§ 11-50A-17 — Contracts for Use of Projects; Purchase of Electric Power; Payment of Charges; Indemnity; Enforcement of Performance

(a) Any municipality, if authorized by resolution or ordinance of its governing body, may contract with the authority for the payment of any rates, tolls, fees, and other charges prescribed in this section and Section 11-50A-18 by the authority for the output, capacity, use or service by the municipality of any projects or other resources of the authority or any of its facilities or undertakings. The obligations to pay the amounts contracted to be paid by the municipality to the authority under the contract or contracts entered into pursuant to the provisions of this section shall be treated as expenses of operating the electric distribution system of the municipality for the payment of which the revenues of the municipality derived from the operation of its electric distribution system (together with any other revenues that may be lawfully pledged therefor) may be pledged; provided that, in the case of a municipality that is an incorporated city or town in the state, such amounts contracted by such municipality to be paid during any fiscal year during which such contract is in effect shall be payable solely out of the current revenues derived from the operation of that municipality’s electric distribution system (together with any other revenues that may be lawfully pledged therefor) for such fiscal year; and, provided further, that no revenues may be pledged to provide funds to fulfill the obligations of a municipality arising under any contract with the authority if, as a result of such pledge, such contract would be deemed to constitute a debt of the municipality within the meaning of any constitutional prohibition or limitation. A municipality’s contract with the authority of the type described in this section may contain covenants with respect to resale rates charged by the municipality for electricity in order to ensure that revenues of the municipality’s electric distribution system are adequate for it to meet its obligations under the contract. The contract of the municipality may include provisions for requirement purchases of bulk electric power and energy and may extend for a term of not more than 50 years or such longer period as shall be the period of duration of any ownership or operation agreement relating to a project from which bulk electric power and energy is derived.
(b) All rates, fees, tolls, and charges payable by a municipality shall be made at the intervals and in the amounts agreed upon and set forth in the contract provided for by this section. The contract may provide for the payment of amounts which shall be sufficient to enable the authority to meet its expenses, interest and principal payments (whether at maturity or upon sinking fund redemption) for bonds, bond anticipation notes or notes, reasonable reserves and the requirements of any rate covenant with respect to debt service coverage contained in any bond resolution or trust agreement or indenture of the authority. The contract may also provide for the commencement of payments, not necessarily based directly on rates, to the authority prior to the completion of the undertaking by the authority of a project. The contract may provide for the making of any payments while the project is partially or wholly not in use and whether or not the project has been or will be completed, is then operable, or is operating, and may provide that those payments shall not be subject to any reduction whether by offset or otherwise and shall not be conditioned upon the performance or nonperformance by any party of any agreement. The contract may also provide that if one or more municipalities defaults in the payment of its obligation under any such contract, the remaining municipalities which also have entered into such contracts shall be required proportionately to pay for and shall be entitled proportionately to use or otherwise dispose of the bulk electric power and energy entitlement of the defaulting municipality. Reductions in the cost of wholesale power determined by an independent certified public accountant employed by each municipality in accordance with standard utility practice to have been realized through purchases from the authority shall be utilized by the municipality in reducing retail electric rates charged to its customers, provided that revenues received from the rates and charges imposed by the municipality for retail electric service shall be sufficient to pay the rates and charges of the authority and to pay all of the municipality’s ownership costs of its electric distribution system and meet the requirements with respect to the maintenance of rates and charges of any financing agreements, covenants, or other arrangements heretofore or hereafter entered into by and binding upon the municipality and to pay and provide for those capital improvements reasonably necessary to provide adequate service to the municipality’s retail electric customers and to provide for the reasonable future expansion of the municipality’s electric distribution system. It is the intent of the legislature that those municipalities that enter into contracts with the authority shall not use any part of the reductions in the costs of wholesale power realized by them for the purpose of making any payments to other public persons, in lieu of taxes or otherwise, unless and only to the extent the municipality has, prior to entering into the contract with the authority, incurred a binding obligation to make such payments.
(c) The contract provided for by this section may obligate the municipality to indemnify and save harmless the authority, the members of its board, its officers or its employees from any and all damage to persons and property occurring on or by reason of the project and to undertake, at the expense of the municipality, the defense of any action brought against the authority by reason of injury or damages to persons or property occurring on or by reason of the project.
(d) In the event of any failure or refusal on the part of a municipality to perform punctually any covenant or obligation contained in the contract provided for by this section, the authority may have the municipality’s performance enforced by any legal or equitable process, including specific performance.

Legislative History

(Acts 1981, No. 81-681, p. 1114, §17.)