§ 37-14-4 — Primary Supplier’s Option to Acquire Facilities Within Existing Municipal Limits

The primary electric supplier within each municipality shall, at its option, have the right to acquire all distribution facilities of any secondary electric supplier used to supply retail electric service within the existing municipal limits and shall have the right to serve all premises within the existing municipal limits of such municipality subject to the following;
(1) The primary electric supplier must announce its intention to exercise its option in writing by registered or certified mail to the affected secondary suppliers within each municipality, addressed to the chief executive officer or manager of such secondary supplier, no later than nine months after April 26, 1984. Simultaneously with the delivery of the notice of exercise of its option by the primary electric supplier, the primary electric supplier shall deposit in escrow with a bank whose principal office is in Alabama and which has capital and surplus of not less than $5,000,000.00, or with any other escrow agent agreeable to the parties, the amount of $1,000.00 for each premises receiving electricity from the distribution facilities proposed to be purchased by the primary electric supplier on the date of the notice based on the primary electric supplier’s good faith estimate of the number of premises involved. The secondary supplier shall, within seven days after receipt of such notice, provide the actual number of premises involved, if different from that estimated by the primary supplier, and the escrow deposit made by the primary supplier shall be adjusted to accommodate any difference within seven days after such actual number of premises is supplied. The escrow agent shall be directed and authorized to invest the funds placed in escrow by the primary electric supplier in any investment directed by the primary electric supplier. The escrow agent is further authorized, upon election of the primary electric supplier making the deposit, to combine for investment any other deposit made by that depositor for the same purpose with respect to different facilities. The escrow agent shall render periodic accountings as to the escrow account to the primary electric supplier and the secondary electric supplier. If the purchase is consummated in accordance with this article, the funds shall be used to satisfy the purchase price of the facilities and other consideration to be paid by the primary electric supplier to the secondary electric supplier due as of the date of closing as determined under this section. Any portion of such fund in excess of the amount due to be paid to the secondary electric supplier on the date of closing shall be refunded to the primary electric supplier. If the amount due to be paid by the primary electric supplier to the secondary electric supplier under this section on the date of closing is in excess of the amount in the escrow account, the primary electric supplier shall pay the difference to the secondary electric supplier at closing. If the closing of the facilities is not consummated because of the failure of the primary electric supplier to pursue its option under this article to purchase the distribution facilities, the escrow agent shall be instructed to deliver from the escrow fund to the secondary electric supplier, 14 days after the date on which the primary electric supplier’s rights to purchase the facilities expire unconsummated, the interest earned on the amount deposited from investment of such funds plus 10 percent of the amount originally deposited by the primary electric supplier. The balance of such escrow funds shall be returned to the primary electric supplier making the deposit.
(2) Unless otherwise agreed to by the secondary electric supplier and except as provided in subdivision (3) of this section, the primary electric supplier must offer to purchase all of the distribution facilities of the secondary electric supplier utilized by the secondary electric supplier for retail electric service within the existing municipal limits of any particular municipality. The primary and secondary electric supplier shall cooperate in the development of an inventory of such facilities and in the valuation of the facilities to be sold and other consideration to be paid in accordance with the principles set forth in subdivision (4) below. The secondary electric supplier shall also furnish to the primary electric supplier an accurate record of the revenues billed to customers of the secondary electric supplier located within the existing municipal limits of the municipality for the 12 months preceding the date of notice from the primary electric supplier of its exercise of the option to purchase facilities. The secondary electric supplier shall also provide the primary electric supplier with such information as is available to the secondary electric supplier concerning title to the distribution facilities. Within three months after initial notice has been given to the secondary electric supplier, if agreement has not been reached as to the inventory of facilities to be acquired and the value thereof or other consideration to be paid, the primary electric supplier shall be entitled to provide, in writing, its proposal listing the distribution facilities to be acquired, stating its estimate of the value and listing its evaluation of other consideration to be paid in accordance with subdivision (4) hereof. Within 30 days after receipt of any such proposal, the secondary electric supplier shall state its objections, if any, to the matters contained in such proposal. If the secondary electric supplier fails to submit objections within such 30-day period, the proposal submitted by the primary electric supplier shall be conclusive as to the matters contained therein. If the secondary electric supplier does provide written objections, any dispute between the parties shall be resolved by mutual agreement or by the procedure set forth in Section 37-14-6.
(3) Each affected secondary supplier shall have the right to continue to provide retail electric service in accordance with its established rules and regulations, without time limitation, to any premises within the existing municipal limits of any municipality, the electric load of which (a) was 800 kilowatts or greater for three consecutive months during the three years prior to January 1, 1984; or (b) is served from a substation or step-down transformer from 44 kilovolts or higher which is devoted exclusively to service to the particular premises.
(4) The reproduction cost new, less depreciation, of the facilities to be acquired shall be determined as of 30 days prior to the date established for the closing of the acquisition. The facilities transferred shall be conveyed by warranty deed, “as is, where is,” without warranty, express or implied, as to the condition of the facilities. In addition to such reproduction costs, the primary electric supplier shall (i) reimburse the secondary electric supplier the costs to the secondary electric supplier for removal of its meters which are excluded from the definition of distribution facilities in Section 37-14-5(i); (ii) reimburse the secondary electric supplier the cost of constructing any necessary facilities to reintegrate the system of the secondary electric supplier after detaching the portion to be sold to the primary electric supplier such that the reintegrated system and supply of power and energy thereto in those areas that will continue to be served by the secondary electric supplier will be as adequate and dependable as exists prior to the sale; such reimbursement to include the cost of removal and to be reduced by the salvage value of any facilities removed by the secondary electric supplier; (iii) reimburse the secondary electric supplier its original cost depreciated for facilities of the secondary electric supplier excluded from the definition of distribution facilities under Section 37-14-5(ii) in which case the primary electric supplier shall take title to such facilities or, at the option of the secondary electric supplier, reimburse the secondary electric supplier the cost of removal, in which case the secondary electric supplier shall retain title; and (iv) pay to any wholesale supplier of the secondary electric supplier (or if the secondary electric supplier does not purchase its electric supply at wholesale then to the secondary electric supplier) the original cost depreciated of any facilities other than distribution facilities, as described in Section 37-14-5(iii), rendered useless by such acquisition of the distribution system of the secondary electric supplier; provided, however, at the election of the owner of such facilities, the payment to be made shall be the cost to such owner of relocating such facilities. The primary electric supplier shall pay the secondary electric supplier the amount determined pursuant to this chapter for reproduction cost new less depreciation of the distribution facilities together with the amount due under subdivision (4)(i), (ii), (iii) and (iv) immediately upon transfer of title to the facilities. In addition, to compensate the secondary electric supplier for the loss of future revenues from presently served or future developing premises, and not as compensation for the sale of its facilities, the primary electric supplier shall pay to the secondary electric supplier an amount equal to two and one-half times the total revenue from electric sales derived by the secondary electric supplier from customers within the existing municipal limits during the 12 months prior to the date notice is given by the primary electric supplier of its election to purchase the facilities. This amount shall be paid in 10 equal annual installments beginning on the date the sale of facilities is consummated.
(5) Each affected secondary electric supplier shall have the right to continue to provide service to premises located within the existing municipal limits until such time as the primary electric supplier exercises its option to purchase and until such purchase is consummated pursuant to the procedures established herein. In the event the electric facilities of the secondary electric supplier are subject to an option to purchase as provided herein, the secondary electric supplier shall have the right to continue to maintain such facilities and retail electric service until the primary electric supplier purchases the facilities of the secondary electric supplier; and in the event the primary electric supplier does not exercise the option to purchase the facilities of the secondary electric supplier as provided in this section, the secondary electric supplier shall have the right to continue to maintain its facilities and service and make extensions to serve new premises within the existing municipal limits under the standards set forth in Section 37-14-3, notwithstanding the lack of a franchise from the municipality in which such premises are located. The primary electric supplier shall be prohibited from extending service to such new or existing premises.

Legislative History

(Acts 1984, No. 84-206, p. 314, §4.)