By: Fraser S.B. No. 921

(In the Senate - Filed February 18, 2009; March 9, 2009, read first time and referred to Committee on Business and Commerce; April 8, 2009, reported favorably by the following vote: Yeas 7, Nays 1; April 8, 2009, sent to printer.)

A BILL TO BE ENTITLED

AN ACT

relating to access by the members of electric cooperatives to meetings of the boards of directors and certain information of the electric cooperatives.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 161.002, Utilities Code, is amended by adding Subdivision (2-a) to read as follows:

(2-a) "Board meeting" means a deliberation between a quorum of the voting board, or between a quorum of the voting board and another person, during which electric cooperative business or policy over which the board has responsibility is discussed or considered, or during which the board takes formal action. The term does not include the gathering of a quorum of the board at a social function unrelated to the business of the cooperative, or the attendance by a quorum of the board at a regional, state, or national convention or workshop, ceremonial event, or press conference, if formal action is not taken and any discussion of cooperative business is incidental to the social function, convention, workshop, ceremonial event, or press conference.

SECTION 2. Subsection (b), Section 161.064, Utilities Code, is amended to read as follows:

(b) The bylaws may contain any provision for the regulation and management of the affairs of the electric cooperative that is consistent with the articles of incorporation and this chapter.

SECTION 3. Section 161.072, Utilities Code, is amended by adding Subsections (c) through (m) to read as follows:

(c) Director elections shall be conducted in a manner that is fair and open to all members of the electric cooperative.

(d) A board committee of a cooperative with more than 210,000 members may not cast a member's proxy vote in a director election.

(e) A director who is standing for reelection to the board of a cooperative with not more than 210,000 members may not serve on a committee established under the bylaws for the purpose of casting, or being authorized to cast, the proxy vote of a member in a director election.

(f) A member's proxy vote may be cast in a director election only if:

(1) a proxy form is sent by regular mail to each member of record not later than the 30th day before the date of the meeting at which proxy votes are counted;

(2) the proxy form designates each candidate who is an incumbent director;

(3) an exact copy of the proxy form is posted on the cooperative's Internet website, if the cooperative maintains a website;

(4) the proxy form includes information describing the process by which proxy votes are authorized and cast, including:

(A) the name of each member of the committee, if any, established under the bylaws for the purpose of casting proxy votes in a director election;

(B) the process prescribed in the bylaws for selecting members to serve on the committee; and

(C) the districts represented by each committee member, if applicable; and

(5) the proxy form contains the following statements, in bold type:

(A) "If you grant the committee your proxy, you are giving the committee full authority to vote your proxy for the candidates you selected, or, if you did not select any candidates, to vote your proxy for candidates the committee selects";

(B) "You may rescind your proxy at any time before votes are cast at the meeting to elect directors"; and

(C) "State law prohibits any person from using incentives or other enticements to encourage you to provide your proxy in any board election."

(g) Subsections (d) and (f) may not be construed as limiting the right of an individual member to collect or cast the proxy votes of another member in a director election, if allowed by the bylaws.

(h) This section may not be construed as limiting the use of a proxy as provided by Section 161.069 to establish a quorum to transact business other than the election of a director.

(i) A person may not use an incentive or other enticement to encourage a member to authorize another person to cast the member's proxy vote in a director election.

(j) A cooperative with more than 210,000 members may elect directors only by district. A member may vote for a director to represent a district only if the member resides in that district.

(k) A cooperative with more than 210,000 members may nominate qualified members as candidates in a director election only through a written petition by members. The bylaws must:

(1) specify the number of printed names and dated signatures a petition nominating a candidate must contain;

(2) specify a period within which a petition nominating a candidate must be submitted to the cooperative; and

(3) specify that only members residing in a district may sign a petition for the nomination of a candidate to represent that district.

(l) If the bylaws of a cooperative with not more than 210,000 members allow a committee of members to nominate qualified members as candidates in a director election, the bylaws must also:

(1) allow nominations to be made through one or more written petitions by members;

(2) specify the number of printed names and dated signatures a petition nominating a candidate must contain; and

(3) specify a period within which a petition nominating a candidate must be submitted to the cooperative.

(m) A petition submitted under Subsection (l) must provide on the petition the name and address of the member seeking nomination and, if the cooperative nominates or elects directors by district, the district the member seeks to represent.

SECTION 4. Section 161.075, Utilities Code, is amended to read as follows:

Sec. 161.075. BOARD MEETINGS. (a) The board shall hold a regular or special board meeting at the place and on [the] notice as provided by Section 161.0751 and [prescribed by] the bylaws. Except as provided by Section 161.0752, each member of the electric cooperative is entitled to attend a regular or special board meeting.

(b) The attendance of a director at a board meeting constitutes a waiver of notice to the director of the meeting unless the director attends the meeting for the express purpose of objecting to the transaction of business at the meeting because the meeting is not lawfully called or convened.

(c) A notice or waiver of notice of a board meeting given to a director is not required to specify the business to be transacted at the meeting or the purpose of the meeting.

(d) The board shall keep a record of each regular or special board meeting, in the form of written minutes or a taped recording of the meeting. A record of a meeting must state the subject of each deliberation and indicate each vote, order, decision, or other action taken by the board. The board shall make meeting records available to a member for inspection and copying on the member's written request to the board secretary or to a person the secretary designates.

(e) A member attending a regular or special board meeting may record all or part of the meeting by any means of audio or visual reproduction, including a tape recorder or video camera.

(f) The board may adopt reasonable rules to maintain order at a regular or special board meeting, including rules relating to the location of recording equipment and the manner in which recording may be conducted. A rule adopted by the board under this section may not prevent or unreasonably impair a member from exercising a right granted by this section.

SECTION 5. Subchapter B, Chapter 161, Utilities Code, is amended by adding Sections 161.0751 and 161.0752 to read as follows:

Sec. 161.0751. NOTICE OF BOARD MEETINGS. (a) The board shall give members and the media written notice of the date, hour, place, and subject of a regular or special board meeting. Notice of a board meeting must be given at least 72 hours before the scheduled time of the meeting by:

(1) posting a notice on a bulletin board in a place convenient to members, at the electric cooperative's headquarters and at each district office;

(2) posting a notice on the cooperative's Internet website, if the cooperative maintains a website; and

(3) sending a notice by electronic mail to members of the media who, before the time notice is required by this section, requested notification of meetings.

(b) If the board recesses a regular or special board meeting to continue the following regular business day, the board is not required to post notice of the continued meeting if the recess is taken in good faith and not to circumvent this section and Section 161.075. If a regular or special board meeting is continued to the following regular business day, and on that following day the board continues the meeting to another day, the board shall give written notice as required by this section of the meeting continued to that other day.

(c) In the event of an emergency or urgent necessity that requires immediate board action to meet a reasonably unforeseeable situation, notice may be given in the manner prescribed by Subsection (a) at least two hours before a regular or special board meeting is convened, in order to:

(1) call an emergency board meeting; or

(2) add a subject to the agenda of a previously scheduled board meeting.

(d) Notice under Subsection (c) shall clearly identify the emergency or urgent necessity for which the notice is given. If the board adds a subject to the agenda of a previously scheduled regular or special board meeting, the board secretary or person the secretary designates shall post a copy of the revised agenda on the electric cooperative's Internet website, if the cooperative maintains a website, and physically at the cooperative's headquarters and each district office, not less than two hours before the meeting convenes.

(e) If, at a regular or special board meeting, a member makes an inquiry regarding a subject for which notice has not been given as required by this section, the notice provisions of this section do not apply to:

(1) a statement by the board of specific factual information given in response to the inquiry; or

(2) a recitation of existing policy in response to the inquiry.

(f) Any deliberation of or decision relating to the subject of an inquiry made under Subsection (e) shall be limited to a proposal to place the subject on the agenda for a subsequent board meeting.

Sec. 161.0752. EXECUTIVE SESSIONS. (a) Before the board calls an executive session, the board shall convene in a regular or special board meeting for which notice has been given as provided by Section 161.0751. During that board meeting, the presiding director may call an executive session by announcing that an executive session will be held to deliberate a matter described by Subsection (d) and identifying the specific subdivision of Subsection (d) under which the executive session will be held.

(b) Except as provided by Subsection (c), a final action, decision, or vote on a matter deliberated in an executive session may only be made in a regular or special board meeting for which notice has been given as provided by Section 161.0751.

(c) The board may take action in an executive session for matters described by Subsections (d)(2), (4), and (5).

(d) The board may hold an executive session to which the members do not have access to deliberate:

(1) anticipated or pending litigation, settlement offers, or interpretations of the law with the electric cooperative's legal counsel and with any other person the board considers necessary;

(2) the purchase, exchange, lease, or value of real property, if the board determines in good faith that deliberation in an open board meeting may have a detrimental effect on the electric cooperative;

(3) business and financial issues relating to the negotiation of a contract, if the board determines in good faith that deliberation in an open board meeting may have a detrimental effect on the position of the electric cooperative;

(4) personnel issues, and complaints or charges against a director or electric cooperative employee or consultant, unless the director or employee who is the subject of the deliberation requests a public hearing;

(5) utility-related matters and commercial information that the board determines in good faith are related to the electric cooperative's competitive activity but only to the extent the board specifically determines that disclosure of the information could give an advantage to competitors or potential competitors; or

(6) issues related to security of the electric cooperative, including security personnel, security devices, and security audits.

(e) The board secretary or a person the secretary designates shall make and keep a written or audio record of each executive session. The secretary shall preserve the record for at least two years following the session. The record must include:

(1) a statement of the subject matter of each deliberation;

(2) a record of any further action taken; and

(3) an announcement by the presiding director at the beginning and end of the session indicating the date and time.

SECTION 6. Section 161.077, Utilities Code, is amended by adding Subsection (d) to read as follows:

(d) The provisions of this chapter that apply to the board also apply to the executive committee.

SECTION 7. Subchapter B, Chapter 161, Utilities Code, is amended by adding Sections 161.080, 161.081, 161.082, and 161.083 to read as follows:

Sec. 161.080. MEMBER'S RIGHT OF ACCESS TO RECORDS. (a) Except as provided by Subsection (c), a member of an electric cooperative may, at any reasonable time and on written request that states the purpose of the request:

(1) inspect books and records of the cooperative relevant to that purpose; and

(2) at the member's own expense, copy records the member is entitled to inspect under this section.

(b) An electric cooperative may charge a reasonable fee to the member if fulfilling the member's request will require a large amount of employee time.

(c) An electric cooperative may reject or limit a member's request to inspect its books and records if:

(1) the member refuses to warrant and furnish to the electric cooperative, on the electric cooperative's request, an affidavit that:

(A) the inspection is desired for a purpose reasonably related to the business of the cooperative; or

(B) the member does not intend to sell or offer to sell any list of members of the cooperative or assist another person in obtaining a list of members for that purpose;

(2) the release of the information sought by the member, such as individual member information or personnel information, would unduly infringe on or invade the privacy of a person;

(3) the inspection is sought for a dishonest purpose; or

(4) the records sought to be inspected pertain to trade secrets or information that is privileged, confidential, or proprietary.

Sec. 161.081. POLICIES AND AUDITS. (a) The board shall adopt written policies relating to:

(1) travel expenditures for board members, officers, and employees;

(2) reimbursement of expenses for board members, officers, and employees;

(3) conflicts of interest for board members, officers, and employees;

(4) whistleblower protections;

(5) criteria and procedures for the selection, monitoring, review, and evaluation of outside vendors or contracted professional services;

(6) budgets for use in planning and controlling costs; and

(7) the creation of a committee that audits the actions of the board.

(b) An electric cooperative shall provide for an independent financial audit, to be performed annually by an unaffiliated entity that is professionally qualified to perform such an audit.

(c) The state auditor may audit the financial transactions and operations of a cooperative, at the cooperative's expense.

Sec. 161.082. COMPLAINTS BY MEMBERS. (a) In this section, "commission" means the Public Utility Commission of Texas.

(b) A member may file a written complaint with the general manager of the electric cooperative if the member is aggrieved by an action of the board or by an employee of the board or of the cooperative that the member alleges infringes on a right of the member under this chapter.

(c) Not later than the 20th day after the date the general manager receives a complaint under Subsection (b), the general manager shall take corrective action regarding the complaint, if the general manager determines that the action complained of infringed on the member's rights under this chapter.

(d) If the general manager determines that the action complained of did not infringe on the member's rights under this chapter, or if the general manager otherwise fails to resolve the member's complaint to the member's satisfaction before the 21st day after the general manager receives the member's complaint, the member may file a written complaint with the commission. A complaint filed with the commission under this subsection must:

(1) identify the electric cooperative by name and address;

(2) describe in detail the nature of the member's complaint; and

(3) include copies of documents relevant to the member's complaint, including:

(A) any relevant written request made by the member to the cooperative;

(B) the written complaint made by the member to the general manager under Subsection (b); and

(C) any relevant response from the cooperative regarding a request or complaint.

(e) In reviewing a member's complaint under this section, the commission may request that the cooperative provide to the commission any information relevant to the complaint. The commission must give a cooperative a reasonable opportunity to inspect and copy the requested information before providing the information to the commission. The commission shall designate an employee of the commission to be the person responsible for receiving, inspecting, or copying information received under this subsection.

(f) An electric cooperative shall cooperate with a request for information under Subsection (e) and promptly provide the requested information to the commission's designated employee. The commission may not disclose to any person information provided by a cooperative in response to the request unless:

(1) the commission is required by a court to provide the information to the person;

(2) the person is an authorized employee of the commission; or

(3) the cooperative that provided the information consents to the disclosure.

(g) The commission shall give a cooperative notice before using information provided in response to a request under Subsection (e) in a contested case hearing. On objection by the cooperative that the information is confidential or sensitive, the administrative judge presiding over the contested case hearing shall determine whether the information is admissible in the hearing.

(h) The commission shall return to a cooperative any information provided under this section that is confidential or sensitive to the cooperative.

Sec. 161.083. ALTERNATIVE DISPUTE RESOLUTION. The Public Utility Commission of Texas may refer a complaint made under Section 161.082(d) to the State Office of Administrative Hearings as provided by Section 14.0025 for alternative dispute resolution if the commission determines a referral is in the public interest.

SECTION 8. Subchapter C, Chapter 161, Utilities Code, is amended by adding Sections 161.126 and 161.127 to read as follows:

Sec. 161.126. PROHIBITION ON ACQUISITION OF GENERATOR CAPACITY BY CERTAIN ELECTRIC COOPERATIVES. An electric cooperative with more than 210,000 members that provides retail electric service may not acquire equipment capable of generating electricity for sale unless the Public Utility Commission of Texas first approves of the acquisition. The commission by rule shall establish the standards and procedures by which it will approve an electric cooperative's acquisition of electric generation capacity.

Sec. 161.127. NOTIFICATION OF CERTAIN INVESTMENTS. Not later than the 30th day following the completion of a transaction that results in an electric cooperative or an affiliate of the cooperative creating, acquiring, or receiving an interest in an entity that does not generate, transmit, or distribute electricity, the cooperative shall provide a notice to members that contains:

(1) the name of the entity;

(2) a description of the entity;

(3) the reasons for the decision to enter into the transaction;

(4) a description of the costs associated with the transaction, and the method of financing for those costs; and

(5) a description of the anticipated effect the transaction will have on the cooperative's electric energy rates or prices.

SECTION 9. (a) The changes in law made to Section 161.072, Utilities Code, as amended by this Act, apply only to a director election held on or after the effective date of this Act. A director election held before the effective date of this Act is subject to the law in effect on the date the election is held, and that law is continued in effect for that purpose.

(b) The changes in law made by Section 161.075, Utilities Code, as amended by this Act, and by Sections 161.0751 and 161.0752, Utilities Code, as added by this Act, apply only to a meeting convened on or after the effective date of this Act. A meeting convened before the effective date of this Act is subject to the law in effect on the date the meeting is held, and that law is continued in effect for that purpose.

(c) The changes in law made by Sections 161.080, 161.082, and 161.083, Utilities Code, as added by this Act, apply only to a request to inspect records submitted on or after the effective date of this Act. A request submitted before the effective date of this Act is subject to the law in effect on the date of the request, and that law is continued in effect for that purpose.

(d) The changes in law made by Section 161.127, Utilities Code, as added by this Act, apply only to a transaction that is completed on or after the effective date of this Act. A transaction that is completed before the effective date of this Act is subject to the law in effect on that date, and that law is continued in effect for that purpose.

SECTION 10. This Act takes effect September 1, 2009.

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