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AN ACT relating to combined municipal electric and water utilities. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 96.171 is amended to read as follows: 3
(1) As used in KRS 96.171 to 96.188: 4
(a) "Governing body" means the legislative body of a municipality that elected 5
to operate a combined electric and water system under the provisions of 6
KRS 96.171 to 96.188; and 7
(b) "Customer" means any person who pays for any service provided by the 8
combined system or plant board. 9
(2) The governing body of any municipality now or hereafter owning an electric and 10
water system and operating them as one (1) combined system or plant may elect to 11
operate under the provisions of KRS 96.171[96.172] to 96.188, in which case, from 12
the time of the exercise of such election and the appointment of a board under said 13
sections, the electric and water system of such municipality shall be operated under 14
the provisions of KRS 96.171[96.172] to 96.188 as an electric and water plant. 15
Section 2. KRS 96.172 is amended to read as follows: 16
(1) (a) Any municipality now or hereafter owning and operating an electric system 17
and a water system and operating them as one (1) combined system or plant 18
may elect to operate such systems as an electric and water plant under the 19
provisions of KRS 96.171 to 96.188 by enacting an ordinance declaring 20
therein the desire and intention of the municipality to accept and operate its 21
electric and water system or plant under the provisions of KRS 96.171 to 22
96.188 and by providing in said ordinance that the municipality accepts and 23
agrees to all of the provisions of KRS 96.171 to 96.188. The ordinance shall 24
further authorize the mayor or chief executive to appoint a board, subject to 25
the approval of the appointments by the governing body of the municipality. 26
(b) [Upon the passage of such ordinance ]The mayor or chief executive of any 27 UNOFFICIAL COPY 24 RS BR 454
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such municipality shall, with the approval of the governing body of the 1
municipality, appoint a board of public utilities, consisting of seven (7) 2
customers[five (5) citizens, taxpayers, voters, and users of electric energy or 3
water]. 4
(c) After the effective date of this Act, any vacancy on the board shall be filled 5
in the manner that will bring the total board membership closest to being 6
proportionately representative of the customers who reside inside the city 7
limits of the municipality where the combined system or plant is located 8
compared to the customers who reside outside of the city limits, as follows: 9
1. If a vacancy occurs that would require a member representing 10
customers residing inside the city limits to be appointed, the mayor 11
shall appoint, subject to confirmation by the city commission, a 12
member from a list of three (3) nominees, with each of the following 13
organizations serving the area submitting one (1) nominee for 14
inclusion in the list: 15
a. The chamber of commerce; 16
b. A development interest group; and 17
c. An area development corporation; and 18
2. If a vacancy occurs that would require a member representing 19
customers residing outside of the city limits to be appointed, the mayor 20
shall appoint, subject to confirmation by the fiscal court, a member 21
from a list of three (3) nominees submitted by the county 22
judge/executive for the county where the combined system or plant is 23
located. 24
(d) The[Said] board established under this subsection shall be appointed and 25
qualified before the municipality shall have any authority to proceed further 26
under the provisions of KRS 96.171 to 96.188. The[Said] board, when so 27 UNOFFICIAL COPY 24 RS BR 454
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appointed and qualified, shall be and hereby is declared to be a body-politic 1
and corporate, with perpetual succession; and said board may contract and be 2
contracted with, sue and be sued, in and by its corporate name, and have and 3
use a corporate seal. The name of the board shall be "Electric and Water Plant 4
Board of the City of ____________, Kentucky." 5
(2) No person shall be appointed a member of the board who has, within two (2) years 6
next before his or her appointment, held any public office, or who is related within 7
the third degree to the mayor, the county judge/executive, or any member of the 8
governing body of the municipality or county. 9
(3) Neither the board, nor the superintendent appointed by the board as provided in 10
KRS 96.176, shall appoint to any subordinate office which it may create, nor 11
employ in any capacity any person who is related within the third degree to any 12
member of the board,[ or to] the superintendent,[ or to] the mayor of said 13
municipality, the county judge/executive of the county, or to any member of the 14
governing body of the municipality or county. No officer or employee of a 15
municipality shall be eligible for such appointment until at least one (1) year after 16
the expiration of the term of his or her office or employment. 17
(4) The members of the board shall be customers[citizens, taxpayers, voters, and users 18
of electric energy or water], and shall not at the time of their appointment be 19
indebted to the municipality either directly or indirectly or be surety on the official 20
bond of any officer of said municipality. 21
(5) If at any time during his or her term of office a member of the board becomes a 22
candidate for or is elected or appointed to any public office, the member of the 23
board[he] shall automatically vacate his or her membership from the board, and 24
another person shall be appointed to the position[his place]. 25
(6) Each member of said board shall execute bond, in an amount required by the 26
governing body of the municipality by resolution or ordinance, conditioned upon 27 UNOFFICIAL COPY 24 RS BR 454
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the faithful performance of their official duties. The surety on said bonds shall be a 1
surety company qualified to do business in Kentucky. The cost of said bonds shall 2
be charged as an operating expense and paid by the board. 3
(7) Each member of the board shall qualify by taking the oath required by Section 228 4
of the Constitution of Kentucky. 5
(8) The original appointees shall serve two (2) for one (1) year, one (1) for two (2) 6
years, one (1) for three (3) years and one (1) for four (4) years, respectively, from 7
the date of their appointment, as the said mayor or chief executive officer of the 8
municipality shall designate. Successors to retiring members so appointed shall be 9
appointed for a term of four (4) years in the same manner, prior to the expiration of 10
the term of office of the retiring members. Appointments to complete unexpired 11
terms shall be made in the same manner as original appointments. 12
(9) Any member of the board may be removed from office upon a vote of a majority of 13
the members of the governing body of the municipality for inefficiency, neglect of 14
duty, misfeasance, nonfeasance, or malfeasance in office. 15
Section 3. KRS 96.175 is amended to read as follows: 16
Any board operating under the provisions of KRS 96.171 to 96.188[ shall have the legal 17
power and capacity to perform any act not repugnant to law and] shall have the express 18
power and capacity to do any and all acts or things necessary or convenient for the 19
carrying out of the purposes of KRS 96.171 to 96.188, including, but not by way of 20
limitation, the following express powers: 21
(1) Acquire property, real and personal, tangible and intangible, necessary or incident 22
to the proper conduct of its business. 23
(2) Operate, maintain, improve, and extend the electric and water plant, and provide 24
electric and water service to any user or consumer within and without the 25
boundaries of any municipality, and charge and collect reasonable rates therefor. 26
(3) Fix and determine classifications, rates, and charges for services; provided, 27 UNOFFICIAL COPY 24 RS BR 454
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however, the rates and charges so fixed and determined at all times shall be 1
sufficient to produce revenues sufficient to pay all operating expenses, interest, and 2
bond requirements, sinking fund requirements, adequate depreciation reserves, 3
taxes, or payments in lieu of taxes, and reserves for contemplated extensions and 4
improvements. 5
(4) Construct, lease, operate and control any and all works, lines, buildings, and other 6
facilities across, along, or under any street or public highway, and over any lands 7
which are now or may be the property of the Commonwealth or of any county or 8
municipality within this Commonwealth. The board shall, however, at its own 9
expense, restore any such street or highway to its former condition and state as 10
nearly as may be possible and shall not use the same in a manner as to impair its 11
usefulness or to interfere with or obstruct the maintenance thereof. Before 12
exercising these powers the board shall obtain a permit or consent or approval in 13
writing from the governing authority of the municipality, or the fiscal court, or the 14
Department of Highways, having appropriate jurisdiction over any and all of such 15
respective streets or public highways. 16
(5) Accept gifts, grants of property, real or personal, including money, from any 17
person, municipality, or federal agency, and to accept voluntary and uncompensated 18
services; provided, however, that when engineering services are required by the 19
board no engineer or firm with which he or she is associated who is engaged in 20
whole or in part in the business of buying or selling any electric or water 21
equipment, machinery, fixtures, materials, supplies, or the sale or purchase of bonds 22
shall be eligible for employment or for any service whatsoever under the provisions 23
of KRS 96.171 to 96.188. 24
(6) Contract debts and borrow money for the improvement and extension of any 25
electric and water plant or for the refinancing of any existing bonded indebtedness 26
on the property or any portion thereof, issue bonds therefor, provide for the rights of 27 UNOFFICIAL COPY 24 RS BR 454
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holders of the bonds and to secure the bonds as hereinafter provided, and pledge all 1
or any of the net revenue derived from the electric and water plant to the payment 2
of such debts or repayment of money borrowed. 3
(7) The title to any property, real or personal, which the board may acquire shall vest in 4
the municipality for the use and benefit of the electric and water system. The board 5
shall have the power to sell or otherwise dispose of any personal property used or 6
useful in the operation of the electric and water system which may be or become 7
obsolete or otherwise determined by the board not to be necessary in the operation 8
of the electric and water system. Any bill of sale or other instrument of conveyance 9
shall be executed by the chairman of the board and attested by the secretary of the 10
board. 11
(8) Make contracts and execute instruments containing such covenants, terms, and 12
conditions as in the discretion of the board may be proper, necessary, or advisable 13
for the purpose of obtaining loans from any source, or grants, loans, or other 14
financial assistance from any governmental agency; make all other contracts and 15
execute all other instruments as in the discretion of the board may be advisable in or 16
for the furtherance of the operation, maintenance, improvement, or extension of any 17
electric and water plant and the furnishing of service; and carry out and perform the 18
covenants, terms, and conditions of all such contracts or instruments, as well as all 19
contracts and instruments in existence and effect at the time of the transfer of the 20
property to the board as herein provided. 21
(9) Enter on any lands, waters, and premises for the purpose of making surveys, 22
soundings and examinations in connection with the operation, maintenance, 23
improvement, or extension of any electric and water plant and the furnishing of 24
service. 25
(10) Do all acts and things necessary or convenient to carry out the powers expressly 26
given in KRS 96.171 to 96.188, except sell, convey, or mortgage the real property. 27 UNOFFICIAL COPY 24 RS BR 454
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(11) Make any contracts necessary or convenient for the full exercise of the powers 1
herein granted, including[,] but not limited to[,] contracts for either the purchase or 2
sale or both the purchase and sale of electric energy or power; and, in connection 3
with any such contract with a governmental agency, the board may stipulate and 4
agree to such covenants, terms, and conditions as it deems appropriate, including, 5
but without limitation, covenants, terms, and conditions with respect to the resale 6
rate, financial and accounting methods, and the manner of disposing of the revenues 7
or any part thereof derived from the operation of the plant as herein provided. 8
(12) Acquire by purchase or the exercise of eminent domain all lands, easements, rights 9
of way, either upon or under or above the ground, reasonably necessary or desirable 10
in connection with the operation, maintenance, or extension of an electric and water 11
plant. 12
(13) The board shall have the power to accept the provisions of and conduct its 13
operations under the provisions of the Kentucky Workers' Compensation Act. 14
(14) The board shall have the power to establish, create, provide, and maintain a pension 15
plan for its employees, and to pay out of operating revenues, as an operating 16
expense, such portion of the cost of the creation and maintenance of such pension 17
plan as may be properly payable by the board. 18
Section 4. KRS 96.179 is amended to read as follows: 19
In lieu of taxes, the board shall[may] each year pay to each taxing jurisdiction[school 20
district and municipality] in which its property is located an amount equivalent to an 21
annual ad valorem tax on the fair cash value of the property of the board located in each 22
such jurisdiction, determined upon the tax rate prevailing in such year. 23
Section 5. KRS 96.182 is amended to read as follows: 24
(1) Subject to the provisions of outstanding bonds and contracts, the board shall apply 25
all funds derived from operations: 26
(a) [(1) ] To the payment of operating expenses; 27 UNOFFICIAL COPY 24 RS BR 454
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(b) [, (2) ]To the payment of bond interest and retirement; 1
(c) [, (3) ]To sinking fund requirements; 2
(d) [, (4) ]To the maintenance of a fund to meet depreciation and the 3
improvements and extension of the plant in an amount equal to six percent 4
(6%) of the undepreciated book value of its property; 5
(e) [, (5) ]To the maintenance of a cash working fund equal to one (1) month's 6
revenue; 7
(f) [, (6) ]To the payment of other obligations incurred in the operation and 8
maintenance of the plant and the furnishing of service; and 9
(g) [, and (7) ]To such tax equivalent payments[taxes], if any,[ as the board may 10
elect to pay] under the provisions of KRS 96.179.[, and ] 11
(2) Any surplus revenues at the end of any twelve (12) months ending June 30 shall be 12
transferred to the sinking fund, and used by the board only for: 13
(a) The redemption or purchase of outstanding bonds, in which case such bonds 14
shall be canceled;[,] or[ for the creation and maintenance of a cash working 15
fund, or the creation and maintenance of a fund for improvement and 16
extension of the system, or for ] 17
(b) The reduction of rates[, or the board, after the original cost of the property 18
shall have been fully paid and satisfied may, in its sole discretion, use, apply 19
and pledge all or a part of such surplus revenues for the acquisition, 20
construction, maintenance, improvement, addition to and operation of any 21
"public project" as the same is defined in subsection (1) of KRS 58.010, or for 22
the purpose of purchasing, paying, retiring, guaranteeing the payment of or 23
underwriting revenue bonds issued by the city or any agency thereof to 24
finance the acquisition, construction, maintenance, improvement, addition to 25
and operation of such "public project," which "public project" shall be located 26
within the territory served by the board; the board is hereby vested with all of 27 UNOFFICIAL COPY 24 RS BR 454
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the powers, duties and responsibilities delegated and granted to a 1
"governmental agency" under KRS 58.020 to 58.140, both inclusive; 2
provided, however, that the acquisition or construction of any "public project" 3
as above defined, shall be first approved by the common council before such 4
"public project" is undertaken]. 5
(3) The acquisition, construction, maintenance, improvement, addition to, or 6
operation of any "public project" as defined in KRS 58.010 shall be approved by 7
the governing body before any of those actions are undertaken. 8
(4) Notwithstanding any provision of law to the contrary, the board shall not use 9
revenues from the provision of electric or water utility service to subsidize 10
activities unrelated to the provision of electric or water utility service. The board 11
shall keep separate accounts for all activities unrelated to the provision of electric 12
or water utility service and shall allocate revenues and costs to those accounts 13
separately, in accordance with generally accepted accounting principles. 14
Section 6. KRS 96.184 is amended to read as follows: 15
(1) The board at any time may issue and sell revenue bonds to finance improvements or 16
extensions of the plant, or the board, after the original cost of the property shall 17
have been fully paid and satisfied, may, subject to approval of the governing 18
body[in its sole discretion], issue, sell, and pledge its revenues to secure the 19
payment of revenue bonds the proceeds of which are to be used to finance the 20
acquisition, construction, maintenance, improvement, addition to, and operation of 21
"public projects" as defined in KRS 96.182, or for the purpose of purchasing, 22
paying, retiring, guaranteeing the payment of, or underwriting revenue bonds issued 23
by the city or any agency of the city to finance the acquisition, construction, 24
maintenance, improvement, addition to, and operation of a public project, and sell 25
refunding bonds for the purpose of providing for the payment of any outstanding 26
bonds. 27 UNOFFICIAL COPY 24 RS BR 454
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(2) Bonds issued pursuant to KRS 96.171 to 96.188 may be issued in one (1) or more 1
series, may bear a date or dates, may mature at a time or times, not exceeding forty 2
(40) years from their respective dates, may be in a denomination or denominations, 3
may be in a form, either coupon or registered, may carry registration and 4
conversion privileges, may be executed in a manner, may be payable in a medium 5
of payment, at a place or places, may be sold in blocks, may be subject to terms of 6
purchase or redemption of all or any of the bonds before maturity in a manner and 7
at a price or prices as may be fixed by the board by resolution prior to the sale of 8
the bonds. 9
(3) All revenue bonds issued pursuant to the provisions of KRS 96.171 to 96.188 in the 10
hands of bona fide holders shall have all the qualities and incidents of negotiable 11
instruments under the law merchant. All bonds shall be sold to the highest 12
responsible bidder at the time and place as fixed by the board in the notice of sale of 13
the bonds, which notice shall have been advertised by publication pursuant to KRS 14
Chapter 424. The board shall receive written, sealed, competitive bids, which shall 15
be publicly opened and read at the time and place specified in the notice of sale. 16
The board may reject all bids and readvertise. 17
(4) No holder or holders of any revenue bonds issued under KRS 96.171 to 96.188 18
shall have the right to compel any exercise of taxing power of the municipality to 19
pay the bonds or the interest on the bonds. Each bond issued under KRS 96.171 to 20
96.188 shall recite in substance that the bond, including interest on the bonds, is 21
payable solely from the revenues pledged to the payment of the bond, and that the 22
bond does not constitute a debt of the municipality within the meaning of any 23
statutory or constitutional provision or limitation. 24
(5) Any holder or holders of bonds issued pursuant to KRS 96.171 to 96.188 shall have 25
the rights[right], in addition to all other rights: 26
(a) By action in court, to enforce his, her, or their rights against the board, and 27 UNOFFICIAL COPY 24 RS BR 454
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any other proper officer, agent, or employee, including[,] but without 1
limitation[,] the right to require the board, and any proper officer, agent, or 2
employee of the board, to fix and collect rates and charges adequate to carry 3
out any agreement as to, or pledge of, revenues from the plant, and to require 4
the board and any officer, agent, or employee of the board, to carry out any 5
other covenants or agreements and to perform its and their duties under KRS 6
96.171 to 96.188; and[.] 7
(b) By action in equity, to enjoin any act or thing which may be unlawful or a 8
violation of the rights of the holder of bonds. 9
(6) If there is a default in the payment of the principal or interest of any bonds issued 10
pursuant to KRS 96.171 to 96.188, any court having jurisdiction may, upon the 11
petition of the holders of not less than twenty-five percent (25%) of the outstanding 12
bonds, appoint a receiver to administer the electric plant on behalf of the board, 13
with power to charge and collect rates sufficient to provide for the payment of any 14
bonds or obligations outstanding against the plant and for the payment of the 15
operating expenses and to apply the income and revenues in conformity with KRS 16
96.171 to 96.188. 17
(7) All bonds issued pursuant to KRS 96.171 to 96.188, bearing the signatures of 18
officers in office on the date of the signing of the bonds, shall be valid and binding 19
obligations, notwithstanding that before the delivery and payment of the bonds, any 20
or all the persons whose signatures appear on the bonds shall have ceased to be 21
members of the board issuing the same. The resolution of the board authorizing the 22
issuance of the bonds shall contain a recital that the revenue bonds are issued 23
pursuant to KRS 96.171 to 96.188, which recital shall be prima facie evidence of 24
their validity and of the regularity of their issuance. 25
(8) Bonds may be issued under KRS 96.171 to 96.188 without respect to the provisions 26
of any laws requiring the prior approval of any court, commission, board, or 27 UNOFFICIAL COPY 24 RS BR 454
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regulatory authority. 1
(9) All moneys received from the sale and issuance of bonds shall be used solely for 2
the purpose for which the bonds were issued, except that any premium received for 3
the bonds may be used for the payment of interest and principal of the bonds. 4
Section 7. KRS 96.185 is amended to read as follows: 5
(1) The board shall keep a complete and accurate record of all meetings and actions 6
taken, and of all receipts and disbursements. Such records shall be open to 7
inspection at any and all times to the governing body of the city. An audit of the 8
board's records shall be made annually by a certified public accountant to be 9
selected by the board, and the expense of such audit shall constitute an operating 10
expense and be paid as such by the board. The board shall furnish a copy of such 11
audit to the common council when requested so to do. 12
(2) In conjunction with the preparation of the audits required under subsection (1) of 13
this section and KRS Chapter 65A, in each even-numbered fiscal year the board 14
shall have independent appraisals prepared for the properties and associated 15
services and assets of each discrete project or operation undertaken by the board 16
that is unrelated to the provision of water or electric utility services, including but 17
not limited to any public project undertaken pursuant to Section 5 of this Act. The 18
independent appraisals required by this subsection shall be paid for by the board 19
and shall be conducted by individuals or organizations not affiliated with the city 20
or the board, or any officers or employees thereof, and shall use generally 21
accepted national or professional standards. The board may also contract with 22
the Auditor of Public Accounts to conduct any appraisal required by this 23
subsection. 24
Section 8. KRS 96.187 is amended to read as follows: 25
Any action challenging the validity of any ordinance electing to operate under KRS 26
96.171 to 96.188, or any bond resolution of the board, or any election resolution or 27 UNOFFICIAL COPY 24 RS BR 454
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election held hereunder, shall be brought within sixty (60) days from the date on which 1
such ordinance, election resolution, or bond resolution was published in accordance with 2
KRS Chapter 424[adopted] or election held, as the case may be, and, if not brought 3
within said time, shall be forever barred. 4
SECTION 9. A NEW SECTION OF KRS 96.171 TO 96.188 IS CREATED TO 5
READ AS FOLLOWS: 6
(1) As used in this section: 7
(a) "Institutional advertising" means advertising which is only used for the 8
enhancement or preservation of the public image of the utility and to 9
present it in a favorable light to the general public and potential employees; 10
(b) "Political advertising" means any advertising for the purpose of 11
influencing public opinion with respect to legislative, administrative, or 12
electoral matters, or with respect to any controversial issue of public 13
importance; 14
(c) "Promotional advertising" means any advertising for the purpose of 15
encouraging any person to select or use the service or additional service of 16
the combined electric and water utility, or the selection or installation of any 17
appliance or equipment designed to use such utility's service; and 18
(d) The terms "political advertising," "promotional advertising," and 19
"institutional advertising" do not include advertising: 20
1. That informs utility customers about how they can conserve energy; 21
2. Required by statute or administrative regulation; 22
3. Regarding service interruption, safety measures, or emergency 23
conditions; 24
4. Concerning current employment opportunities; and 25
5. That promotes the use of energy efficient appliances, equipment, or 26
services. 27 UNOFFICIAL COPY 24 RS BR 454
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(2) Notwithstanding any provision of law to the contrary, the board of a combined 1
electric and water plant or system shall not use funds derived from any provision 2
of its services for political advertising or institutional advertising. However, only 3
with regard to funds not derived from the provision of water or electric service, 4
the board of a combined electric water and plant or system may engage in 5
promotional advertising for its public projects undertaken pursuant to Section 5 6
of this Act. 7
SECTION 10. A NEW SECTION OF KRS CHAPTER 278 IS CREATED TO 8
READ AS FOLLOWS: 9
Notwithstanding any provision of law to the contrary, and in addition to all other 10
authority conferred to the commission under this chapter, the commission shall assist 11
in the resolution of consumer complaints of customers of any water or electric utility 12
service provided by combined electric and water systems or plant boards established 13
under KRS Chapter 96.171 to 96.188, and shall review the rates of the customers of 14
each of those combined electric and water systems or plant boards at least once per 15
year. 16