§ 6-51-112 — Electric cooperatives

(a) Notwithstanding any other statute, if the annexing municipality owns and operates its own electric system, it shall either offer to purchase any electric distribution properties and service rights within the annexed area owned by any electric cooperative, or grant such cooperative a franchise to serve the annexed area, as follows: (1) The municipality shall notify the affected electric cooperative in writing of the boundaries of the annexed area and shall indicate such area on appropriate maps; (2) The municipality shall offer to purchase the electric distribution properties of the cooperative located within the annexed area, together with all of the cooperative's rights to serve within such area, for a cash consideration, which shall consist of: (A) The present-day reproduction cost, new, of the facilities being acquired, less depreciation computed on a straight-line basis; plus (B) An amount equal to the cost of constructing any necessary facilities to reintegrate the system of the cooperative outside the annexed area after detaching the portion to be sold; plus (C) An annual amount, payable each year for a period of ten (10) years, equal to the sum of: (i) Twenty-five percent (25%) of the revenues received from power sales to consumers of electric power within the annexed area, except consumers with large industrial power loads greater than three hundred kilowatts (300kW), during the last twelve (12) months preceding the date of the notice provided for in subdivision (a)(1); and (ii) Fifty percent (50%) of the net revenues, which is gross power sales revenues less wholesale cost of power including facilities rental charge, received from power sales to consumers with large industrial power loads greater than three hundred kilowatts (300kW) within the annexed area during the last twelve (12) months preceding the date of the notice provided for in subdivision (a)(1); (3) The electric cooperative, within ninety (90) days after receipt of an offer by the annexing municipality to purchase the cooperative's electric distribution properties and service rights within the annexed area, shall signify in writing its acknowledgement of the offer, and the parties shall proceed to act. The annexing municipality shall then be obligated to buy and pay for, and the cooperative shall be obligated to sell to the municipality, such properties and rights free and clear of all mortgage liens and encumbrances for the cash consideration computed and payable as provided in subdivision (a)(2); (4) The annexing municipality, if it elects not to make the offer to purchase as provided for in subdivisions (a)(1) and (2), shall grant to the cooperative a franchise to serve within the annexed area, for a period of not less than five (5) years, and the municipality shall thereafter renew or extend the franchise or grant new franchises for similar subsequent periods; provided, that upon expiration of any such franchise, the municipality may elect instead to make an offer to buy the cooperative's electric distribution properties and service rights as they then exist in accordance with and subject to subdivisions (a)(1) and (2); provided further, that, during the term of any such franchise, the annexing municipality shall be entitled to serve only such electric customers or locations within the annexed area as it served on the date when such annexation became effective; (5) If any annexing municipality contracts its boundaries so as to exclude from its corporate limits any territory, the cooperative may elect within sixty (60) days thereafter to purchase from such municipality, and such municipality shall thereupon sell and convey to the cooperative, the electric distribution properties and service rights of the municipality in any part of the excluded area that the electric cooperative had previously served, upon the same procedures set forth in subdivisions (a)(1)-(4) for acquisitions by municipalities; (6) Nothing contained in this section shall prohibit municipalities and any cooperative from buying, selling, or exchanging electric distribution properties, service rights and other rights, property, and assets by mutual agreement; (7) The territorial areas lying outside municipal boundaries served by municipal and cooperative electric systems will remain the same as generally established by power facilities already in place or legal agreements on March 6, 1968, and new consumers locating in any unserved areas between the respective power systems shall be served by the power system whose facilities were nearest on March 6, 1968, except to the extent that territorial areas are revised in accordance with this section; and (8) "Electric distribution properties," as used in this section, means all electric lines and facilities used or useful in serving ultimate consumers, but does not include lines and facilities that are necessary for integration and operation of portions of a cooperative's electric system that are located outside the annexed area. (b) The methods of allocation and conveyance of property and property rights of any electric cooperative to any annexing municipality provided for in subsection (a) shall be exclusively available to such annexing municipality and to such electric cooperative notwithstanding § 7-52-105 or any other title or section of the code in conflict or conflicting herewith.

Legislative History

Acts 1968, ch. 413, §§ 2, 3; T.C.A., § 6-320.