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SENATE BILL 1595
By Jackson
HOUSE BILL 1673
By Bricken
HB1673
010677
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AN ACT to amend Tennessee Code Annotated, Title 7,
Chapter 34; Title 7, Chapter 82; Title 9, Chapter
21 and Title 68, Chapter 221, relative to utility
regulation.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 7-34-115, is amended by deleting
subsections (j) and (k).
SECTION 2. Tennessee Code Annotated, Section 7-82-202, is amended by deleting the
last sentence of subdivision (a)(2).
SECTION 3. Tennessee Code Annotated, Section 7-82-202(g), is amended by deleting
"municipality or county" and substituting "municipality, county, or utility authority".
SECTION 4. Tennessee Code Annotated, Section 7-82-202, is amended by deleting
subsection (e) and substituting:
(e)
(1) As used in this subsection (e):
(A) "Agreement" means the agreement among two (2) or more
utility systems to consolidate, along with the resolution passed by the
utility systems' governing body and the petition to the county mayor
requesting that the county mayor order the utility systems to consolidate;
(B) "Component utility" means a utility system that is a party to an
agreement to consolidate;
(C) "Consolidation" means the merger or consolidation of two (2)
or more utility systems, at least one (1) of which is a utility district, or the
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transfer of the assets and obligations of one (1) or more utility systems to
one (1) or more other utility systems;
(D) "Consolidated utility" means the surviving utility system
following a consolidation, or the new utility system created by a
consolidation;
(E) "Order" means the order entered by a county mayor ordering
the utility systems to consolidate;
(F) "Public hearing" means the hearing regarding the
consolidation of two (2) or more utility systems required by subdivision
(e)(2)(E); and
(G) "Utility system" has the same meaning as the term is defined
in § 7-82-701.
(2)
(A) Two (2) or more utility systems, at least one (1) of which is a
utility district, may agree to consolidate to more efficiently and
conveniently furnish the utility systems' services.
(B) The utility systems' governing bodies must pass a resolution
to initiate the consolidation.
(C) The resolution passed by the utility systems' governing bodies
must include a petition to one (1) or more county mayors requesting that
the mayor or mayors enter an order approving the agreement.
(D) The petition must be submitted to the county mayor of the
county or counties in which the utility system was created. If a
component utility is a multi-county utility system, the petition must be
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submitted to the county mayor of any county in which the utility system is
situated in whole or in part.
(E)
(i) The county mayor or mayors shall proceed with the
petition in the same manner as provided in this chapter for the
creation of a utility district, except as set forth in this subdivision
(e)(2)(E) and subsection (g).
(ii) If the petition was submitted to more than one (1)
county mayor, each mayor must hold a public hearing within the
mayor's respective county.
(iii) The county mayor shall give notice of the date, place,
and purpose of the public hearing not more than fifteen (15) days
nor less than seven (7) days prior to the date of the public hearing.
(iv) Notice must be posted in a newspaper of general
circulation in the service area of all of the affected utility systems.
If there is no such newspaper in the service area of an affected
utility system, or no newspaper in the service area will run within
the timeframe set forth in subdivision (e)(2)(E)(iii), notice must be
posted in five (5) conspicuous public places within the boundaries
of the affected utility system.
(v) Notice of the public hearing must be sent to the chief
executive officer of each affected utility system. The chief
executive officer may choose to waive the notice requirement
under this subdivision (e)(2)(E)(v).
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(vi) Notice of the public hearing must be sent to the chief
executive officer of each utility system, municipality, or county,
with territory that overlaps the territory of the proposed utility
system, or with territory located within five (5) miles of the territory
of the proposed utility system.
(3)
(A) The county mayor or mayors shall enter an order approving
the agreement if the mayor or mayors find that the consolidation:
(i) Would enhance the public convenience and necessity;
(ii) Is economically sound and feasible; and
(iii) Is in the best interest of the public served by the utility
systems that are parties to the agreement.
(B) The agreement and order must:
(i) Designate a name for the consolidated utility;
(ii) Define the consolidated utility's services and
boundaries, and provide that the consolidated utility assumes the
operation of the component utilities;
(iii) Account for the revenues from the component utilities
in such a manner as not to impair the legal obligations of the
consolidated utility, and preserve and protect the contract rights
vested in the owners of any outstanding bonds, obligations, or
contractual interests;
(iv) Provide for an equitable distribution of the component
utilities' assets and liabilities;
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(v) Provide for the termination of the existence of the
component utilities, if necessary, and establish the legal rights,
duties, and obligations of any surviving entities and parties
involved; and
(vi) Appoint commissioners to the new utility district,
subject to the requirements of this subsection (e).
(C) The order must be entered into by the mayor or mayors to
whom petitions were submitted. If a petition was submitted to more than
one (1) mayor, the order entered by each mayor must be substantially
identical.
(4)
(A) Notwithstanding this section or another law to the contrary,
two (2) or more component utilities may establish in the component
utilities' agreement that the board of commissioners of the consolidated
utility will consist of five (5) commissioners. This subdivision (e)(4)(A)
only applies when the consolidated utility is a utility district and at least
two (2) of the component utilities are utility districts.
(B) The petition for consolidation must name in the petition up to
five (5) individuals to serve as commissioners for the consolidated utility,
each of whom is an existing member of the governing body of one (1) of
the component utilities proposing to consolidate and is qualified to serve
in accordance with § 7-82-308(d).
(C) The county mayor or mayors conducting the public hearing or
hearings shall appoint the individuals identified in the agreement and
order as commissioners for the consolidated utility, unless the county
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mayor or mayors find such individuals are not qualified to serve as
commissioners under§ 7-82-308(d).
(D) If the consolidating districts do not name five (5) individuals
who are qualified to serve as commissioners under§ 7-82-308(d), then
the county mayor or mayors shall appoint a sufficient number of
individuals who are qualified under§ 7-82-308(d) to serve as
commissioners for any seats not named by the consolidating districts in
the petition.
(E) The county mayor or mayors shall appoint one (1)
commissioner for an initial two-year term, two (2) commissioners for initial
three-year terms, and two (2) commissioners for initial four-year terms.
(F) If an agreement is submitted to more than one (1) county
mayor and the county mayors cannot agree as to the appointment of a
commissioner in this subdivision (e)(4), then the county mayor of the
county in which the greatest number of customers in the consolidated
utility reside shall determine any disputed appointments, including the
commissioner's initial term.
(5) Notwithstanding this section or another law to the contrary, four (4) or
more utility districts that agree to consolidate may agree to increase the size of
the board of commissioners of the consolidated utility to seven (7)
commissioners in accordance with the requirements of subdivision (e)(4). The
county mayor shall appoint two (2) commissioners for initial two-year terms, two
(2) commissioners for initial three-year terms, and three (3) commissioners for
initial four-year terms.
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SECTION 5. Tennessee Code Annotated, Section 7-82-307, is amended by deleting
subdivision (b)(5).
SECTION 6. Tennessee Code Annotated, Section 7-82-308, is amended by deleting
subsection (f).
SECTION 7. Tennessee Code Annotated, Section 7-82-401, is amended by deleting
subsection (d) and substituting:
(d) The result of each audit must be kept as a public and permanent record of
the utility district and is subject to the inspection of each customer. Copies of each audit
must also be made available to the press.
SECTION 8. Tennessee Code Annotated, Section 7-82-401, is amended by deleting
subdivision (f)(2).
SECTION 9. Tennessee Code Annotated, Section 7-82-608, is amended by deleting the
section.
SECTION 10. Tennessee Code Annotated, Section 7-82-702(b)(1), is amended by
deleting subdivision (G) and substituting:
(G) Petitions for reinstatement of a person's eligibility to serve on a utility
system's governing body pursuant to SECTION 17(j).
SECTION 11. Tennessee Code Annotated, Section 7-82-702, is amended by deleting
subdivision (b)(5) and substituting:
(5) The board's decision in an informal hearing is subject to appellate review in
the same manner as a contested case under the Uniform Administrative Procedures Act,
compiled in title 4, chapter 5. The Davidson County chancery court has jurisdiction over
judicial review of the board's decisions.
SECTION 12. Tennessee Code Annotated, Section 7-82-703, is amended by deleting
subsection (g) and substituting:
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(g)
(1)
(A) Notwithstanding any other law to the contrary, a utility system
does not fall under the jurisdiction of the board for the purpose of
reporting negative change in net position annually if the utility system:
(i) Supplies wholesale water service only or treats
wastewater for wholesale use only, unless otherwise allowed
under subdivision (g)(4); and
(ii) Is approved by the board under subdivision (g)(2).
(B) Notwithstanding subdivision (g)(1)(A), the utility system must
be referred to the board if the utility system has a deficit total net position
in any one (1) year, has a deficit unrestricted net position for any one (1)
year, or is currently in default on any of its debt instruments, as described
under this section.
(2) Any utility system proposing to supply wholesale water service only or
to treat wastewater for wholesale use only under subdivision (g)(1) shall first
obtain approval from the board by submitting a plan of service to the board for
approval. Upon receipt of a request for approval of a plan of service, board staff
may request any additional information as may be required to properly review the
proposed plan of service. Once the request is deemed complete by board staff,
the board shall review the request at the next available board meeting; provided,
however, that the board meeting date must be no more than ninety (90) days
from the date of the submission of the plan of service unless agreed to in writing
by board staff and the utility system. Upon receipt of approval, if the utility
system's plan of service is materially amended in the discretion of board staff,
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then the utility system must obtain subsequent board approval of such
amendment in accordance with the same requirements as the original plan of
service approval.
(3) The board has discretion to allow for the provision of a minimal
amount of retail service by a utility system primarily serving as a wholesale
provider when the board determines such allowance is in the public's interest.
SECTION 13. Tennessee Code Annotated, Section 7-82-703, is amended by adding
the following as a new subsection:
(i) A utility system remains financially distressed until the board issues an order
closing the utility system's financial distress case, or until, for a period of two (2) or more
consecutive years, the utility system:
(1) Does not meet any criteria for financial distress, as described in
subsection (b); and
(2) Has not been on the agenda of a board meeting, or been discussed
at a board meeting whether or not the utility system was on the meeting agenda.
SECTION 14. Tennessee Code Annotated, Section 7-82-704, is amended by deleting
subsections (a) and (b) and substituting:
(a)
(1) The board may order the merger or consolidation of an ailing utility
system with another utility system if the merger is necessary to ensure:
(A) The long-term financial stability of the ailing utility system;
(B) Continued utility service to the ailing utility system's
customers;
(C) The well-being of the public being served by the ailing utility
system; or
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(D) The best interests of the ailing utility system and the utility
system into which the ailing utility is consolidating or with which the ailing
utility system is merging.
(2) A utility system is ailing if the utility system:
(A) Is financially distressed, as described in § 7-82-703(b);
(B) Is financially unable to expand the amount or type of service
as set forth and described in its founding documents or petition for
creation as described under § 7-82-201, § 68-221-604, § 68-221-1304, or
another section or private act; or
(C) 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. As used in this subdivision (a)(2)(C),
"severe managerial incompetence" includes:
(i) Frequent interruptions in service to multiple customers,
lasting multiple days;
(ii) Frequent infrastructure failures that result in
interruptions in service or cause the quality of service to fall below
safe levels; or
(iii) Failure to:
(a) Respond to reports of damage to, or failure of,
infrastructure within a reasonable timeframe;
(b) Improve or attempt to improve infrastructure,
including necessary maintenance, upgrades, or
construction of redundant infrastructure where necessary;
or
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(c) Correct a deficiency in oversight, operational
management, or financial management, which leads to
repeated harm to the utility system, a violation of state or
federal law, or fraud, waste, or abuse of the utility system's
resources.
(b)
(1) After reviewing the audited annual financial report and operations of
the ailing utility system, the board may order the ailing utility system to obtain a
study from a qualified expert on the feasibility and benefit of the ailing system
merging or consolidating with another utility system. For purposes of this
subdivision (b)(1), the board may determine by vote that an expert is not qualified
to conduct the study, or determine that the study is not sufficient for any reason
deemed appropriate in the board's discretion.
(2)
(A) If the board determines that the ailing utility system is unable
or unwilling to obtain a feasibility study from a qualified expert, or if the
feasibility study performed by a qualified expert is inconclusive, the board
may order board staff to conduct a feasibility study of a merger with utility
systems surrounding the ailing utility.
(B) Board staff may review any information necessary to
determine whether a merger or consolidation with a surrounding utility
system:
(i) Is feasible;
(ii) Is in the best interests of the ailing utility; and
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(iii) Would harm the utility system(s) with which a merger
or consolidation is being considered.
(C) The board shall adopt a minimum list of factors and
information that board staff must collect as part of its feasibility study, and
the board must review the factors and information collected, prior to
ordering board staff to conduct a public hearing as described in
subdivision (b)(3).
(3)
(A) After the results of the study are submitted to the board, the
board has reviewed and discussed the results, and if the results of the
study favor a merger, the board may order board staff to hold a public
hearing regarding the merger or consolidation.
(B) The public hearing must be held within the service area of the
ailing utility system, or within ten (10) miles of the utility system's
administrative headquarters.
(C) The public hearing must notify customers of the potential
merger or consolidation and allow customers a reasonable opportunity to
provide feedback in response to the potential merger or consolidation.
(D) Feedback from the public hearing will be presented to the board at
the board's next meeting, or at the informal hearing required by subsection (d).
Feedback from the public hearing must be presented to the board before it takes
final action on the merger or consolidation.
SECTION 15. Tennessee Code Annotated, Section 7-82-704(c), is amended by
deleting the language "subdivision (b)(2)" and substituting "subdivision (b)(3)".
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SECTION 16. Tennessee Code Annotated, Section 7-82-702(a)(3)(A)(iv), is amended
by deleting the language "as described in § 7-82-704(a)(3)" and substituting "as described in §
7-82-704(a)(2)(C)".
SECTION 17. Tennessee Code Annotated, Title 7, Chapter 82, Part 7, is amended by
adding the following as a new section:
7-82-711.
(a) As used in this section:
(1) "Continuing education period" means a period of three (3) years
beginning January 1 after the calendar year in which a governing body member
completes the continuing education requirements set forth in subdivision (b)(2)
and each succeeding three-year period thereafter; and
(2) "Governing body" means the elected or appointed body that
supervises, controls, or operates a utility system.
(b)
(1) All members of a governing body must meet the continuing education
requirements in this section.
(2) All members of a utility system's governing body shall attend a
minimum of twelve (12) hours of continuing education in one (1) or more of the
subjects listed in subdivision (a)(4), within one (1) year of initial election or
appointment to the utility system's governing body.
(3) In each continuing education period after the initial continuing
education period required by subdivision (b)(2), a governing body member shall
attend a minimum of six (6) hours of continuing education in one (1) or more of
the subjects listed in subdivision (b)(4).
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(4) The subjects for the continuing education required by this section
include, but are not limited to, board governance, financial oversight,
policymaking responsibilities, and other topics reasonably related to the duties of
the members of a utility system's governing body.
(c)
(1) For purposes of this section, a governing body member may request
a continuing education extension of up to six (6) months from the comptroller of
the treasury or the comptroller's designee. If the extension is granted, the
governing body member must complete any additional required continuing
education hours necessary to achieve full compliance for only the relevant
continuing education period within the extension period. The request for an
extension must be made in writing and shall only be granted upon:
(A) A reasonable showing of substantial compliance with this
section; or
(B) Unforeseeable hardship.
(2) The governing body member shall file copies of any extension
request letters and corresponding comptroller of the treasury determination
letters with the member's utility system, together with or supplemental to the
annual written statement required by subsection (g).
(d)
(1) The comptroller of the treasury shall offer online continuing education
courses for purposes of compliance with this section.
(2) Any association or organization with appropriate knowledge and
experience may prepare a continuing education curriculum for governing body
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members covering the subjects set forth in subdivision (b)(4) to be submitted to
the comptroller of the treasury for review and approval prior to use.
(3) The comptroller of the treasury shall file a copy of approved
continuing education curricula with the Tennessee board of utility regulation.
Changes and updates to the curricula must be submitted to the comptroller of the
treasury for approval prior to use. Any continuing education curriculum approved
by the comptroller of the treasury must be updated every three (3) years and
resubmitted to the comptroller of the treasury for review and approval.
(e)
(1) A person required to complete continuing education under this
section may take online courses in lieu of attending continuing education courses
in person. Online courses are subject to the requirements of subdivisions (d)(2)-
(3).
(2) The online continuing education provider shall provide a certificate of
completion or attendance that must be submitted by the governing body member
to the utility system, or submitted by the provider directly to the utility system.
Each utility system shall keep the certificate of completion or attendance for six
(6) years after the calendar year in which the certificate of completion or
attendance is submitted.
(f) The utility system shall pay the continuing education course registration and
travel expenses for the continuing education required by this section for the members of
the utility system's governing body. A utility system is not required to pay any costs
associated with continuing education required pursuant to subsection (j).
(g)
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(1) By January 31 of each year, each governing body member shall file
with the utility system an annual written statement on a form developed by the
comptroller of the treasury that certifies the continuing education courses
attended by the member during the prior calendar year.
(2) The annual written statement must:
(A) Identify the date of each course attended; the course's subject
matter, location, and sponsor; and the hours attended for each course;
and
(B) Include a certificate of attendance, on a form acceptable to
the comptroller of the treasury, for each course listed on the annual
written statement that certifies the governing body member attended the
course.
(3) For years in which the governing body member did not attend
continuing education courses, the governing body member shall file an annual
written statement certifying that the governing body member attended no
continuing education that year.
(4) A utility system shall keep the annual written statements filed
pursuant to subdivisions (g)(1) and (g)(3), in addition to any extension request
letters and corresponding comptroller determination letters, for six (6) years
following the calendar year in which the annual written statement was filed.
(h) If a member of a utility system's governing body fails to meet the continuing
education requirements set forth in this section before the end of the continuing
education period or before the end of any extension approved by the comptroller of the
treasury or the comptroller's designee, then the Tennessee board of utility regulation has
full discretion to order reasonable sanctions against the utility system.
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(i)
(1)
(A) A governing body member who fails to meet the continuing
education requirements set forth in this section before the end of any
continuing education period or before the end of an extension approved
by the comptroller of the treasury or the comptroller's designee is not
eligible to receive any payment or benefit from the utility system as a
result of the governing body member's position on the utility system's
governing body.
(B) The Tennessee board of utility regulation:
(i) May order the utility system to take any necessary and
legal action to recover funds paid to a governing body member
who was ineligible to receive them; and
(ii) May order the utility system to cease providing any
payment or benefit that violates subdivision (i)(1)(A).
(2) A governing body member who fails to meet the continuing education
requirements set forth in this section before the end of any continuing education
period or before the end of an extension approved by the comptroller of the
treasury or the comptroller's designee is not eligible for reappointment or
reelection to another term of office, except as described in subsection (j).
(3) An existing governing body member who is nominated for
reappointment under this part shall certify to the appointing authority prior to
reappointment that the governing body member has complied with the continuing
education requirements in this section.
(4) This subsection (i) does not apply to an elected official.
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(j)
(1) If a person becomes ineligible to serve on the governing body of a
utility system for failing to meet the continuing education requirements or any
other requirements in this section, the person may file a petition for reinstatement
of the person's eligibility with the Tennessee board of utility regulation. The
petition is treated as an informal hearing under § 7-82-702(b)(1).
(2) The petitioner cannot file a petition for reinstatement until after the
completion of the term of office for which the petitioner has failed to meet
continuing education requirements that caused the petitioner's ineligibility to
serve.
(3)
(A) The board will conduct an informal hearing on the petition and
may issue an order establishing the terms and conditions for the
reinstatement of the petitioner's eligibility to serve.
(B) The board’s order:
(i) Must require the petitioner to obtain twelve (12) hours
of continuing education within one (1) year of the date of the
order;
(ii) Must include an effective date for reinstatement of
eligibility, contingent upon the petitioner meeting all requirements
of the order; and
(iii) May include any other terms and conditions the board
deems appropriate.
(k) A governing body member serving on the governing body of a utility district
who is seeking reelection shall certify to the utility system prior to being placed on the
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ballot that the governing body member has complied with the continuing education
requirements set forth in this section. This subsection (k) only applies to governing body
members serving on the governing body of a utility district where the governing body is
elected.
SECTION 18. Tennessee Code Annotated, Section 9-21-408, is amended by deleting
subsection (a) and substituting:
(a)
(1) Local governments may make internal loans in accordance with
procedures for issuance of notes or bonds in part 5, 6, 7, or 8 of this chapter.
(2) Utility systems, as defined in § 7-82-701, may make internal loans in
accordance with procedures and guidelines established by the comptroller of the
treasury or the comptroller's designee as authorized in § 4-3-305.
SECTION 19. Tennessee Code Annotated, Section 68-221-605, is amended by deleting
subsections (f) and (g).
SECTION 20. Tennessee Code Annotated, Section 68-221-1305, is amended by
deleting subsections (f) and (g).
SECTION 21. This act takes effect July 1, 2026, the public welfare requiring it.