
This bill revises the time within which rate protests may be filed from within 30 days of the date of publication of a statement to within 60 days of the end of a fiscal year.
This bill specifies that a utility district's budget be created in conformity with generally accepted accounting principles and prepared in a form consistent with accepted governmental standards and as approved by the comptroller.
This bill clarifies and adds to the present law concerning the board's authority to conduct informal hearings concerning customer complaints, failure to provide services, failure to adopt and enforce policies required by law, and the inadequacy of policies. This bill moves the venue for judicial review of any decision of the board from the county in which the hearing was held to Davidson County chancery court.
Present law generally requires the comptroller to file with the utility management review board a copy of an audited annual financial report of a financially distressed utility district. After reviewing the report and holding a public hearing, the board is authorized to prescribe a rate structure to be adopted by the financially distressed utility district to cause such utility district to eliminate negative changes in net position, to liquidate in an orderly fashion any deficit total net position or to cure a default on any indebtedness of the district, or any combination of these. If the commissioners of the financially distressed utility district do not adopt the prescribed rate structure, the utility management review board is required to petition the chancery court to require the adoption of the rate structure prescribed by the board or such other remedial actions that, in the opinion of the court, may be required to cause the utility district to be operated in accordance with state law.
This bill adds a requirement that the comptroller refer a utility system to the board if the utility system:
(1) Fails to complete and submit to the board for administrative review an audited annual financial report for two consecutive years;
(2) Is found to have used utility funds to pay non-utility expenses, used non-utility funds to pay utility expenses, or transferred utility funds to any other non-utility fund or account, unless the use or transfer is allowed by law; or
(3) Is found to have made an illegal payment or transfer of funds.
This bill authorizes the Tennessee board of utility regulation to take one or more of the following remedial actions for a financially distressed utility system:
(1) Changes in ownership, management, accounting practices, or user rates;
(2) Adoption or change to maintenance practices, software, or hardware, or development of alternative supplies of resources, means of distribution of resources, or methods of wastewater management;
(3) Merger or consolidation of a utility system with another system; or
(4) Development of rules and policies by the utility system as necessary for effective and responsible management of a utility system.
Under present law, if a utility district is financially distressed or is financially unable to expand the amount or type of service or services as set forth and described in its petition for creation, then the utility management review board may consider the merger or consolidation of the utility district with another utility district or districts to restore financial stability and to ensure continued operations for the benefit of the public being served by the utility district.
This bill instead authorizes the Tennessee board of utility regulation to order the merger or consolidation of an ailing utility system with another utility system if the merger is necessary to restore financial stability of the system, ensure continued operation, or otherwise ensure the well-being of the public being served by the utility system. Under this bill, a utility system is ailing if the utility system:
(1) Is financially distressed;
(2) Is financially unable to expand the amount or type of service as set forth and described in its founding documents or petition for creation, or any other section or private act; or
(3) Displays a pattern of severe managerial incompetence such that the utility system cannot provide the public it serves with safe, consistent access to its services.
Under present law, when a financially distressed utility district is merged with another district, the board is authorized to develop a plan of mitigation payments. This bill adds to the purposes that may be included in the mitigation payments amounts sufficient to fund capital improvements or connect one utility system to another, if the merger is not achievable without the improvements.
This bill revises and adds to the board's authority to review utility systems under its jurisdiction for compliance with federal law. Of significance, this bill adds authorization for the board to review utility systems to determine the financial, technical, and managerial capacities of a utility system to efficiently manage its system, including reasonable and just user rates, debt structures, and water loss. This bill also specifies that the board may take appropriate remedial action (as listed above in (1) – (4)) to correct a deficiency identified by the board.
This bill adds data points that utility districts must include in their annual reports to the board, as described in the full text of this bill.
This bill specifies that the board may take appropriate remedial action (as listed above in (1) – (4)) against a utility district that fails to submit a water loss report.
This bill adds a requirement that a utility system ensure that each member of the utility's governing body completes all required training and collect an annual training statement, on a form approved by the board, from each member of the governing body.
This bill adds a requirement that an employee of, or member of, the governing body of a utility system who becomes aware of a transfer, loan, grant to or from the utility fund, or another transaction in violation of law, immediately report the transaction to the comptroller.
This bill transfers the current balance of the utility district revitalization fund into a new utility revitalization fund. Present law requires that the fund be used for grants to utility districts that have merged or consolidated under the provisions for financially distressed utility districts to mitigate the financial impact of the merger or consolidation.
This bill adds authorization for utility systems pursuing a voluntary merger, consolidation, or acquisition may apply to the board for grants from the fund. This bill authorizes the board to grant the application if it finds that the merger is in the best interest of at least one utility system's service population, does not harm another service population, and the grant is necessary to achieve the merger.
The full text of this bill makes additional changes concerning the bases for determining grant awards, grant eligibility, accounting, and reporting.
DETERMINING A DEFICIT FOR CERTAIN MUNICIPAL WATER SYSTEMS
This bill deletes a provision of present law that provides, in any area where service has been extended by a municipal water system or utility district, from Selmer or Henderson, using funds received from a community development block grant for such water system, in determining whether a facility has a retained earnings deficit or an operating deficit, depreciation shall not include the depreciation on assets acquired with such grant funds if the number of water customers to be served by such extension is, at the time of the initial extension, 75 or fewer.
WATER AND WASTEWATER TREATMENT AUTHORITY ACT
This bill makes various changes to the Water and Wastewater Treatment Authority Act to reflect this bill's transfer of the powers and duties of the water and wastewater financing board to the Tennessee board of utility regulation.
As discussed above with regard to budgets developed pursuant to the Utility District Law of 1937, this bill adds a requirement to the budgeting process for water and wastewater treatment authorities that their budgets be created in conformity with generally accepted accounting principles and prepared in a form consistent with accepted governmental standards and as approved by the comptroller.
WASTEWATER FACILITIES ACT OF 1987
This bill deletes various provisions of the Wastewater Facilities Act of 1987 concerning the establishment of the water and wastewater financing board and subjects for which wastewater facilities will now be regulated under the Utility District Law of 1937.
REGIONAL WATER AND WASTEWATER TREATMENT AUTHORITY ACT
As discussed above with regard to budgets developed pursuant to the Utility District Law of 1937, this bill adds a requirement to the budgeting process for water and wastewater treatment authorities created under the Regional Water and Wastewater Treatment Authority Act that their budgets be created in conformity with generally accepted accounting principles and prepared in a form consistent with accepted governmental standards and as approved by the comptroller.
ON APRIL 3, 2023, THE SENATE ADOPTED AMENDMENTS #1 AND #2 AND PASSED SENATE BILL 845, AS AMENDED.
AMENDMENT #1 changes the sunset date for the newly constituted Tennessee board of utility regulation from June 30, 2026, to June 30, 2025.
AMENDMENT #2 revises various provisions of this bill, as follows:
(1) Terminates the Tennessee board of utility regulation created by this bill pursuant to the Tennessee Governmental Entity Review Law in June 30, 2025, instead of June 30, 2026;
(2) Requires the comptroller's report issued within 15 days from the proposed bond or note issue statement to be published only on the authority's website during the week following the report's receipt;
(3) Clarifies that if an authority proposes to sell bonds in excess of $50 million at a negotiated sale, a written request for proposal must be sent to a minimum of five qualified firms not later than 30 days prior to the first meeting of the authority's governing body to discuss the specific bond transaction;
(4) Adds that "financially distressed utility district" includes a utility district that has a deficit in total net position or unrestricted net position in any one year;
(5) Clarifies that "utility system" includes the water, wastewater, or natural gas systems of a county, metropolitan government, or incorporated town or city;
(6) Requires that at least one member of the Tennessee board of utility regulation must sit on the governing body or be an active employee of a utility system that owns or operates a natural gas system;
(7) Clarifies that the board has the authority to review and conduct informal hearings on the failure of a utility system to adopt or enforce policies for the efficient and financially responsible operation of water leak adjustment within their utility system;
(8) Requires that for any complaint submitted to the board for the failure of a utility system to offer or extend utility service to a customer, the utility system has the affirmative burden to show that it does not have the capacity to serve the customer; service to the customer is not economically feasible; or service is not in the best interest of the utility and its existing customers;
(9) Limits the board's ability to conduct an informal hearing only upon a referral from the comptroller or board staff. However, the board staff must recommend that the board conduct a hearing pursuant to a customer complaint, so long as the complaint presents a dispute that, if resolved in favor of the complainant, would justify the board ordering remedial action;
(10) Clarifies that the comptroller must refer a utility system to the board if the utility system failed to complete and submit an audited financial report for administrative review for two consecutive years to the comptroller; and
(11) Requires that when two utility systems merge and the utility sy